Budget Implementation Act, 2006, No. 2
S.C. 2007, c. 2
Assented to 2007-02-21
A second Act to implement certain provisions of the budget tabled in Parliament on May 2, 2006
SUMMARY
Part 1 implements the following income tax measures proposed or referenced in Budget 2006:
–
the new Canada Employment Credit;
–
the new Textbook Tax Credit;
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the new tax credit for public transit passes;
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the new deduction for tradespeople’s tool expenses;
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a complete exemption for scholarship income received in connection with enrolment at an institution which qualifies the student for the education tax credit;
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the new Children’s Fitness Tax Credit;
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a doubling, to $2,000 from $1,000, of the amount on which the pension income credit is calculated;
–
an extension of the $500,000 lifetime capital gains exemption, and various intergenerational rollovers, to fishers;
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the new Apprenticeship Job Creation Tax Credit;
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a reduction of the current 12 per cent small business tax rate to 11.5 per cent for 2008 and to 11 per cent thereafter;
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an increase, to $400,000 from $300,000, of the amount that a small business can earn at the small business tax rate, effective January 1, 2007; and
–
a reduction of the minimum tax on financial institutions.
Part 2 implements the proposal in Budget 2006 to lower the income tax rate on large corporation dividends received by Canadians.
Part 3 implements the proposal in Budget 2006 to reduce excise duties for Canadian vintners and brewers.
Her Majesty, by and with the advice and consent of the Senate and House of Commons of Canada, enacts as follows:
SHORT TITLE
Marginal note:Short title
1. This Act may be cited as the Budget Implementation Act, 2006, No. 2.
PART 1R.S., c. 1 (5th Supp.) AMENDMENTS TO THE INCOME TAX ACT
2. (1) Clause (B) of the description of B in subparagraph 8(1)(r)(ii) of the Income Tax Act is replaced by the following:
(B) the greater of
(I) the amount that is the total of $500 and the amount determined for the taxation year for B in subsection 118(10), and
(II) 5% of the total of
1. the total of all amounts each of which is the taxpayer’s income from employment for the taxation year as an eligible apprentice mechanic, computed without reference to this paragraph, and
2. the amount, if any, by which the amount required by paragraph 56(1)(n.1) to be included in computing the taxpayer’s income for the taxation year exceeds the amount required by paragraph 60(p) to be deducted in computing that income, and
(2) Subsection 8(1) of the Act is amended by striking out the word “and” at the end of paragraph (q), by adding the word “and” at the end of paragraph (r) and by adding the following after paragraph (r):
Marginal note:Deduction — tradesperson’s tools
(s) if the taxpayer is employed as a tradesperson at any time in the taxation year, the lesser of $500 and the amount determined by the formula
A - $1,000
where
A
is the lesser of
(i) the total of all amounts each of which is the cost of an eligible tool acquired by the taxpayer in the year, and
(ii) the total of
(A) the amount that would, if this subsection were read without reference to this paragraph, be the taxpayer’s income for the taxation year from employment as a tradesperson in the taxation year, and
(B) the amount, if any, by which the amount required by paragraph 56(1)(n.1) to be included in computing the taxpayer’s income for the taxation year exceeds the amount required by paragraph 60(p) to be deducted in computing that income.
(3) Subparagraph 8(6)(a)(i) of the Act is replaced by the following:
(i) is registered in a program established in accordance with the laws of Canada or of a province that leads to designation under those laws as a mechanic licensed to repair self-propelled motorized vehicles, and
(4) Paragraph 8(6)(b) of the Act is amended by striking out the word “and” at the end of subparagraph (ii) and by adding the following after subparagraph (iii):
(iv) is, unless the device or equipment can be used only for the purpose of measuring, locating or calculating, not an electronic communication device or electronic data processing equipment; and
(5) Subsection 8(7) of the Act is replaced by the following:
Marginal note:Eligible tool of tradesperson
(6.1) For the purposes of paragraph (1)(s), an eligible tool of a taxpayer is a tool (including ancillary equipment) that
(a) is acquired by the taxpayer on or after May 2, 2006 for use in connection with the taxpayer’s employment as a tradesperson;
(b) has not been used for any purpose before it is acquired by the taxpayer;
(c) is certified in prescribed form by the taxpayer’s employer to be required to be provided by the taxpayer as a condition of, and for use in, the taxpayer’s employment as a tradesperson; and
(d) is, unless the device or equipment can be used only for the purpose of measuring, locating or calculating, not an electronic communication device or electronic data processing equipment.
Marginal note:Cost of tool
(7) Except for the purposes of the description of A in subparagraph (1)(r)(ii) and the description of A in paragraph (1)(s), the cost to a taxpayer of an eligible tool the cost of which was included in determining the value of one or both of those descriptions in respect of the taxpayer for a taxation year is the amount determined by the formula
K - (K × L/M)
where
K
is the cost to the taxpayer of the tool determined without reference to this subsection;
L
is
(a) if the tool is a tool to which only paragraph (1)(r) applies in the taxation year, the amount that would be determined under subparagraph (1)(r)(ii) in respect of the taxpayer for the taxation year if the value of C in that subparagraph were nil,
(b) if the tool is a tool to which only paragraph (1)(s) applies in the taxation year, the amount determined under that paragraph to be deductible by the taxpayer in the taxation year, or
(c) if the tool is a tool to which both paragraphs (1)(r) and (s) apply in the taxation year, the amount that is the total of
(i) the amount that would be determined under subparagraph (1)(r)(ii) in respect of the taxpayer for the taxation year if the value of C in that subparagraph were nil, and
(ii) the amount determined under paragraph (1)(s) to be deductible by the taxpayer in the taxation year; and
M
is the amount that is
(a) if the tool is a tool to which only paragraph (1)(r) applies in the taxation year, the value of A determined under subparagraph (1)(r)(ii) in respect of the taxpayer for the taxation year,
(b) if the tool is a tool to which only paragraph (1)(s) applies in the taxation year, the amount determined under subparagraph (i) of the description of A in paragraph (1)(s) in respect of the taxpayer for the taxation year, and
(c) if the tool is a tool to which both paragraphs (1)(r) and (s) apply in the taxation year, the amount that is the greater of the value of A determined under subparagraph (1)(r)(ii) in respect of the taxpayer for the taxation year and the amount determined under subparagraph (i) of the description of A in paragraph (1)(s) in respect of the taxpayer for the taxation year.
(6) Subsection (1) applies to the 2006 and subsequent taxation years except that, for the 2006 taxation year, subclause (B)(I) of the description of B in subparagraph 8(1)(r)(ii) of the Act, as enacted by subsection (1), is to be read as follows:
(I) the amount that is the total of $1,000 and the amount, if any, deducted by the taxpayer for the taxation year under paragraph (1)(s), and
(7) Subsections (2) and (5) apply to the 2006 and subsequent taxation years.
(8) Subsections (3) and (4) apply to property acquired on or after May 2, 2006.
3. (1) The portion of subsection 14(1.01) of the Act before paragraph (c) is replaced by the following:
Marginal note:Election re capital gain
(1.01) A taxpayer may, in the taxpayer’s return of income for a taxation year, or with an election under subsection 83(2) filed on or before the taxpayer’s filing-due date for the taxation year, elect that the following rules apply to a disposition made at any time in the year of an eligible capital property in respect of a business, if the taxpayer’s actual proceeds of the disposition exceed the taxpayer’s eligible capital expenditure in respect of the acquisition of the property, that eligible capital expenditure can be determined and, for taxpayers who are individuals, the taxpayer’s exempt gains balance in respect of the business for the taxation year is nil:
(a) for the purpose of subsection (5) other than the description of A in the definition “cumulative eligible capital”, the proceeds of disposition of the property are deemed to be equal to the amount of that eligible capital expenditure;
(b) the taxpayer is deemed to have disposed at that time of a capital property that had, immediately before that time, an adjusted cost base to the taxpayer equal to the amount of that eligible capital expenditure, for proceeds of disposition equal to the actual proceeds; and
(2) Paragraph 14(1.01)(c) of the Act is replaced by the following:
(c) if the eligible capital property is
(i) a qualified farm property (within the meaning assigned by subsection 110.6(1)) of the taxpayer at that time, the capital property deemed by paragraph (b) to have been disposed of by the taxpayer is deemed to be a qualified farm property of the taxpayer at that time, and
(ii) a qualified fishing property (within the meaning assigned by subsection 110.6(1)) of the taxpayer at that time, the capital property deemed by paragraph (b) to have been disposed of by the taxpayer is deemed to be a qualified fishing property of the taxpayer at that time.
(3) Section 14 of the Act is amended by adding the following after subsection (1.01):
Marginal note:Election re property acquired with pre-1972 outlays or expenditures
(1.02) If at any time in a taxation year a taxpayer has disposed of an eligible capital property in respect of which an outlay or expenditure to acquire the property was made before 1972 (which outlay or expenditure would have been an eligible capital expenditure if it had been made or incurred as a result of a transaction that occurred after 1971), the taxpayer’s actual proceeds of the disposition exceed the total of those outlays or expenditures, that total can be determined, subsection 21(1) of the Income Tax Application Rules applies in respect of the disposition and, for taxpayers who are individuals, the taxpayer’s exempt gains balance in respect of the business for the taxation year is nil, the taxpayer may, in the taxpayer’s return of income for the taxation year, or with an election under subsection 83(2) filed on or before the taxpayer’s filing-due date for the taxation year, elect that the following rules apply:
(a) for the purpose of subsection (5) other than the description of A in the definition “cumulative eligible capital”, the proceeds of disposition of the property are deemed to be nil;
(b) the taxpayer is deemed to have disposed at that time of a capital property that had, immediately before that time, an adjusted cost base to the taxpayer equal to nil, for proceeds of disposition equal to the amount determined, in respect of the disposition, under subsection 21(1) of the Income Tax Application Rules; and
(c) if the eligible capital property is at that time a qualified farm property (within the meaning assigned by subsection 110.6(1)) of the taxpayer, the capital property deemed by paragraph (b) to have been disposed of by the taxpayer is deemed to have been at that time a qualified farm property of the taxpayer.
Marginal note:Non-application of subsections (1.01) and (1.02)
(1.03) Subsections (1.01) and (1.02) do not apply to a disposition by a taxpayer of a property
(a) that is goodwill; or
(b) that was acquired by the taxpayer
(i) in circumstances where an election was made under subsection 85(1) or (2) and the amount agreed on in that election in respect of the property was less than the fair market value of the property at the time it was so acquired, and
(ii) from a person or partnership with whom the taxpayer did not deal at arm’s length and for whom the eligible capital expenditure in respect of the acquisition of the property cannot be determined.
(4) Paragraph 14(1.02)(c) of the Act, as enacted by subsection (3), is replaced by the following:
(c) if the eligible capital property is
(i) a qualified farm property (within the meaning assigned by subsection 110.6(1)) of the taxpayer at that time, the capital property deemed by paragraph (b) to have been disposed of by the taxpayer is deemed to be a qualified farm property of the taxpayer at that time, and
(ii) a qualified fishing property (within the meaning assigned by subsection 110.6(1)) of the taxpayer at that time, the capital property deemed by paragraph (b) to have been disposed of by the taxpayer is deemed to be a qualified fishing property of the taxpayer at that time.
(5) Section 14 of the Act is amended by adding the following after subsection (1.1):
Marginal note:Deemed capital gain
(1.2) For the purposes of section 110.6 and paragraph 3(b) as it applies for the purposes of that section, an amount included under paragraph (1)(b) in computing a taxpayer’s income for a particular taxation year from a fishing business is deemed to be a taxable capital gain of the taxpayer for the year from the disposition in the year of qualified fishing property to the extent of the lesser of
(a) the amount included under paragraph (1)(b) in computing the taxpayer’s income for the particular year from the fishing business, and
(b) the amount determined by the formula
A - B
where
A
is the amount by which
(i) ½ of the total of all amounts each of which is the taxpayer’s proceeds from a disposition on or after May 2, 2006 and in the particular taxation year or a preceding taxation year of eligible capital property (referred to in this subsection as a “disposed property”) that was at the time of the disposition a qualified fishing property (within the meaning assigned by subsection 110.6(1)) of the taxpayer exceeds the total of
(ii) ½ of the total of all amounts each of which is
(A) an eligible capital expenditure of the taxpayer in respect of the fishing business that was made or incurred in respect of a disposed property, or
(B) an outlay or expense of the taxpayer that was not deductible in computing the taxpayer’s income and that was made or incurred for the purpose of making a disposition of a disposed property, and
B
is the total of all amounts each of which is an amount deemed by this section to be a taxable capital gain of the taxpayer for a taxation year preceding the particular year from the disposition of qualified fishing property of the taxpayer.
(6) The description of E in the definition “cumulative eligible capital” in subsection 14(5) of the Act is replaced by following:
E
is the total of all amounts each of which is ¾ of the amount, if any, by which
(a) an amount that the taxpayer has or may become entitled to receive, after the taxpayer’s adjustment time and before that time, on account of capital in respect of the business carried on or formerly carried on by the taxpayer, other than an amount that
(i) is included in computing the taxpayer’s income, or deducted 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,
(ii) reduces the cost or capital cost of a property or the amount of an outlay or expense, or
(iii) is included in computing any gain or loss of the taxpayer from a disposition of a capital property
exceeds
(b) all outlays and expenses that were not otherwise deductible in computing the taxpayer’s income and were made or incurred by the taxpayer for the purpose of obtaining the amount described by paragraph (a), and
(7) Subsection (1) applies to dispositions of eligible capital property that occur in taxation years that end after February 27, 2000, except that, in its application to those dispositions of eligible capital property that occur before December 21, 2002, the portion of subsection 14(1.01) of the Act before paragraph (c), as enacted by subsection (1), is to be read as follows:
(1.01) A taxpayer may, in the taxpayer’s return of income for a taxation year, elect that the following rules apply to a disposition made at any time in the taxation year of an eligible capital property (other than goodwill) in respect of a business, if the taxpayer’s actual proceeds of the disposition exceed the taxpayer’s cost of the property, that cost can be determined and, for taxpayers who are individuals, the taxpayer’s exempt gains balance in respect of the business for the taxation year is nil:
(a) for the purposes of subsection (5), the proceeds of disposition of the property are deemed to be equal to that cost;
(b) the taxpayer is deemed to have disposed at that time of a capital property that had, immediately before that time, an adjusted cost base to the taxpayer equal to that cost, for proceeds of disposition equal to the actual proceeds; and
(8) Subsections (2), (4) and (5) apply to dispositions of property that occur on or after May 2, 2006.
(9) Subsection (3) applies to dispositions of eligible capital property that occur after December 20, 2002, except that, in applying subsection 14(1.03) of the Act, as enacted by subsection (3), to dispositions that occur on or before February 27, 2004, subsection 14(1.03) is to be read without reference to its paragraph (b).
(10) Subsection (6) applies to amounts that become receivable on or after May 2, 2006, except that it does not apply to an amount that became receivable by a taxpayer before August 31, 2006 if the taxpayer so elects by filing with the Minister of National Revenue an election in writing on or before the taxpayer’s filing-due date for the taxpayer’s taxation year that includes August 31, 2006.
4. (1) Subsection 40(1.1) of the Act is replaced by the following:
Marginal note:Reserve — property disposed of to a child
(1.1) In computing the amount that a taxpayer may claim under subparagraph (1)(a)(iii) in computing the taxpayer’s gain from the disposition of a property, that subparagraph shall be read as if the references in that subparagraph to “1/5” and “4” were references to “1/10” and “9” respectively, if,
(a) the property was disposed of by the taxpayer to the taxpayer’s child,
(b) that child was resident in Canada immediately before the disposition, and
(c) the property was immediately before the disposition,
(i) any land in Canada or depreciable property in Canada of a prescribed class that was used by the taxpayer, the spouse or common-law partner of the taxpayer, a child or a parent of the taxpayer in a farming or fishing business carried on in Canada,
(ii) a share of the capital stock of a family farm corporation of the taxpayer or an interest in a family farm partnership of the taxpayer (such a share or an interest having the meaning assigned by subsection 70(10)),
(iii) a qualified small business corporation share of the taxpayer (within the meaning assigned by subsection 110.6(1)), or
(iv) a share of the capital stock of a family fishing corporation of the taxpayer or an interest in a family fishing partnership (such a share or an interest having the meaning assigned by subsection 70(10)).
(2) Subsection (1) applies to dispositions of property that occur on or after May 2, 2006.
5. (1) Subsection 44(1.1) of the Act is replaced by the following:
Marginal note:Reserve — property disposed of to a child
(1.1) In computing the amount that a taxpayer may claim under subparagraph (1)(e)(iii) in computing the taxpayer’s gain from the disposition of a former property of the taxpayer, that subparagraph shall be read as if the references in that subparagraph to “1/5” and “4” were references to “1/10” and “9” respectively if that former property is real or immovable property in respect of the disposition of which, because of subsection 73(3), the rules in subsection 73(3.1) applied to the taxpayer and a child of the taxpayer.
(2) Subsection (1) applies to dispositions of property that occur on or after May 2, 2006.
6. (1) Paragraph 56(1)(k) of the Act is replaced by the following:
Marginal note:Certain tools of an employee, re proceeds
(k) all amounts received in the year by a person or partnership (in this paragraph referred to as the “vendor”) as consideration for the disposition by the vendor of a property the cost of which was included in computing an amount under paragraph 8(1)(r) or (s) in respect of the vendor or in respect of a person with whom the vendor does not deal at arm’s length, to the extent that the total of those amounts received in respect of the disposition in the year and in preceding taxation years exceeds the total of the cost to the vendor of the property immediately before the disposition and all amounts included in respect of the disposition under this paragraph in computing the vendor’s income for a preceding taxation year, unless the property was acquired by the vendor in circumstances to which subsection 85(5.1) or subsection 97(5) applied;
(2) Subsection 56(1) of the Act is amended by adding the following after paragraph (n):
Marginal note:Apprenticeship incentive grant
(n.1) amounts received by the taxpayer in the year under the Apprenticeship Incentive Grant program administered by the Department of Human Resources and Social Development;
(3) Subsection 56(3) of the Act is replaced by the following:
Marginal note:Exemption for scholarships, fellowships, bursaries and prizes
(3) For the purpose of subparagraph (1)(n)(ii), a taxpayer’s scholarship exemption for a taxation year is the total of
(a) the total of all amounts each of which is the amount included under subparagraph (1)(n)(i) in computing the taxpayer’s income for the taxation year in respect of a scholarship, fellowship or bursary received in connection with the taxpayer’s enrolment in an educational program in respect of which an amount may be deducted under subsection 118.6(2) in computing the taxpayer’s tax payable under this Part for the taxation year,
(b) the total of all amounts each of which is the lesser of
(i) the amount included under subparagraph (1)(n)(i) in computing the taxpayer’s income for the taxation year in respect of a scholarship, fellowship, bursary or prize that is to be used by the taxpayer in the production of a literary, dramatic, musical or artistic work, and
(ii) the total of all amounts each of which is an expense incurred by the taxpayer in the taxation year for the purpose of fulfilling the conditions under which the amount described in subparagraph (i) was received, other than
(A) personal or living expenses of the taxpayer (except expenses in respect of travel, meals and lodging incurred by the taxpayer in the course of fulfilling those conditions and while absent from the taxpayer’s usual place of residence for the period to which the scholarship, fellowship, bursary or prize, as the case may be, relates),
(B) expenses for which the taxpayer is entitled to be reimbursed, and
(C) expenses that are otherwise deductible in computing the taxpayer’s income, and
(c) the lesser of $500 and the amount by which the total described in subparagraph (1)(n)(i) for the taxation year exceeds the total of the amounts determined under paragraphs (a) and (b).
(4) Subsection 56(8) of the Act is replaced by the following:
Marginal note:CPP/QPP and UCCB amounts for previous years
(8) Notwithstanding subsections (1) and (6), if
(a) one or more amounts are received by an individual (other than a trust) in a taxation year as, on account of, in lieu of payment of or in satisfaction of, any benefit under the Universal Child Care Benefit Act, the Canada Pension Plan or a provincial pension plan as defined in section 3 of the Canada Pension Plan, and
(b) a portion, not less than $300, of the total of those amounts relates to one or more preceding taxation years,
that portion shall, at the option of the individual, not be included in the individual’s income.
(5) Subsections (1), (3) and (4) apply to the 2006 and subsequent taxation years.
(6) Subsection (2) applies to the 2007 and subsequent taxation years.
7. (1) Section 60 of the Act is amended by adding the following after paragraph (o.1):
Marginal note:Repayment of apprenticeship incentive grant
(p) the total of all amounts each of which is an amount paid in the taxation year as a repayment under the Apprenticeship Incentive Grant program of an amount that was included because of paragraph 56(1)(n.1) in computing the taxpayer’s income for the taxation year or a preceding taxation year;
(2) Subsection (1) applies to the 2007 and subsequent taxation years.
8. (1) Paragraph (b) of the definition “earned income” in subsection 63(3) of the Act is replaced by the following:
(b) all amounts that are included, or that would, but for paragraph 81(1)(a) or subsection 81(4), be included, because of section 6 or 7 or paragraph 56(1) (n), (n.1), (o) or (r), in computing the taxpayer’s income,
(2) Subsection (1) applies to the 2007 and subsequent taxation years.
9. (1) Clause (ii)(J) of the description of A in paragraph 64(a) of the Act is replaced by the following:
(J) where the taxpayer has an impairment in physical or mental functions, for the cost of attendant care services provided in Canada and to a person who is neither the taxpayer’s spouse or common-law partner nor under 18 years of age, if the taxpayer is a taxpayer in respect of whom an amount may be deducted because of section 118.3, or if the taxpayer has been certified in writing by a medical practitioner to be a person who, because of that impairment is, and is likely to be indefinitely, dependent on others for their personal needs and care and who as a result requires a full-time attendant,
(2) Subsection (1) applies to the 2005 and subsequent taxation years.
10. (1) Subsections 70(9) to (9.3) of the Act are replaced by the following:
Marginal note:When subsection (9.01) applies
(9) Subsection (9.01) applies to a taxpayer and a child of the taxpayer in respect of land in Canada or depreciable property in Canada of a prescribed class of the taxpayer in respect of which subsection (5) would, if this Act were read without reference to this subsection, apply if
(a) the property was, before the death of the taxpayer, used principally in a fishing or farming business carried on in Canada in which the taxpayer, the spouse or common-law partner of the taxpayer or a child or a parent of the taxpayer was actively engaged on a regular and continuous basis (or, in the case of property used in the operation of a woodlot, was engaged to the extent required by a prescribed forest management plan in respect of that woodlot);
(b) the child of the taxpayer was resident in Canada immediately before the day on which the taxpayer died; and
(c) as a consequence of the death of the taxpayer, the property is transferred to and becomes vested indefeasibly in the child within the period ending 36 months after the death of the taxpayer or, if written application has been made to the Minister by the taxpayer’s legal representative within that period, within any longer period that the Minister considers reasonable in the circumstances.
Marginal note:Transfer of farming and fishing property to child
(9.01) If, because of subsection (9), this subsection applies to the taxpayer and a child of the taxpayer in respect of a property of the taxpayer that has been transferred to the child as a consequence of the death of the taxpayer, the following rules apply:
(a) where the taxpayer’s legal representative does not elect in the taxpayer’s return of income under this Part for the year in which the taxpayer died, to have paragraph (b) apply to the taxpayer and the child in respect of the property,
(i) paragraphs (5)(a) and (b) and section 69 do not apply to the taxpayer and the child in respect of the property,
(ii) the taxpayer is deemed to have
(A) disposed of the property immediately before the taxpayer’s death, and
(B) received, at the time of the disposition of the property, proceeds of disposition in respect of that disposition of the property equal to
(I) where the property was depreciable property of a prescribed class, the lesser of
1. the capital cost to the taxpayer of the property, and
2. the amount, determined immediately before the time of the disposition of the property, that is that proportion of the undepreciated capital cost of property of that class to the taxpayer that the capital cost to the taxpayer of the property is of the capital cost to the taxpayer of all property of that class that had not, at or before that time, been disposed of, and
(II) where the property is land (other than land to which subclause (I) applies), the adjusted cost base to the taxpayer of the property immediately before the time of the disposition of the property,
(iii) the child is, immediately after the time of the disposition of the property, deemed to have acquired the property at a cost equal to the taxpayer’s proceeds of disposition in respect of the disposition of the property determined under subparagraph (ii), and
(iv) where the property was depreciable property of a prescribed class, paragraphs (5)(c) and (d) apply to the taxpayer and the child in respect of the property as if the references in those paragraphs to “paragraph (a)” and “paragraph (b)” were read as “subparagraph (9.01)(a)(ii)” and “subparagraph (9.01)(a)(iii)”, respectively; and
(b) where the taxpayer’s legal representative elects, in the taxpayer’s return of income under this Part for the taxation year in which the taxpayer died, to have this paragraph apply to the taxpayer in respect of the property,
(i) paragraphs (5)(a) and (b) and section 69 do not apply to the taxpayer and the child in respect of the property,
(ii) the taxpayer is deemed to have
(A) disposed of the property immediately before the taxpayer’s death, and
(B) received, at the time of the disposition of the property, proceeds of disposition in respect of that disposition of the property equal to
(I) where the property was depreciable property of a prescribed class, the amount that the legal representative designates, which must not be greater than the greater of nor less than the lesser of
1. the fair market value of the property immediately before the time of the disposition of the property, and
2. the lesser of the capital cost to the taxpayer of the property and the amount, determined immediately before the time of the disposition of the property, that is that proportion of the undepreciated capital cost of property of that class to the taxpayer that the capital cost to the taxpayer of the property is of the capital cost to the taxpayer of all property of that class that had not, at or before that time, been disposed of, and
(II) where the property is land (other than land to which subclause (I) applies), the amount that the legal representative designates, which must not be greater than the greater of nor less than the lesser of
1. the fair market value of the property immediately before the time of the disposition of the property, and
2. the adjusted cost base to the taxpayer of the property immediately before the time of the disposition of the property,
(iii) the child is, immediately after the time of the disposition of the property, deemed to have acquired the property at a cost equal to the taxpayer’s proceeds of disposition in respect of the disposition of the property determined under subparagraph (ii),
(iv) where the property was depreciable property of a prescribed class, paragraphs (5)(c) and (d) apply to the taxpayer in respect of the property as if the references in those paragraphs to “paragraph (a)” and “paragraph (b)” were read as “subparagraph (9.01)(b)(ii)” and “subparagraph (9.01)(b)(iii)”, respectively,
(v) except for the purpose of this subparagraph,
(A) where the amount designated by the taxpayer’s legal representative under subclause (ii)(B)(I), exceeds the greater of the amounts determined under sub-subclauses (ii)(B)(I)1 and 2 in respect of the property, the amount designated is deemed to be equal to the greater of those amounts, and
(B) where the amount designated by the taxpayer’s legal representative under subclause (ii)(B)(II) exceeds the greater of the amounts determined under sub-subclauses (ii)(B)(II)1 and 2 in respect of the property, the amount designated is deemed to be equal to the greater of those amounts, and
(vi) except for the purpose of this subparagraph,
(A) where the amount designated by the taxpayer’s legal representative under subclause (ii)(B)(I) is less than the lesser of the amounts determined under sub-subclauses (ii)(B)(I)1 and 2 in respect of the property, the amount designated is deemed to be equal to the lesser of those amounts, and
(B) where the amount designated by the taxpayer’s legal representative under subclause (ii)(B)(II) is less than the lesser of the amounts determined under sub-subclauses (ii)(B)(II)1 and 2 in respect of the property, the amount designated is deemed to be equal to the lesser of those amounts.
Marginal note:When subsection (9.11) applies
(9.1) Subsection (9.11) applies to a trust and a child of the settlor of the trust in respect of a property in respect of which subsection 104(4) or (5) would, if this Act were read without reference to this subsection, apply to the trust as a consequence of the death of the beneficiary under the trust who was a spouse or a common-law partner of the settlor if
(a) the property (or property for which the property was substituted) was transferred to the trust by the settlor;
(b) subsection (6), subsection 73(1) (as that subsection applied to transfers before 2000) or subparagraph 73(1.01)(c)(i) applied to the settlor and the trust in respect of the transfer referred to in paragraph (a);
(c) the property is, immediately before the beneficiary’s death, land or a depreciable property of a prescribed class of the trust that was used in a fishing or farming business carried on in Canada;
(d) the child of the settlor is, immediately before the beneficiary’s death, resident in Canada; and
(e) as a consequence of the beneficiary’s death, the property is transferred to and becomes vested indefeasibly in the child of the settlor within the period ending 36 months after that beneficiary’s death or, if written application has been made to the Minister by the taxpayer’s legal representative within that period, within any longer period that the Minister considers reasonable in the circumstances.
Marginal note:Transfer of farming and fishing property from trust to settlor’s children
(9.11) If, because of subsection (9.1), this subsection applies to the trust and a child of the settlor of the trust in respect of a property of the trust that has been distributed to the child as a consequence of the death of the beneficiary under the trust who was the spouse or common-law partner of the settlor, the following rules apply:
(a) where the trust does not elect, in its return of income under this Part for the taxation year in which the beneficiary died, to have paragraph (b) apply to the trust in respect of the property,
(i) subsections 104(4) and (5) and section 69 do not apply to the trust and the child in respect of the property,
(ii) the trust is deemed to have
(A) disposed of the property immediately before the beneficiary’s death, and
(B) received, at the time of the disposition, proceeds of disposition in respect of that disposition equal to
(I) where the property was depreciable property of a prescribed class, the lesser of
1. the capital cost to the trust of the property, and
2. the amount, determined immediately before the time of the disposition of the property, that is that proportion of the undepreciated capital cost of property of that class to the trust that the capital cost to the trust of the property is of the capital cost to the trust of all property of that class that had not, at or before that time, been disposed of, and
(II) where the property is land (other than land to which subclause (I) applies), the adjusted cost base to the trust of the property immediately before the time of the disposition of the property, and
(iii) the child is, immediately after the time of the disposition of the property, deemed to have acquired the property at a cost equal to the trust’s proceeds of disposition in respect of the disposition of the property determined under subparagraph (ii);
(b) where the trust elects, in the trust’s return of income under this Part for the taxation year in which the beneficiary died, to have this paragraph apply to the trust in respect of the property,
(i) subsections 104(4) and (5) do not apply to the trust in respect of the property,
(ii) the trust is deemed to have
(A) disposed of the property immediately before the beneficiary’s death, and
(B) received, at the time of the disposition of the property, proceeds of disposition in respect of the disposition of the property equal to
(I) where the property was depreciable property of a prescribed class, the amount that the trust designates, which must not be greater than the greater of nor less than the lesser of
1. the fair market value of the property immediately before the time of the disposition of the property, and
2. the lesser of the capital cost to the trust of the property and the amount, determined immediately before the time of the disposition of the property, that is that proportion of the undepreciated capital cost of property of that class to the trust that the capital cost to the trust of the property is of the capital cost to the trust of all property of that class that had not, at or before that time, been disposed of, and
(II) where the property is land (other than land to which subclause (I) applies), the amount that the trust designates, which must not be greater than the greater of nor less than the lesser of
1. the fair market value of the property immediately before the time of the disposition of the property, and
2. the adjusted cost base to the trust of the property immediately before the time of the disposition of the property,
(iii) the child is, immediately after the time of the disposition of the property, deemed to have acquired the property at a cost equal to the trust’s proceeds of disposition in respect of the disposition of the property determined under subparagraph (ii),
(iv) except for the purpose of this subparagraph,
(A) where the amount designated by the trust under subclause (ii)(B)(I) exceeds the greater of the amounts determined under sub-subclauses (ii)(B)(I)1 and 2 in respect of the property, the amount designated is deemed to be equal to the greater of those amounts, and
(B) where the amount designated by the trust under subclause (ii)(B)(II) exceeds the greater of the amounts determined under sub-subclauses (ii)(B)(II)1 and 2 in respect of the property, the amount designated is deemed to be equal to the greater of those amounts, and
(v) except for the purpose of this subparagraph,
(A) where the amount designated by the trust under subclause (ii)(B)(I) is less than the lesser of the amounts determined under sub-subclauses (ii)(B)(I)1 and 2 in respect of the property, the amount designated is deemed to be equal to the lesser of those amounts, and
(B) where the amount designated by the trust under subclause (ii)(B)(II), is less than the lesser of the amounts determined under sub-subclauses (ii)(B)(II)1 and 2 in respect of the property, the amount designated is deemed to be equal to the lesser of those amounts;
(c) where paragraph (a) or (b) (each of which is referred to in this subsection as the “relevant provision”) applied to the trust in respect of a property that was depreciable property of a prescribed class (other than where the trust’s proceeds of disposition of the property under the relevant provision are redetermined under subsection 13(21.1)),
(i) the capital cost to the child of the property, immediately after the time of the disposition, is deemed to be the amount that was the capital cost to the trust of the property, immediately before the time of the disposition, and
(ii) the amount, if any, by which the capital cost to the trust of the property, immediately before the time of the disposition, exceeds the amount determined under the relevant provision to be the cost of the property to the child, immediately after the time of the disposition, is, for the purposes of sections 13 and 20 and any regulations made for the purpose of paragraph 20(1)(a), deemed to have been allowed to the child in respect of the property under regulations made for the purpose of paragraph 20(1)(a) in computing income for taxation years that ended before the child acquired the property; and
(d) where the relevant provision applied to the trust in respect of a property and the trust’s proceeds of disposition in respect of the disposition of the property determined under the relevant provision are redetermined under subsection 13(21.1), notwithstanding the relevant provision,
(i) where the capital cost to the trust of the property, immediately before the time of the disposition, exceeds the amount redetermined under subsection 13(21.1), for the purposes of sections 13 and 20 and any regulations made for the purpose of paragraph 20(1)(a),
(A) the capital cost to the child of the property, immediately after the time of the disposition, is deemed to be the amount that was the capital cost to the trust of the property, immediately before the time of the disposition, and
(B) the amount, if any, by which the capital cost to the trust of the property, immediately before the time of the disposition, exceeds the amount redetermined under subsection 13(21.1) is deemed to have been allowed to the child in respect of the property under regulations made for the purpose of paragraph 20(1)(a) in computing income for taxation years that ended before the child acquired the property, and
(ii) where the property is land, the cost to the child of the property is deemed to be the amount that was the trust’s proceeds of disposition as redetermined under subsection 13(21.1).
Marginal note:When subsection (9.21) applies
(9.2) Subsection (9.21) applies to a taxpayer and a child of the taxpayer in respect of a property of the taxpayer in respect of which subsection (5) would, if this Act were read without reference to this subsection, apply to the taxpayer and the child if
(a) the property was, immediately before the death of the taxpayer, a share of the capital stock of a family fishing corporation of the taxpayer, an interest in a family fishing partnership of the taxpayer, a share of the capital stock of a family farm corporation of the taxpayer or an interest in a family farm partnership of the taxpayer;
(b) the child of the taxpayer was resident in Canada immediately before the day on which taxpayer died; and
(c) as a consequence of the death of the taxpayer, the property is transferred to and becomes vested indefeasibly in the child within the period ending 36 months after the death of the taxpayer or, if written application has been made to the Minister by the taxpayer’s legal representative within that period, within any longer period that the Minister considers reasonable in the circumstances.
Marginal note:Transfer of family farm and fishing corporations and partnerships
(9.21) If, because of subsection (9.2), this subsection applies to the taxpayer and a child of the taxpayer in respect of a property of the taxpayer that has been transferred to the child as a consequence of the death of the taxpayer, the following rules apply:
(a) where the taxpayer’s legal representative does not elect, in the taxpayer’s return of income under this Part for the taxation year in which the taxpayer died, to have paragraph (b) apply to the taxpayer in respect of the property,
(i) paragraphs (5)(a) and (b) and section 69 do not apply to the taxpayer and the child in respect of the property,
(ii) where the property is, immediately before the death of the taxpayer, a share of the capital stock of a family fishing corporation of the taxpayer, or a share of the capital stock of a family farm corporation of the taxpayer,
(A) the taxpayer is deemed to have
(I) disposed of the property immediately before the taxpayer’s death, and
(II) received proceeds of disposition in respect of that disposition equal to the adjusted cost base to the taxpayer, immediately before the time of that disposition, of the property, and
(B) the child is, immediately after the time of the disposition, deemed to have acquired the property at a cost equal to the taxpayer’s proceeds of disposition in respect of that disposition determined under clause (A), and
(iii) where the property is, immediately before the death of the taxpayer, a partnership interest described in paragraph (9.2)(a) (other than a partnership interest to which subsection 100(3) applies),
(A) the taxpayer is, except for the purpose of paragraph 98(5)(g), deemed not to have disposed of the property as a consequence of the taxpayer’s death,
(B) the child is deemed to have acquired the property at the time of the taxpayer’s death at a cost equal to the cost to the taxpayer of the interest immediately before the time that is immediately before the time of the taxpayer’s death, and
(C) each amount required by subsection 53(1) or (2) to be added or deducted in computing the adjusted cost base to the taxpayer, immediately before the time of the taxpayer’s death, of the property is deemed to be an amount required by subsection 53(1) or (2) to be added or deducted in computing, at any time at or after the time of the taxpayer’s death, the adjusted cost base to the child of the property; and
(b) where the taxpayer’s legal representative elects, in the taxpayer’s return of income under this Part for the taxation year in which the taxpayer died, to have this paragraph apply to the taxpayer in respect of the property,
(i) paragraphs (5)(a) and (b) and section 69 do not apply to the taxpayer and the child in respect of the property,
(ii) subject to subparagraph (iii), where the property is, immediately before the taxpayer’s death, a share of the capital stock of a family fishing corporation of the taxpayer, a share of the capital stock of a family farm corporation of the taxpayer, an interest in a family fishing partnership of the taxpayer or an interest in a family farm partnership of the taxpayer,
(A) the taxpayer is deemed to have
(I) disposed of the property immediately before the taxpayer’s death, and
(II) received, at the time of the disposition of the property, proceeds of disposition in respect of the disposition of the property equal to the amount that the taxpayer’s legal representative designates, which must not be greater than the greater of nor less than the lesser of
1. the fair market value of the property immediately before the taxpayer’s death, and
2. the adjusted cost base to the taxpayer of the property immediately before the time of the disposition,
(B) the child is, immediately after the time of the disposition, deemed to have acquired the property at a cost equal to the taxpayer’s proceeds of disposition in respect of the disposition of the property determined under clause (A),
(C) except for the purpose of this clause, where the amount designated by the taxpayer’s legal representative under subclause (A)(II) exceeds the greater of the amounts determined under sub-subclauses (A)(II)1 and 2 in respect of the property, the amount designated is deemed to be equal to the greater of those amounts, and
(D) except for the purpose of this clause, where the amount designated by the taxpayer’s legal representative under subclause (A)(II) is less than the lesser of the amounts determined under sub-subclauses (A)(II)1 and 2 in respect of the property, the amount designated is deemed to be equal to the lesser of those amounts, and
(iii) where the property is, immediately before the death of the taxpayer, a partnership interest described in paragraph (9.2)(a) (other than a partnership interest to which subsection 100(3) applies), and the taxpayer’s legal representative further elects, in the taxpayer’s return of income under this Part for the taxation year in which the taxpayer died, to have this subparagraph apply to the taxpayer in respect of the property,
(A) the taxpayer is, except for the purpose of paragraph 98(5)(g), deemed not to have disposed of the property as a consequence of the taxpayer’s death,
(B) the child is deemed to have acquired the property at the time of the taxpayer’s death at a cost equal to the cost to the taxpayer of the interest immediately before the time that is immediately before the death of the taxpayer, and
(C) each amount required by subsection 53(1) or (2) to be added or deducted in computing the adjusted cost base to the taxpayer, immediately before the time of the taxpayer’s death, of the property is deemed to be an amount required by subsection 53(1) or (2) to be added or deducted in computing, at any time at or after the taxpayer’s death, the adjusted cost base to the child of the property.
Marginal note:When subsection (9.31) applies
(9.3) Subsection (9.31) applies to a trust and a child of the settlor of the trust in respect of a property in respect of which subsection 104(4) would, if this Act were read without reference to this subsection, apply to the trust as a consequence of the death of the beneficiary under the trust who was a spouse or a common-law partner of the settlor of the trust if
(a) the property (or property for which the property was substituted) was transferred to the trust by the settlor and was, immediately before that transfer, a share of the capital stock of a family farm corporation of the settlor, a share of the capital stock of a family fishing corporation of the settlor, an interest in a family farm partnership of the settlor or an interest in a family fishing partnership of the settlor;
(b) subsection (6), subsection 73(1) (as that subsection applied to transfers before 2000) or subparagraph 73(1.01)(c)(i) applied to the settlor and the trust in respect of the transfer referred to in paragraph (a);
(c) the property is, immediately before the beneficiary’s death,
(i) a share of the capital stock of a Canadian corporation that would, immediately before that beneficiary’s death, be a share of the capital stock of a family farm corporation of the settlor, if the settlor owned the share at that time and paragraph (a) of the definition “share of the capital stock of a family farm corporation”, in subsection (10) were read without the words “in which the person or a spouse, common-law partner, child or parent of the person was actively engaged on a regular and continuous basis (or, in the case of property used in the operation of a woodlot, was engaged to the extent required by a prescribed forest management plan in respect of that woodlot)”,
(ii) a share of the capital stock of a Canadian corporation that would, immediately before the beneficiary’s death, be a share of the capital stock of a family fishing corporation of the settlor, if the settlor owned the share at that time and paragraph (a) of the definition “share of the capital stock of a family fishing corporation” in subsection (10) were read without reference to the words “in which the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual was actively engaged on a regular and continuous basis”, or
(iii) a partnership interest in a partnership that carried on the business of farming or fishing in Canada in which it used all or substantially all of the property;
(d) the child of the settlor was, immediately before that beneficiary’s death, resident in Canada; and
(e) as a consequence of that beneficiary’s death, the property is transferred to and becomes vested indefeasibly in the child within the period ending 36 months after that beneficiary’s death or, if written application has been made to the Minister by the taxpayer’s legal representative within that period, within any longer period that the Minister considers reasonable in the circumstances.
Marginal note:Transfer of family farm or fishing corporation or family farm or fishing partnership from trust to children of settlor
(9.31) If, because of subsection (9.3), this subsection applies to the trust and a child of the settlor of the trust in respect of a property of the trust that has been distributed to the child as a consequence of the death of the beneficiary under the trust who was a spouse or common-law partner of the settlor of the trust, the following rules apply:
(a) where the trust does not elect, in its return of income under this Part for the taxation year in which the beneficiary died, to have paragraph (b) apply to the trust in respect of the property
(i) section 69 and subsection 104(4) do not apply to the trust and the child in respect of the property,
(ii) where the property is, immediately before the beneficiary’s death, a share described in subparagraph (9.3)(c)(i) or (ii),
(A) the trust is deemed to have
(I) disposed of the property immediately before the beneficiary’s death, and
(II) received proceeds of disposition in respect of that disposition equal to the adjusted cost base to the trust of the property immediately before the time of that disposition, and
(B) the child is, immediately after the time of the disposition, deemed to have acquired the property at a cost equal to the trust’s proceeds of disposition in respect of that disposition of the property determined under clause (A), and
(iii) where the property is, immediately before the beneficiary’s death, a partnership interest described in subparagraph (9.3)(c)(iii) (other than a partnership interest to which subsection 100(3) applies),
(A) the trust is, except for the purpose of paragraph 98(5)(g), deemed not to have disposed of the property as a consequence of the beneficiary’s death,
(B) the child is deemed to have acquired the property, at the time of the beneficiary’s death, at a cost equal to the cost to the trust of the interest immediately before the time that is immediately before the time of the beneficiary’s death, and
(C) each amount required by subsection 53(1) or (2) to be added or deducted in computing the adjusted cost base to the trust, immediately before the beneficiary’s death, of the property is deemed to be an amount required by subsection 53(1) or (2) to be added or deducted in computing, at or after the time of the beneficiary’s death, the adjusted cost base to the child of the property; and
(b) where the trust elects, in its return of income under this Part for the taxation year in which the beneficiary died, to have this paragraph apply to the trust in respect of the property
(i) subsection 104(4) does not apply to the trust in respect of the property and section 69 does not apply to the trust or the child in respect of the transfer of the property,
(ii) subject to subparagraph (iii), where the property is, immediately before the beneficiary’s death, a share of the capital stock of a corporation described in subparagraph (9.3)(c)(i) or (ii) or a partnership interest described in subparagraph (9.3)(c)(iii),
(A) the trust is deemed to have
(I) disposed of the property immediately before the beneficiary’s death, and
(II) received, at the time of the disposition of property, proceeds of disposition in respect of the disposition of the property equal to the amount that the trust designates, which must not be greater than the greater of nor less than the lesser of
1. the fair market value of the property immediately before the beneficiary’s death, and
2. the adjusted cost base to the trust of the property immediately before the beneficiary’s death, and
(B) the child is, immediately after the time of the disposition of the property, deemed to have acquired the property at a cost equal to the trust’s proceeds of disposition in respect of that disposition of the property determined under clause (A),
(iii) where the property is, immediately before that beneficiary’s death, a partnership interest described in subparagraph (9.3)(c)(iii) (other than a partnership interest to which subsection 100(3) applies), and the trust further elects, in its return of income under this Part for the taxation year in which the beneficiary died, to have this subparagraph apply to the trust in respect of the property,
(A) the trust is, except for the purpose of paragraph 98(5)(g), deemed not to have disposed of the property as a consequence of the beneficiary’s death,
(B) the child is deemed to have acquired the property, at the time of the beneficiary’s death, at a cost equal to the cost to the trust of the property immediately before the time that is immediately before the beneficiary’s death, and
(C) each amount required by subsection 53(1) or (2) to be added or deducted in computing, immediately before the beneficiary’s death, the adjusted cost base to the trust of the property is deemed to be an amount required by subsection 53(1) or (2) to be added or deducted in computing, at or after the time of the beneficiary’s death, the adjusted cost base to the child of the property,
(iv) except for the purpose of this subparagraph, where the amount designated by the trust under subclause (ii)(A)(II) exceeds the greater of the amounts determined under sub-subclauses (ii)(A)(II)1 and 2 in respect of the property, the amount designated is deemed to be equal to the greater of those amounts, and
(v) except for the purpose of this subparagraph, where the amount designated by the trust under subclause (ii)(A)(II) is less than the lesser of the amounts determined under sub-subclauses (ii)(A)(II)1 and 2 in respect of the property, the amount designated is deemed to be equal to the lesser of those amounts.
(2) Subsection 70(9.6) of the Act is replaced by the following:
Marginal note:Transfer to a parent
(9.6) Subsection (9.01) or (9.21), as the case may be, applies in respect of a transfer of a property as if the references in those subsections to “child” were read as references to “parent” if
(a) the property was acquired by a taxpayer in circumstances where any of subsections (9.01), (9.11), (9.21), (9.31) and 73(3.1) and (4.1) applied in respect of the acquisition;
(b) as a consequence of the death of the taxpayer the property is transferred to a parent of the taxpayer; and
(c) the taxpayer’s legal representative has elected, in the taxpayer’s return of income under this Part for the taxation year in which the taxpayer died, that this subsection apply in respect of the transfer.
(3) Subsection 70(9.8) of the Act is replaced by the following:
Marginal note:Leased farm and fishing property
(9.8) For the purposes of subsections (9) and 14(1), paragraph 20(1)(b), subsection 73(3) and paragraph (d) of the definitions “qualified farm property” and “qualified fishing property” in subsection 110.6(1), a property of an individual is, at a particular time, deemed to be used by the individual in a fishing or farming business, as the case may be, carried on in Canada if, at that particular time, the property is being used, principally in the course of carrying on a fishing or farming business in Canada, by
(a) a corporation, a share of the capital stock of which is a share of the capital stock of a family fishing corporation, or a share of the capital stock of a family farm corporation, of the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual; or
(b) a partnership, a partnership interest of which is an interest in a family fishing partnership, or an interest in a family farm partnership, of the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual.
(4) The definition “interest in a family farm partnership” in subsection 70(10) of the Act is replaced by the following:
“interest in a family farm partnership”
« participation dans une société de personnes agricole familiale »
“interest in a family farm partnership” of an individual at any time means a partnership interest owned by the individual at that time if, at that time, all or substantially all of the fair market value of the property of the partnership was attributable to
(a) property that has been used principally in the course of carrying on a farming business in Canada in which the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual was actively engaged on a regular and continuous basis (or, in the case of property used in the operation of a woodlot, was engaged to the extent required by a prescribed forest management plan in respect of that woodlot), by
(i) the partnership,
(ii) a corporation, a share of the capital stock of which is a share of the capital stock of a family farm corporation of the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual,
(iii) a partnership, a partnership interest in which is an interest in a family farm partnership of the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual, or
(iv) the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual,
(b) shares of the capital stock or indebtedness of one or more corporations all or substantially all of the fair market value of the property of which was attributable to property described in paragraph (d),
(c) partnership interests or indebtedness of one or more partnerships all or substantially all of the fair market value of the property of which was attributable to property described in paragraph (d), or
(d) properties described in any of paragraphs (a) to (c);
(5) Subsection 70(10) of the Act is amended by adding the following in alphabetical order:
“interest in a family fishing partnership”
« participation dans une société de personnes de pêche familiale »
“interest in a family fishing partnership” of an individual at any time means a partnership interest owned by the individual at that time if, at that time, all or substantially all of the fair market value of the property of the partnership was attributable to
(a) property that has been used principally in the course of carrying on a fishing business in Canada in which the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual was actively engaged on a regular and continuous basis, by
(i) the partnership,
(ii) a corporation, a share of the capital stock of which is a share of the capital stock of a family fishing corporation of the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual,
(iii) a partnership, a partnership interest in which is an interest in a family fishing partnership of the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual, or
(iv) the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual,
(b) shares of the capital stock or indebtedness of one or more corporations all or substantially all of the fair market value of the property of which was attributable to property described in paragraph (d),
(c) partnership interests or indebtedness of one or more partnerships all or substantially all of the fair market value of the property of which was attributable to property described in paragraph (d), or
(d) properties described in any of paragraphs (a) to (c);
“share of the capital stock of a family fishing corporation”
« action du capital-actions d’une société de pêche familiale »
“share of the capital stock of a family fishing corporation” of an individual at any time means a share of the capital stock of a corporation owned by the individual at that time if, at that time, all or substantially all of the fair market value of the property owned by the corporation was attributable to
(a) property that has been used principally in the course of carrying on a fishing business in Canada in which the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual was actively engaged on a regular and continuous basis, by
(i) the corporation,
(ii) a corporation, a share of the capital stock of which is a share of the capital stock of a family fishing corporation of the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual,
(iii) a corporation controlled by a corporation described in subparagraph (i) or (ii),
(iv) a partnership, a partnership interest in which is an interest in a family fishing partnership of the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual, or
(v) the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual,
(b) shares of the capital stock or indebtedness of one or more corporations all or substantially all of the fair market value of the property of which was attributable to property described in paragraph (d),
(c) partnership interests or indebtedness of one or more partnerships all or substantially all of the fair market value of the property of which was attributable to property described in paragraph (d), or
(d) properties described in any of paragraphs (a) to (c);
(6) Subsections (1) to (5) apply to a disposition, that occurs on or after May 2, 2006, of a property unless the disposition of the property was before 2007 and the taxpayer elects in writing in the taxpayer’s return of income for the taxation year in which the disposition occurred to have subsection 70(9), (9.1), (9.2) or (9.3) of the Act, as that subsection read on May 1, 2006, apply to the disposition of the property.
11. (1) Paragraph 73(3)(c) of the Act is replaced by the following:
(c) subsection 69(1) does not apply in determining the proceeds of disposition of the depreciable property, the land or the eligible capital property;
(2) Paragraph 73(4)(b) of the Act is replaced by the following:
(b) subsection 69(1) does not apply in determining the proceeds of disposition of the property; and
(3) Subsections 73(3) and (4) of the Act, as amended by subsections (1) and (2), respectively, are replaced by the following:
Marginal note:When subsection (3.1) applies
(3) Subsection (3.1) applies to a taxpayer and a child of the taxpayer in respect of property that has been transferred, at any time, by the taxpayer to the child, where
(a) the property was, immediately before the transfer, land in Canada or depreciable property in Canada of a prescribed class, of the taxpayer, or any eligible capital property in respect of a fishing or farming business carried on in Canada by the taxpayer;
(b) the child of the taxpayer was resident in Canada immediately before the transfer; and
(c) the property has been used principally in a fishing or farming business in which the taxpayer, the taxpayer’s spouse or common-law partner, a child of the taxpayer or a parent of the taxpayer was actively engaged on a regular and continuous basis (or in the case of property used in the operation of a woodlot, was engaged to the extent required by a prescribed forest management plan in respect of that woodlot).
Marginal note:Inter vivos transfer of farm or fishing property to child
(3.1) If, because of subsection (3), this subsection applies to the taxpayer and a child of the taxpayer in respect of a property transferred by the taxpayer to the child of the taxpayer, the following rules apply:
(a) where, immediately before the transfer, the property was depreciable property of a prescribed class, the taxpayer is deemed to have disposed of the property, at the time of the transfer, for proceeds of disposition equal to
(i) in any case to which neither subparagraph (ii) nor (iii) applies, the taxpayer’s proceeds of disposition otherwise determined,
(ii) the greater of the amounts referred to in clauses (A) and (B), if the taxpayer’s proceeds of disposition otherwise determined exceed the greater of
(A) the fair market value of the property immediately before the time of the transfer, and
(B) the lesser of
(I) the capital cost to the taxpayer of the property, and
(II) the amount, determined immediately before the time of the disposition of the property, that is that proportion of the undepreciated capital cost of property of that class to the taxpayer that the capital cost to the taxpayer of the property is of the capital cost to the taxpayer of all property of that class that had not, at or before that time, been disposed of, or
(iii) if the taxpayer’s proceeds of disposition otherwise determined are less than the lesser of the amounts referred to in clauses (ii)(A) and (B), the lesser of those amounts;
(b) where the property transferred was land, the taxpayer is deemed to have disposed of the property at the time of the transfer for proceeds of disposition equal to,
(i) in any case to which neither subparagraph (ii) nor (iii) applies, the taxpayer’s proceeds of disposition otherwise determined,
(ii) the greater of the amounts referred to in clauses (A) and (B), if the taxpayer’s proceeds of disposition otherwise determined exceed the greater of
(A) the fair market value of the land immediately before the time of the transfer, and
(B) the adjusted cost base to the taxpayer of the land immediately before the time of the transfer, or
(iii) if the taxpayer’s proceeds of disposition otherwise determined are less than the lesser of the amounts referred to in clauses (ii)(A) and (B), the lesser of those amounts;
(c) where, immediately before the transfer, the property was eligible capital property, the taxpayer is deemed to have disposed of the property, at the time of the transfer, for proceeds of disposition equal to,
(i) in any case to which neither subparagraph (ii) nor (iii) applies, the taxpayer’s proceeds of disposition otherwise determined,
(ii) the greater of the amounts referred to in clauses (A) and (B), if the taxpayer’s proceeds of disposition otherwise determined exceed the greater of
(A) the fair market value of the property immediately before the time of the transfer, and
(B) the amount determined by the formula
4/3 (A × B/C)
where
A
is the taxpayer’s cumulative eligible capital in respect of the business,
B
is the fair market value of the property immediately before the transfer, and
C
is the fair market value immediately before the transfer of all the taxpayer’s eligible capital property in respect of the business, or
(iii) if the taxpayer’s proceeds of disposition otherwise determined are less than the lesser of the amounts referred to in clauses (ii)(A) and (B), the lesser of those amounts;
(d) subsection 69(1) does not apply to the taxpayer and the child in respect of the property;
(e) the child is deemed to have acquired the property at a cost equal to the taxpayer’s proceeds of disposition in respect of the disposition of the property determined under
(i) where the property is depreciable property of the taxpayer, paragraph (a), and
(ii) where the property is land of the taxpayer, paragraph (b);
(f) if the property was, immediately before the transfer, an eligible capital property of the taxpayer in respect of a business, the child is deemed to have acquired
(i) where the child does not continue to carry on the business, a capital property, immediately after the transfer, at a cost equal to the taxpayer’s proceeds of disposition in respect of the disposition of the property determined under paragraph (c),
(ii) where the child continues to carry on the business, an eligible capital property and to have made an eligible capital expenditure at a cost equal to the total of
(A) the taxpayer’s proceeds of disposition referred to in paragraph (c), and
(B) 4/3 of the amount determined by the formula
(A × B/C) - D
where
A
is the amount, if any, determined for F in the definition “cumulative eligible capital” in subsection 14(5) in respect of the business immediately before the transfer,
B
is the fair market value of the property immediately before the transfer,
C
is the fair market value immediately before the transfer of all the taxpayer’s eligible capital property in respect of the business, and
D
is the amount, if any, included under paragraph 14(1)(a) in computing the taxpayer’s income as a result of the disposition, and
(iii) for the purpose of determining at any subsequent time the child’s cumulative eligible capital in respect of the business, an amount equal to ¾ of the amount determined under subparagraph (ii) is to be added to the amount otherwise determined for P in the definition “cumulative eligible capital” in subsection 14(5);
(g) for the purpose of determining, in respect of any disposition of the property, after the time of the transfer, the amount deemed to be the child’s taxable capital gain, and the amount to be included in computing the child’s income, there shall be added to the amount otherwise determined for Q in respect of the business in the definition “cumulative eligible capital” in subsection 14(5), the amount determined by the formula,
A × B/C
where
A
is the amount, if any, determined for Q in that definition in respect of the business immediately before the time of the transfer,
B
is the fair market value, immediately before that time, of the transferred property , and
C
is the fair market value immediately before that time of all the taxpayer’s eligible capital property in respect of the business; and
(h) where the property is depreciable property of a prescribed class of the taxpayer and the capital cost to the taxpayer of the property exceeds the cost to the child of the property, for the purposes of sections 13 and 20 and any regulations made under paragraph 20(1)(a),
(i) the capital cost to the child of the property is deemed to be the amount that was the capital cost to the taxpayer of the property immediately before the transfer, and
(ii) the excess is deemed to have been allowed to the child in respect of the property under regulations made under paragraph 20(1)(a) in computing income for taxation years that ended before the the child acquired the property.
Marginal note:When subsection (4.1) applies
(4) Subsection (4.1) applies to a taxpayer and a child of the taxpayer in respect of property that has been transferred, at any time, to the child if
(a) the child was resident in Canada immediately before the transfer; and
(b) the property was, immediately before the transfer, a share of the capital stock of a family fishing corporation of the taxpayer, a share of the capital stock of a family farm corporation of the taxpayer, an interest in a family fishing partnership of the taxpayer or an interest in a family farm partnership of the taxpayer (within the meaning assigned by subsection 70(10)).
Marginal note:Inter vivos transfer of family farm or fishing corporations and partnerships
(4.1) If, because of subsection (4), this subsection applies to the taxpayer and the taxpayer’s child in respect of the transfer of the property by the taxpayer to the child,
(a) subject to paragraph (c), where the property was, immediately before the transfer, a share of the capital stock of a family fishing corporation of the taxpayer, a share of the capital stock of a family farm corporation of the taxpayer, an interest in a family fishing partnership of the taxpayer or an interest in a family farm partnership of the taxpayer, the taxpayer is deemed to have disposed of the property at the time of the transfer for proceeds of disposition equal to,
(i) in any case to which neither subparagraph (ii) nor (iii) applies, the taxpayer’s proceeds of disposition otherwise determined,
(ii) the greater of the amounts referred to in clauses (A) and (B), if the taxpayer’s proceeds of disposition otherwise determined exceed the greater of
(A) the fair market value of the property immediately before the time of the transfer, and
(B) the adjusted cost base to the taxpayer of the property immediately before the time of the transfer, or
(iii) if the taxpayer’s proceeds of disposition otherwise determined are less than the lesser of the amounts referred to in clauses (ii)(A) and (B), the lesser of those amounts;
(b) subject to paragraph (c), where the property is, immediately before the transfer, a share of the capital stock of a family fishing corporation of the taxpayer, a share of the capital stock of a family farm corporation of the taxpayer, an interest in a family fishing partnership of the taxpayer or an interest in a family farm partnership of the taxpayer, the child is deemed to have acquired the property for an amount equal to the taxpayer’s proceeds of disposition in respect of the disposition of the property determined under paragraph (a);
(c) where the property is, immediately before the transfer, an interest in a family fishing partnership of the taxpayer, or an interest in a family farm partnership of the taxpayer (other than a partnership interest to which subsection 100(3) applies), the taxpayer receives no consideration in respect of the transfer of the property and the taxpayer elects, in the taxpayer’s return of income under this Part for the taxation year which includes the time of the transfer, to have this paragraph apply in respect of the transfer of the property,
(i) the taxpayer is, except for the purpose of paragraph 98(5)(g), deemed not to have disposed of the property at the time of the transfer,
(ii) the child is deemed to have acquired the property at the time of the transfer at a cost equal to the cost to the taxpayer of the interest immediately before the transfer, and
(iii) each amount required by subsection 53(1) or (2) to be added or deducted in computing the adjusted cost base to the taxpayer, immediately before the transfer, of the property is deemed to be an amount required by subsection 53(1) or (2) to be added or deducted in computing at any time at or after the time of the transfer, the adjusted cost base to the child of the property; and
(d) subsection 69(1) does not apply to the taxpayer and the child in respect of the property.
(4) Subsections (1) and (2) apply to dispositions that occur after December 20, 2002.
(5) Subsection (3) applies to a disposition, that occurs on or after May 2, 2006, of a property unless the disposition of the property was before 2007 and the taxpayer elects in writing in the taxpayer’s return of income for the taxation year in which the disposition occurred to have subsection 73(3) or 73(4) of the Act, as that subsection read on May 1, 2006, apply to the disposition of the property.
12. (1) Subsection 74.1(2) of the Act is replaced by the following:
Marginal note:Transfers and loans to minors
(2) If an individual has transferred or lent property, either directly or indirectly, by means of a trust or by any other means whatever, to or for the benefit of a person who was under 18 years of age (other than an amount received in respect of that person either as a consequence of the operation of subsection 122.61(1) or under section 4 of the Universal Child Care Benefit Act) and who
(a) does not deal with the individual at arm’s length, or
(b) is the niece or nephew of the individual,
any income or loss, as the case may be, of that person for a taxation year from the property or from property substituted for that property, that relates to the period in the taxation year throughout which the individual is resident in Canada, is deemed to be income or a loss, as the case may be, of the individual and not of that person unless that person has, before the end of the taxation year, attained the age of 18 years.
(2) Subsection (1) applies in respect of amounts received after June 30, 2006.
13. (1) The portion of subsection 85(5.1) of the Act before paragraph (a) is replaced by the following:
Marginal note:Acquisition of certain tools — capital cost and deemed depreciation
(5.1) If subsection (1) has applied in respect of the acquisition at any particular time of any depreciable property by a corporation from an individual, the cost of the property to the individual was included in computing an amount under paragraph 8(1)(r) or (s) in respect of the individual, and the amount that would be the cost of the property to the individual immediately before the transfer if this Act were read without reference to subsection 8(7) (which amount is in this subsection referred to as the “individual’s original cost”) exceeds the individual’s proceeds of disposition of the property,
(2) Subsection (1) applies to the 2006 and subsequent taxation years.
14. (1) The portion of subsection 97(5) of the Act before paragraph (a) is replaced by the following:
Marginal note:Acquisition of certain tools — capital cost and deemed depreciation
(5) If subsection (2) has applied in respect of the acquisition at any particular time of any depreciable property by a partnership from an individual, the cost of the property to the individual was included in computing an amount under paragraph 8(1)(r) or (s) in respect of the individual, and the amount that would be the cost of the property to the individual immediately before the transfer if this Act were read without reference to subsection 8(7) (which amount is in this subsection referred to as the “individual’s original cost”) exceeds the individual’s proceeds of disposition of the property,
(2) Subsection (1) applies to the 2006 and subsequent taxation years.
15. (1) Paragraph 104(21.2)(b) of the Act is replaced by the following:
(b) the beneficiary is, for the purposes of sections 3, 74.3 and 111 as they apply for the purposes of section 110.6,
(i) deemed to have disposed of the capital property referred to in clause (ii)(A), (B) or (C) if a taxable capital gain is determined in respect of the beneficiary for the beneficiary’s taxation year in which the designation year ends under those clauses, and
(ii) deemed to have a taxable capital gain for the beneficiary’s taxation year in which the designation year ends
(A) from a disposition of a capital property that is qualified farm property (as defined for the purpose of section 110.6) of the beneficiary equal to the amount determined by the formula
(A × B × C)/(D × E)
(B) from a disposition of a capital property that is a qualified small business corporation share (as defined for the purpose of section 110.6) of the beneficiary equal to the amount determined by the formula
(A × B × F)/(D × E)
and
(C) from a disposition of a capital property that is a qualified fishing property (as defined for the purpose of section 110.6) of the beneficiary equal to the amount determined by the formula
(A × B × I)/(D × E)
where
A
is the lesser of
(I) the amount determined by the formula
G - H
where
G
is the total of amounts designated under subsection (21) for the designation year by the trust, and
H
is the total of amounts designated under subsection (13.2) for the designation year by the trust, and
(II) the trust’s eligible taxable capital gains for the designation year,
B
is the amount, if any, by which the amount designated under subsection (21) for the designation year by the trust in respect of the beneficiary exceeds the amount designated under subsection (13.2) for the year by the trust in respect of the beneficiary for the taxation year,
C
is the amount, if any, that would be determined under paragraph 3(b) for the designation year in respect of the trust’s capital gains and capital losses if the only properties referred to in that paragraph were qualified farm properties of the trust disposed of by it after 1984,
D
is the total of all amounts each of which is the amount determined for B for the designation year in respect of a beneficiary under the trust,
E
is the total of the amounts determined for C, F and I for the designation year in respect of the beneficiary,
F
is the amount, if any, that would be determined under paragraph 3(b) for the designation year in respect of the trust’s capital gains and capital losses if the only properties referred to in that paragraph were qualified small business corporation shares of the trust, other than qualified farm property, disposed of by it after June 17, 1987, and
I
is the amount, if any, that would be determined under paragraph 3(b) for the designation year in respect of the trust’s capital gains and capital losses if the only properties referred to in that paragraph were qualified fishing properties of the trust disposed of by it on or after May 2, 2006,
(2) Subsection (1) applies to taxation years of a trust that end on or after May 2, 2006.
16. (1) Subsection 108(1) of the Act is amended by adding the following in alphabetical order:
“qualified fishing property”
« bien de pêche admissible »
“qualified fishing property” of an individual has the meaning assigned by subsection 110.6(1);
(2) Subsection (1) applies after May 1, 2006.
17. (1) The definitions “interest in a family farm partnership”, “qualified farm property” and “share of the capital stock of a family farm corporation” in subsection 110.6(1) of the Act are replaced by the following:
“interest in a family farm partnership”
« participation dans une société de personnes agricole familiale »
“interest in a family farm partnership” of an individual (other than a trust that is not a personal trust) at any time means a partnership interest owned by the individual at that time if
(a) throughout any 24-month period ending before that time, more than 50% of the fair market value of the property of the partnership was attributable to
(i) property that was used principally in the course of carrying on the business of farming in Canada in which the individual, a beneficiary referred to in clause (C) or a spouse, common-law partner, child or parent of the individual or of a beneficiary referred to in clause (C) was actively engaged on a regular and continuous basis, by
(A) the partnership,
(B) the individual,
(C) where the individual is a personal trust, a beneficiary of the trust,
(D) a spouse, common-law partner, child or parent of the individual or of a beneficiary referred to in clause (C),
(E) a corporation, a share of the capital stock of which was a share of the capital stock of a family farm corporation of the individual, a beneficiary referred to in clause (C) or a spouse, common-law partner, child or parent of the individual or of a beneficiary referred to in clause (C), or
(F) a partnership, a partnership interest of which was an interest in a family farm partnership of the individual, a beneficiary referred to in clause (C) or a spouse, common-law partner, child or parent of the individual or of a beneficiary referred to in clause (C),
(ii) shares of the capital stock or indebtedness of one or more corporations all or substantially all of the fair market value of the property of which was attributable to properties described in subparagraph (iv),
(iii) a partnership interest in or indebtedness of one or more partnerships all or substantially all of the fair market value of the property of which was attributable to properties described in subparagraph (iv), or
(iv) properties described in any of subparagraphs (i) to (iii), and
(b) at that time, all or substantially all of the fair market value of the property of the partnership was attributable to property described in subparagraph (a)(iv);
“qualified farm property”
« bien agricole admissible »
“qualified farm property” of an individual (other than a trust that is not a personal trust) at any time means a property owned at that time by the individual, the spouse or common-law partner of the individual or a partnership, an interest in which is an interest in a family farm partnership of the individual or the individual’s spouse or common-law partner that is
(a) real or immovable property that was used principally in the course of carrying on the business of farming in Canada by,
(i) the individual,
(ii) if the individual is a personal trust, a beneficiary of the trust that is entitled to receive directly from the trust any income or capital of the trust,
(iii) a spouse, common-law partner, child or parent of a person referred to in subparagraph (i) or (ii),
(iv) a corporation, a share of the capital stock of which is a share of the capital stock of a family farm corporation of an individual referred to in any of subparagraphs (i) to (iii), or
(v) a partnership, an interest in which is an interest in a family farm partnership of an individual referred to in any of subparagraphs (i) to (iii),
(b) a share of the capital stock of a family farm corporation of the individual or the individual’s spouse or common-law partner,
(c) an interest in a family farm partnership of the individual or the individual’s spouse or common-law partner, or
(d) an eligible capital property (which is deemed to include capital property to which paragraph 70(5.1)(b) or 73(3.1)(f) applies) used by a person or partnership referred to in any of subparagraphs (a)(i) to (v), or by a personal trust from which the individual acquired the property, in the course of carrying on the business of farming in Canada;
“share of the capital stock of a family farm corporation”
« action du capital-actions d’une société agricole familiale »
“share of the capital stock of a family farm corporation” of an individual (other than a trust that is not a personal trust) at any time means a share of the capital stock of a corporation owned by the individual at that time if
(a) throughout any 24-month period ending before that time, more than 50% of the fair market value of the property owned by the corporation was attributable to
(i) property that was used principally in the course of carrying on the business of farming in Canada in which the individual, a beneficiary referred to in clause (C) or a spouse or common-law partner, child or parent of the individual or of a beneficiary referred to in clause (C) was actively engaged on a regular and continuous basis, by
(A) the corporation,
(B) the individual,
(C) where the individual is a personal trust, a beneficiary of the trust,
(D) a spouse, common-law partner, child or parent of the individual or of a beneficiary referred to in clause (C),
(E) another corporation that is related to the corporation and of which a share of the capital stock was a share of the capital stock of a family farm corporation of the individual, a beneficiary referred to in clause (C) or a spouse, common-law partner, child or parent of the individual or of a beneficiary referred to in clause (C), or
(F) a partnership, an interest in which was an interest in a family farm partnership of the individual, a beneficiary referred to in clause (C) or a spouse, common-law partner, child or parent of the individual or of such a beneficiary,
(ii) shares of the capital stock or indebtedness of one or more corporations all or substantially all of the fair market value of the property of which was attributable to property described in subparagraph (iv),
(iii) a partnership interest in or indebtedness of one or more partnerships all or substantially all of the fair market value of the property of which was attributable to properties described in subparagraph (iv), or
(iv) properties described in any of subparagraphs (i) to (iii), and
(b) at that time, all or substantially all of the fair market value of the property owned by the corporation was attributable to property described in subparagraph (a)(iv);
(2) Paragraph (b) of the description of A in the definition “annual gains limit” in subsection 110.6(1) of the Act is replaced by:
(b) the amount that would be determined in respect of the individual for the year under paragraph 3(b) in respect of capital gains and losses if the only properties referred to in that paragraph were qualified farm properties disposed of by the individual after 1984, qualified small business corporation shares disposed of by the individual after June 17, 1987 and qualified fishing properties disposed of by the individual on or after May 2, 2006, and
(3) Subparagraph (a)(i) of the definition “share of the capital stock of a family farm corporation” in subsection 110.6(1) of the Act is amended by striking out the word “or” at the end of clause (D) and by adding the following after that clause:
(D.1) another corporation that is related to the corporation and of which a share of the capital stock was a share of the capital stock of a family farm corporation of the individual, a beneficiary referred to in clause (C) or a spouse or common-law partner, child or parent of the individual or of a beneficiary referred to in clause (C), or
(4) Subsection 110.6(1) of the Act is amended by adding the following in alphabetical order:
“interest in a family fishing partnership”
« participation dans une société de personnes de pêche familiale »
“interest in a family fishing partnership” of an individual (other than a trust that is not a personal trust) at any time means a partnership interest owned by the individual at that time if
(a) throughout any 24-month period ending before that time, more than 50% of the fair market value of the property of the partnership was attributable to
(i) property that was used principally in the course of carrying on the business of fishing in Canada in which the individual, a beneficiary referred to in clause (C) or a spouse or common-law partner, child or parent of the individual or of a beneficiary referred to in clause (C) was actively engaged on a regular and continuous basis, by
(A) the partnership,
(B) the individual,
(C) where the individual is a personal trust, a beneficiary of the trust,
(D) a spouse, common-law partner, child or parent of the individual or of a beneficiary referred to in clause (C),
(E) a corporation, a share of the capital stock of which was a share of the capital stock of a family fishing corporation of the individual, a beneficiary referred to in clause (C) or a spouse, common-law partner, child or parent of the individual or of a beneficiary referred to in clause (C), or
(F) a partnership, a partnership interest of which was an interest in a family fishing partnership of the individual, a beneficiary referred to in clause (C) or a spouse, common-law partner, child or parent of the individual or of a beneficiary referred to in clause (C),
(ii) shares of the capital stock or indebtedness of one or more corporations all or substantially all of the fair market value of the property of which was attributable to properties described in subparagraph (iv),
(iii) a partnership interest in or indebtedness of one or more partnerships all or substantially all of the fair market value of the property of which was attributable to properties described in subparagraph (iv), or
(iv) properties described in any of subparagraph (i) to (iii), and
(b) at that time, all or substantially all of the fair market value of the property of the partnership was attributable to property described in subparagraph (a)(iv);
“qualified fishing property”
« bien de pêche admissible »
“qualified fishing property” of an individual (other than a trust that is not a personal trust) at any time means a property owned at that time by the individual, the spouse or common-law partner of the individual or a partnership, an interest in which is an interest in a family fishing partnership of the individual or the individual’s spouse or common-law partner that is
(a) real or immovable property or a fishing vessel that was used principally in the course of carrying on the business of fishing in Canada by,
(i) the individual,
(ii) if the individual is a personal trust, a beneficiary of the trust that is entitled to receive directly from the trust any income or capital of the trust,
(iii) a spouse, common-law partner, child or parent of a person referred to in subparagraph (i) or (ii),
(iv) a corporation, a share of the capital stock of which is a share of the capital stock of a family fishing corporation of an individual referred to in any of subparagraphs (i) to (iii), or
(v) a partnership, an interest in which is an interest in a family fishing partnership of an individual referred to in any of subparagraphs (i) to (iii),
(b) a share of the capital stock of a family fishing corporation of the individual or the individual’s spouse or common-law partner,
(c) an interest in a family fishing partnership of the individual or the individual’s spouse or common-law partner, or
(d) an eligible capital property (which is deemed to include capital property to which paragraph 70(5.1)(b) or 73(3.1)(f) applies) used by a person or partnership referred to in any of subparagraphs (a)(i) to (v), or by a personal trust from which the individual acquired the property, in the course of carrying on the business of fishing in Canada;
“share of the capital stock of a family fishing corporation”
« action du capital-actions d’une société de pêche familiale »
“share of the capital stock of a family fishing corporation” of an individual (other than a trust that is not a personal trust) at any time means a share of the capital stock of a corporation owned by the individual at that time if
(a) throughout any 24-month period ending before that time, more than 50% of the fair market value of the property owned by the corporation was attributable to
(i) property that was used principally in the course of carrying on the business of fishing in Canada in which the individual, a beneficiary referred to in clause (C) or a spouse or common-law partner, child or parent of the individual or of a beneficiary referred to in clause (C), was actively engaged on a regular and continuous basis, by
(A) the corporation,
(B) the individual,
(C) where the individual is a personal trust, a beneficiary of the trust,
(D) a spouse, common-law partner, child or parent of the individual or of a beneficiary referred to in clause (C),
(E) another corporation that is related to the corporation and of which a share of the capital stock was a share of the capital stock of a family fishing corporation of the individual, a beneficiary referred to in clause (C) or a spouse, common-law partner, child or parent of the individual or of a beneficiary referred to in clause (C), or
(F) a partnership, an interest in which was an interest in a family fishing partnership of the individual, a beneficiary referred to in clause (C) or a spouse, common-law partner, child or parent of the individual or of such a beneficiary,
(ii) shares of the capital stock or indebtedness of one or more corporations all or substantially all of the fair market value of the property of which was attributable to property described in subparagraph (iv),
(iii) a partnership interest in or indebtedness of one or more partnerships all or substantially all of the fair market value of the property of which was attributable to properties described in subparagraph (iv), or
(iv) properties described in any of subparagraphs (i) to (iii), and
(b) at that time, all or substantially all of the fair market value of the property owned by the corporation was attributable to property described in subparagraph (a)(iv).
(5) Section 110.6 of the Act is amended by adding the following after subsection (1.1):
Marginal note:Property used in a fishing business
(1.2) For the purposes of applying the definition “qualified fishing property”, in subsection (1), of an individual, at any time, a property owned at that time by the individual, the spouse or common-law partner of the individual, or a partnership, an interest in which is an interest in a family fishing partnership of the individual or of the individual’s spouse or common-law partner, will not be considered to have been used in the course of carrying on the business of fishing in Canada, unless
(a) throughout the period of at least 24 months immediately preceding that time, the property or property for which the property was substituted (in this paragraph referred to as “the property”) was owned, by any one or more of
(i) the individual, or a spouse, common-law partner, child or parent of the individual,
(ii) a partnership, an interest in which is an interest in a family fishing partnership of the individual or of the individual’s spouse or common-law partner,
(iii) if the individual is a personal trust, the individual from whom the trust acquired the property or a spouse, common-law partner, child or parent of that individual, or
(iv) a personal trust from which the individual or a child or parent of the individual acquired the property; and
(b) either
(i) in at least two years while the property was owned by the one or more persons referred to in paragraph (a),
(A) the gross revenue of a person (in this clause referred to as the “operator”) referred to in paragraph (a) from the fishing business referred to in clause (B) for the period during which the property was owned by a person described in paragraph (a) exceeded the income of the operator from all other sources for that period, and
(B) the property was used principally in a fishing business carried on in Canada in which an individual referred to in paragraph (a), or where the individual is a personal trust, a beneficiary of the trust, was actively engaged on a regular and continuous basis, or
(ii) throughout a period of at least 24 months while the property was owned by one or more persons or partnerships referred to in paragraph (a), the property was used by a corporation referred to in subparagraph (a)(iv) of the definition “qualified fishing property” in subsection (1) or by a partnership referred to in paragraph (a)(v) of that definition in a fishing business in which an individual referred to in any of subparagraphs (a)(i) to (iii) of that definition was actively engaged on a regular and continuous basis.
Marginal note:Property used in a farming business
(1.3) For the purposes of applying the definition “qualified farm property”, in subsection (1), of an individual, at any time, a property owned at that time by the individual, the spouse or common-law partner of the individual, or a partnership, an interest in which is an interest in a family farm partnership of the individual or of the individual’s spouse or common-law partner, will not be considered to have been used in the course of carrying on the business of farming in Canada, unless
(a) throughout the period of at least 24 months immediately preceding that time, the property or property for which the property was substituted (in this paragraph referred to as “the property”) was owned, by any one or more of
(i) the individual, or a spouse, common-law partner, child or parent of the individual,
(ii) a partnership, an interest in which is an interest in a family farm partnership of the individual or of the individual’s spouse or common-law partner,
(iii) if the individual is a personal trust, the individual from whom the trust acquired the property or a spouse, common-law partner, child or parent of that individual, or
(iv) a personal trust from which the individual or a child or parent of the individual acquired the property;
(b) if paragraph (c) does not apply, either
(i) in at least two years while the property was owned by the one or more persons referred to in paragraph (a),
(A) the gross revenue of a person (in this clause referred to as the “operator”) referred to in paragraph (a) from the farming business referred to in clause (B) for the period during which the property was owned by a person described in paragraph (a) exceeded the income of the operator from all other sources for that period, and
(B) the property was used principally in a farming business carried on in Canada in which an individual referred to in paragraph (a), or where the individual is a personal trust, a beneficiary of the trust, was actively engaged on a regular and continuous basis, or
(ii) throughout a period of at least 24 months while the property was owned by one or more persons or partnerships referred to in paragraph (a), the property was used by a corporation referred to in subparagraph (a)(iv) of the definition “qualified farm property” in subsection (1) or by a partnership referred to in subparagraph (a)(v) of that definition in a farming business in which an individual referred to in any of subparagraphs (a)(i) to (iii) of that definition was actively engaged on a regular and continuous basis; or
(c) if the property or property for which the property was substituted was last acquired by the individual or partnership before June 18, 1987 or after June 17, 1987 under an agreement in writing entered into before that date,
(i) in the year the property was disposed of by the individual, the property was used principally in the course of carrying on the business of farming in Canada by
(A) the individual, or a spouse, common-law partner, child or parent of the individual,
(B) a beneficiary referred to in subparagraph (a)(ii) in the definition “qualified farm property” in subsection (1) or a spouse, common-law partner, child or parent of that beneficiary,
(C) a corporation referred to in subparagraph (a)(iv) in the definition “qualified farm property” in subsection (1),
(D) a partnership referred to in subparagraph (a)(v) in the definition “qualified farm property” in subsection (1), or
(E) a personal trust from which the individual acquired the property, or
(ii) in at least five years during which the property was owned by a person described in clauses (A) to (E), the property was used principally in the course of carrying on the business of farming in Canada by
(A) the individual, or a spouse, common-law partner, child or parent of the individual,
(B) a beneficiary referred to in subparagraph (a)(ii) in the definition “qualified farm property” in subsection (1) or a spouse, common-law partner, child or parent of that beneficiary,
(C) a corporation referred to in subparagraph (a)(iv) in the definition “qualified farm property” in subsection (1),
(D) a partnership referred to in subparagraph (a)(v) in the definition “qualified farm property” in subsection (1), or
(E) a personal trust from which the individual acquired the property.
(6) The description of A in paragraph 110.6(2)(a) of the Act is replaced by the following:
A
is the total of all amounts each of which is an amount deducted under this section in computing the individual’s taxable income for a preceding taxation year that ended
(i) before 1988, or
(ii) after October 17, 2000,
(7) Paragraph 110.6(2)(d) of the Act is replaced by the following:
(d) the amount that would be determined in respect of the individual for the year under paragraph 3(b) in respect of capital gains and capital losses if the only properties referred to in that paragraph were qualified farm properties of the individual disposed of after June 17, 1987.
(8) Paragraph 110.6(2.1)(d) of the Act is replaced by the following:
(d) the amount that would be determined in respect of the individual for the year under paragraph 3(b) (to the extent that that amount is not included in computing the amount determined under paragraph (2)(d) or (2.2)(d) in respect of the individual) in respect of capital gains and capital losses if the only properties referred to in paragraph 3(b) were qualified small business corporation shares of the individual disposed of after June 17, 1987.
(9) Section 110.6 of the Act is amended by adding the following after subsection (2.1):
Marginal note:Capital gains deduction — qualified fishing property
(2.2) In computing the taxable income for a taxation year of an individual (other than a trust) who was resident in Canada throughout the year and who, in the year or a preceding year, disposed of a property that was, at the time of disposition, a qualified fishing property of the individual, there may be deducted the amount that the individual claims not exceeding the least of
(a) the amount determined by the formula in paragraph (2)(a) in respect of the individual for the year;
(b) the amount, if any, by which the individual’s cumulative gains limit at the end of that year exceeds the total of all amounts each of which is an amount deducted under subsection (2) or (2.1) in computing the individual’s taxable income for the year;
(c) the amount, if any, by which the individual’s annual gains limit for the year exceeds the total of all amounts each of which is an amount deducted under subsection (2) or (2.1) in computing the individual’s taxable income for the year; and
(d) the amount that would be determined in respect of the individual for the year under paragraph 3(b) in respect of capital gains and capital losses if the only properties referred to in that paragraph were qualified fishing properties of the individual disposed of on or after May 2, 2006.
(10) Subsections 110.6(4) to (8) of the Act are replaced by the following:
Marginal note:Maximum capital gains deduction
(4) Notwithstanding subsections (2), (2.1) and (2.2), the total amount that may be deducted under this section in computing an individual’s income for a taxation year shall not exceed the amount determined by the formula in paragraph (2)(a) in respect of the individual for the year.
Marginal note:Deemed resident in Canada
(5) For the purposes of subsections (2), (2.1) and (2.2), an individual is deemed to have been resident in Canada throughout a particular taxation year if
(a) the individual was resident in Canada at any time in the particular taxation year; and
(b) the individual was resident in Canada throughout the immediately preceding taxation year or throughout the immediately following taxation year.
Marginal note:Failure to report capital gain
(6) Notwithstanding subsections (2), (2.1) and (2.2), no amount may be deducted under this section in respect of a capital gain of an individual for a particular taxation year in computing the individual’s taxable income for the particular taxation year, if
(a) the individual knowingly or under circumstances amounting to gross negligence
(i) fails to file the individual’s return of income for the particular taxation year within one year after the taxpayer’s filing-due date for the particular taxation year, or
(ii) fails to report the capital gain in the individual’s return of income for the particular taxation year; and
(b) the Minister establishes the facts justifying the denial of such an amount under this section.
Marginal note:Deduction not permitted
(7) Notwithstanding subsections (2), (2.1) and (2.2), no amount may be deducted under this section in computing an individual’s taxable income for a taxation year in respect of a capital gain of the individual for the taxation year, if the capital gain is from a disposition of property which disposition is part of a series of transactions or events
(a) to which subsection 55(2) would apply if this Act were read without reference to paragraph 55(3)(b); or
(b) in which any property is acquired by a corporation or partnership for consideration that is significantly less than the fair market value of the property at the time of acquisition (other than an acquisition as the result of an amalgamation or merger of corporations or the winding-up of a corporation or partnership or a distribution of property of a trust in satisfaction of all or part of a corporation’s capital interest in the trust).
Marginal note:Deduction not permitted
(8) Nothwithstanding subsections (2), (2.1) and (2.2), where an individual has a capital gain for a taxation year from the disposition of a property and it can reasonably be concluded, having regard to all the circumstances, that a significant part of the capital gain is attributable to the fact that dividends were not paid on a share (other than a prescribed share) or that dividends paid on such a share in the taxation year or in any preceding taxation year were less than 90% of the average annual rate of return on that share for that year, no amount in respect of that capital gain shall be deducted under this section in computing the individual’s taxable income for the year.
(11) Paragraph 110.6(12)(b) of the Act is replaced by the following:
(b) the amount, if any, that would be determined in respect of the trust for that year under paragraph 3(b) in respect of capital gains and capital losses if the only properties referred to in that paragraph were qualified farm properties disposed of by it after 1984, qualified small business corporation shares disposed of by it after June 17, 1987 and qualified fishing properties disposed of by it on or after May 2, 2006, and
(12) Subsections (1), (2), (4) and (5) apply to dispositions of property that occur on or after May 2, 2006.
(13) Subsection (3) applies to dispositions of property that occur after 2001 and before May 2, 2006.
(14) Subsection (6) applies to preceding taxation years that end after October 17, 2000.
(15) Subsections (7) to (11) apply to taxation years that end on or after May 2, 2006.
18. (1) Paragraphs 117(2)(c) and (d) of the Act, as enacted by subsection 58(3) of the Budget Implementation Act, 2006, chapter 4 of the Statutes of Canada, 2006, are replaced by the following:
(c) if the amount taxable is greater than the amount determined for the year in respect of $72,756, but is equal to or less than the amount determined for the year in respect of $118,285, the total of the amounts determined in respect of the taxation year under paragraphs (a) and (b) plus 26% of the amount by which the amount taxable exceeds the amount determined in respect of $72,756; and
(d) if the amount taxable is greater than the amount that would be determined for the year in respect of $118,285, the total of the amounts determined in respect of the taxation year under paragraphs (a), (b) and (c) plus 29% of the amount by which the amount taxable exceeds the amount determined in respect of $118,285.
(2) Subsection (1) applies to the 2007 and subsequent taxation years.
19. (1) The portion of subsection 117.1(1) of the Act before paragraph (a) is replaced by the following:
Marginal note:Annual adjustment (indexing)
117.1 (1) The amount of $1,000 referred to in the formula in paragraph 8(1)(s) and each of the amounts expressed in dollars in subsection 117(2), the description of B in subsection 118(1), subsection 118(2), paragraph (a) of the description of B in subsection 118(10), subsection 118.01(2), the descriptions of C and F in subsection 118.2(1), subsections 118.3(1), 122.5(3) and 122.51(1) and (2) and Part I.2 in relation to tax payable under this Part or Part I.2 for a taxation year shall be adjusted so that the amount to be used under those provisions for the year is the total of
(2) Subsection (1) applies to the 2008 and subsequent taxation years.
20. (1) The portion of the description of B before paragraph (a) in subsection 118(3) of the Act is replaced by the following:
B
is the lesser of $2,000 and
(2) Section 118 of the Act is amended by adding the following after subsection (9):
Marginal note:Canada Employment Credit
(10) For the purpose of computing the tax payable under this Part by an individual for a taxation year, there may be deducted the amount determined by the formula
A × B
where
A
is the appropriate percentage for the taxation year; and
B
is the lesser of
(a) $1,000, and
(b) the amount that would be the individual’s income for the taxation year from all offices and employments if this Act were read without reference to section 8.
(3) Subsections (1) and (2) apply to the 2006 and subsequent taxation years, except that in its application to the 2006 taxation year, the reference to “$1,000” in paragraph (a) in the description of B in subsection 118(10) of the Act, as enacted by subsection (2), shall be read as a reference to “$250”.
21. (1) The Act is amended by adding the following after section 118.01:
Marginal note:Definitions
118.02 (1) The following definitions apply in this section.
“eligible public transit pass”
« laissez-passer de transport admissible »
“eligible public transit pass” means a document
(a) issued by or on behalf of a qualified Canadian transit organization; and
(b) identifying the right of an individual who is the holder or owner of the document to use public commuter transit services of that qualified Canadian transit organization on an unlimited number of occasions and on any day on which the public commuter transit services are offered during an uninterrupted period of at least 28 days.
“public commuter transit services”
« services de transport en commun »
“public commuter transit services” means services offered to the general public, ordinarily for a period of at least five days per week, of transporting individuals, from a place in Canada to another place in Canada, by means of bus, ferry, subway, train or tram, and in respect of which it can reasonably be expected that those individuals would return daily to the place of their departure.
“qualified Canadian transit organization”
« organisme de transport canadien admissible »
“qualified Canadian transit organization” means a person authorised, under a law of Canada or a province, to carry on in Canada a business that is the provision of public commuter transit services, which is carried on through a permanent establishment in Canada.
“qualifying relation”
« proche admissible »
“qualifying relation” of an individual for a taxation year means a person who is
(a) the individual’s spouse or common-law partner at any time in the taxation year; or
(b) a child of the individual who has not, during the taxation year, attained the age of 19 years.
Marginal note:Transit pass tax credit
(2) For the purpose of computing the tax payable under this Part by an individual for a taxation year, there may be deducted the amount determined by the formula
A × B
where
A
is the appropriate percentage for the taxation year; and
B
is the amount determined by the formula
C - D
where
C
is the total of all amounts each of which is the portion of the cost of an eligible public transit pass attributable to the use of public commuter transit services in the taxation year by the individual or by a person who is in the taxation year a qualifying relation of the individual, and
D
is the total of all amounts each of which is the amount of a reimbursement, allowance or any other form of assistance that any person is or was entitled to receive in respect of an amount included in computing the value of C (other than an amount that is included in computing the income for any taxation year of that person and that is not deductible in computing the taxable income of that person).
Marginal note:Apportionment of credit
(3) If more than one individual is entitled to a deduction under this section for a taxation year in respect of an eligible public transit pass, the total of all amounts so deductible shall not exceed the maximum amount that would be so deductible for the year by any one of those individuals for that eligible public transit pass if that individual were the only individual entitled to deduct an amount for the year under this section, and if the individuals cannot agree as to what portion of the amount each can so deduct, the Minister may fix the portions.
Marginal note:Definitions
118.03 (1) The following definitions apply in this section.
“eligible fitness expense”
« dépense admissible pour activités physiques »
“eligible fitness expense” in respect of a qualifying child of an individual for a taxation year means the amount of a fee paid to a qualifying entity (other than an amount paid to a qualifying entity that is, at the time the amount is paid, the individual’s spouse or common-law partner or another individual who is under 18 years of age) to the extent that the fee is attributable to the cost of registration or membership of the qualifying child in a program of prescribed physical activity and, for the purposes of this section, that cost
(a) includes the cost to the qualifying entity of the program in respect of its administration, instruction, rental of required facilities, and uniforms and equipment that are not available to be acquired by a participant in the program for an amount less than their fair market value at the time, if any, they are so acquired; and
(b) does not include
(i) the cost of accommodation, travel, food or beverages, or
(ii) any amount deductible under section 63 in computing any person’s income for any taxation year.
“qualifying child”
« enfant admissible »
“qualifying child” of an individual for a taxation year means a child of the individual who had not, before the taxation year, attained the age of 16 years.
“qualifying entity”
« entité admissible »
“qualifying entity” means a person or partnership that offers one or more programs of prescribed physical activity.
Marginal note:Child fitness tax credit
(2) For the purpose of computing the tax payable under this Part by an individual for a taxation year, there may be deducted the amount determined by the formula
A × B
where
A
is the appropriate percentage for the taxation year; and
B
is the total of all amounts each of which is, in respect of a qualifying child of the individual for the taxation year, the lesser of $500 and the amount determined by the formula
C - D
where
C
is total of all amounts each of which is an amount paid in the taxation year by the individual, or by the individual’s spouse or common law partner, that is an eligible fitness expense in respect of the qualifying child of the individual, and
D
is the total of all amounts that any person is or was entitled to receive, each of which relates to an amount included in computing the value of C in respect of the qualifying child that is the amount of a reimbursement, allowance or any other form of assistance (other than an amount that is included in computing the income for any taxation year of that person and that is not deductible in computing the taxable income of that person).
Marginal note:Apportionment of credit
(3) If more than one individual is entitled to a deduction under this section for a taxation year in respect of a qualifying child, the total of all amounts so deductible shall not exceed the maximum amount that would be so deductible for the year by any one of those individuals in respect of that qualifying child if that individual were the only individual entitled to deduct an amount for the year under this section in respect of that qualifying child, and if the individuals cannot agree as to what portion of the amount each can so deduct, the Minister may fix the portions.
(2) Section 118.02 of the Act, as enacted by subsection (1), applies to the 2006 and subsequent taxation years, in respect of the use of public commuter transit services after June 2006.
(3) Section 118.03 of the Act, as enacted by subsection (1), applies to the 2007 and subsequent taxation years.
22. (1) Paragraph 118.3(1)(b) of the Act is replaced by the following:
(b) the individual has filed for a taxation year with the Minister the certificate described in paragraph (a.2) or (a.3), and
(2) Subsection (1) applies to the 2005 and subsequent taxation years.
23. (1) Section 118.6 of the Act is amended by adding the following after subsection (2):
Marginal note:Post-secondary textbook credit
(2.1) If an amount may be deducted under subsection (2) in computing the individual’s tax payable for a taxation year, there may be deducted in computing the individual’s tax payable under this Part for the year the amount determined by the formula
A × B
where
A
is the appropriate percentage for the year; and
B
is the total of the products obtained when
(a) $65 is multiplied by the number of months referred to in paragraph (a) of the description of B in subsection (2), and
(b) $20 is multiplied by the number of months referred to in paragraph (b) of that description.
(2) The portion of subsection 118.6(3) of the Act before paragraph (a) is replaced by the following:
Marginal note:Students eligible for the disability tax credit
(3) In calculating the amount deductible under subsection (2) or (2.1), the reference in subsection (2) to “full-time student” is to be read as “student” if
(3) Subparagraph 118.6(3)(b)(iii) of the English version of the Act is replaced by the following:
(iii) an impairment with respect to the individual’s ability in feeding or dressing themself, by a medical doctor or an occupational therapist,
(iii.1) an impairment with respect to the individual’s ability in walking, by a medical doctor, an occupational therapist or a physiotherapist, or
(4) Subparagraph 118.6(3)(b)(iv) of the French version of the Act is replaced by the following:
(iv) s’il s’agit d’une déficience quant à la capacité de s’alimenter ou de s’habiller, un médecin en titre ou un ergothérapeute,
(iv.1) s’il s’agit d’une déficience quant à la capacité de marcher, un médecin en titre, un ergothérapeute, ou un physiothérapeute,
(5) Subparagraph 118.6(3)(b)(iv) of the English version of the Act is replaced by the following:
(iv) an impairment with respect to the individual’s ability in mental functions necessary for everyday life (within the meaning assigned by paragraph 118.4(1)(c.1)), by a medical doctor or a psychologist.
(6) Subparagraph 118.6(3)(b)(v) of the French version of the Act is replaced by the following:
(v) s’il s’agit d’une déficience des fonctions mentales nécessaires aux activités de la vie courante, un médecin en titre ou un psychologue.
(7) Subsections (1) and (2) apply to the 2006 and subsequent taxation years.
(8) Subsections (3) and (4) apply to the 2005 and subsequent taxation years in respect of certifications made by a physiotherapist after February 22, 2005.
(9) Subsections (5) and (6) apply to the 2005 and subsequent taxation years.
24. (1) Subsection 118.61(1) of the Act is replaced by the following:
Marginal note:Unused tuition, textbook and eduction tax credits
118.61 (1) In this section, an individual’s unused tuition, textbook and education tax credits at the end of a taxation year is the amount determined by the formula
A + (B - C) - (D + E)
where
A
is the amount determined under this subsection in respect of the individual at the end of the preceding taxation year;
B
is the total of all amounts each of which may be deducted under section 118.5 or 118.6 in computing the individual’s tax payable under this Part for the year;
C
is the lesser of the value of B and the amount that would be the individual’s tax payable under this Part for the year if no amount were deductible under this Division (other than an amount deductible under this section and any of sections 118, 118.01, 118.02, 118.03, 118.3 and 118.7);
D
is the amount that the individual may deduct under subsection (2) for the year; and
E
is the tuition, textbook and education tax credits transferred for the year by the individual to the individual’s spouse, common-law partner, parent or grandparent.
(2) Paragraphs 118.61(2)(a) and (b) of the Act are replaced by the following:
(a) the amount determined under subsection (1) in respect of the individual at the end of the preceding taxation year, and
(b) the amount that would be the individual’s tax payable under this Part for the year if no amount were deductible under this Division (other than an amount deductible under this section and any of sections 118, 118.01, 118.02, 118.03, 118.3 and 118.7).
(3) Subsection 118.61(3) of the Act is repealed.
(4) Subsection 118.61(4) of the Act is replaced by the following:
Marginal note:Change of appropriate percentage
(4) For the purpose of determining the amount that may be deducted under subsection (2) or 118.6(2.1) in computing an individual’s tax payable for a taxation year, in circumstances where the appropriate percentage for the taxation year is different from the appropriate percentage for the preceding taxation year, the individual’s unused tuition, textbook and education tax credits at the end of the preceding taxation year is deemed to be the amount determined by the formula
A/B × C
where
A
is the appropriate percentage for the current taxation year;
B
is the appropriate percentage for the preceding taxation year; and
C
is the amount that would be the individual’s unused tuition, textbook and education tax credits at the end of the preceding taxation year if this section were read without reference to this subsection.
(5) Subsections (1) to (3) apply to the 2006 and subsequent taxation years except that
(a) in its application to the 2006 taxation year, the description of C in subsection 118.61(1) of the Act, as enacted by subsection (1), is to be read without its reference to section 118.03; and
(b) in its application to the 2006 taxation year, paragraph 118.61(2)(b) of the Act, as enacted by subsection (2), is to be read without its reference to section 118.03.
(6) Subsection (4) applies to the 2005 and subsequent taxation years, except that for the 2005 and 2006 taxation years, the references to “unused tuition, textbook and education tax credits” in subsection 118.61(4) of the Act, as enacted by subsection (4), are to be read as references to “unused tuition and education tax credits”.
25. (1) The description of A in section 118.8 of the Act is replaced by the following:
A
is the tuition, textbook and education tax credits transferred for the year by the spouse or common-law partner to the individual;
(2) Subparagraph (b)(ii) of the description of C in section 118.8 of the Act is replaced by the following:
(ii) the amount that would be the spouse’s or common-law partner’s tax payable under this Part for the year if no amount were deductible under this Division (other than an amount deductible under section 118, 118.01, 118.02, 118.03, 118.3, 118.61 or 118.7).
(3) Subsection (1) applies to the 2006 and subsequent taxation years.
(4) Subsection (2) applies to the 2005 and subsequent taxation years except that
(a) in its application to the 2005 taxation year, subparagraph (b)(ii) of the description of C in section 118.8 of the Act, as enacted by subsection (2), is to be read without its reference to section 118.02; and
(b) in its application to the 2005 and 2006 taxation years, subparagraph (b)(ii) of the description of C in section 118.8 of the Act, as enacted by subsection (2), is to be read without its reference to section 118.03.
26. (1) The portion of section 118.81 of the Act before paragraph (a) is replaced by the following:
Marginal note:Tuition, textbook and education tax credits transferred
118.81 In this subdivision, the tuition, textbook and education tax credits transferred for a taxation year by a person to an individual is the lesser of
(2) The description of B in paragraph 118.81(a) of the Act is replaced by the following:
B
is the amount that would be the person’s tax payable under this Part for the year if no amount were deductible under this Division (other than an amount deductible under any of sections 118, 118.01, 118.02, 118.03, 118.3, 118.61 and 118.7), and
(3) Subsections (1) and (2) apply to the 2006 and subsequent taxation years except that, in its application to the 2006 taxation year, the description of B in paragraph 118.81(a) of the Act, as enacted by subsection (2), is to be read without its reference to section 118.03.
27. (1) Section 118.9 of the Act is replaced by the following:
Marginal note:Transfer to parent or grandparent
118.9 If for a taxation year a parent or grandparent of an individual (other than an individual in respect of whom the individual’s spouse or common-law partner deducts an amount under section 118 or 118.8 for the year) is the only person designated in writing by the individual for the year for the purpose of this section, there may be deducted in computing the tax payable under this Part for the year by the parent or grandparent, as the case may be, the tuition, textbook and education tax credits transferred for the year by the individual to the parent or grandparent, as the case may be.
(2) Subsection (1) applies to the 2006 and subsequent taxation years.
28. (1) Subparagraph 118.91(b)(i) of the Act is replaced by the following:
(i) such of the deductions permitted under subsections 118(3), (10) and 118.6(2.1) and sections 118.01, 118.02, 118.03, 118.1, 118.2, 118.5, 118.6, 118.62 and 118.7 as can reasonably be considered wholly applicable, and
(2) Subsection (1) applies to the 2006 and subsequent taxation years except that, in its application to the 2006 taxation year, subparagraph 118.91(b)(i) of the Act, as enacted by subsection (1), is to be read without its reference to section 118.03.
29. (1) Sections 118.92 to 118.94 of the Act are replaced by the following:
Marginal note:Ordering of credits
118.92 In computing an individual’s tax payable under this Part, the following provisions shall be applied in the following order: subsections 118(1) and (2), section 118.7, subsections 118(3) and (10) and sections 118.01, 118.02, 118.03, 118.3, 118.61, 118.5, 118.6, 118.9, 118.8, 118.2, 118.1, 118.62 and 121.
Marginal note:Credits in separate returns
118.93 If a separate return of income with respect to a taxpayer is filed under subsection 70(2), 104(23) or 150(4) for a particular period and another return of income under this Part with respect to the taxpayer is filed for a period ending in the calendar year in which the particular period ends, for the purpose of computing the tax payable under this Part by the taxpayer in those returns, the total of all deductions claimed in all those returns under any of subsections 118(3) and (10) and sections 118.01 to 118.7 and 118.9 shall not exceed the total that could be deducted under those provisions for the year with respect to the taxpayer if no separate returns were filed under any of subsections 70(2), 104(23) and 150(4).
Marginal note:Tax payable by non-residents (credits restricted)
118.94 Sections 118, 118.01, 118.02, 118.03 and 118.2, subsections 118.3(2) and (3) and sections 118.6, 118.8 and 118.9 do not apply for the purpose of computing the tax payable under this Part for a taxation year by an individual who at no time in the year is resident in Canada unless all or substantially all of the individual’s income for the year is included in computing the individual’s taxable income earned in Canada for the year.
(2) Subsection (1) applies to the 2006 and subsequent taxation years except that, in its application to the 2006 taxation year, sections 118.92 and 118.94 of the Act, as enacted by subsection (1), are to be read without their references to section 118.03.
30. (1) Paragraph 118.95(a) of the Act is replaced by the following:
(a) such of the deductions as the individual is entitled to under subsections 118(3) and (10) and sections 118.01, 118.02, 118.03, 118.1, 118.2, 118.5, 118.6, 118.62 and 118.7 as can reasonably be considered wholly applicable to the taxation year, and
(2) Subsection (1) applies to the 2006 and subsequent taxation years except that, in its application to the 2006 taxation year, paragraph 118.95(a) of the Act, as enacted by subsection (1), is to be read without its reference to section 118.03.
31. (1) Subparagraph (b)(i) of the description of A in subsection 122.51(2) of the Act is replaced by the following:
(i) the amount determined by the formula
(25/C) × D
where
C
is the appropriate percentage for the particular taxation year, and
D
is the total of all amounts each of which is the amount determined by the formula in subsection 118.2(1) for the purpose of computing the individual’s tax payable under this Part for a taxation year that ends in the calendar year, and
(2) Subsection (1) applies to the 2005 and subsequent taxation years.
32. (1) The portion of paragraph (a) of the definition “full-rate taxable income” in subsection 123.4(1) of the Act before subparagraph (i) is replaced by the following:
(a) if the corporation is not a corporation described in paragraph (b) or (c) for the year, the amount by which that portion of the corporation’s taxable income for the year (or, for greater certainty, if the corporation is non-resident, that portion of its taxable income earned in Canada for the year) that is subject to tax under subsection 123(1) exceeds the total of
(2) Subparagraph (a)(iv) of the definition “full-rate taxable income” in subsection 123.4(1) of the Act is replaced by the following:
(iv) if the corporation is a credit union throughout the year and the corporation deducted an amount for the year under subsection 125(1) (because of the application of subsections 137(3) and (4)), the amount if any, by which, the lesser of the amounts described in paragraphs 137(3)(a) and (b) exceeds the amount described in paragraph 137(3)(c) in respect of the corporation for the year;
(3) Subparagraph (b)(ii) of the definition “full-rate taxable income” in subsection 123.4(1) of the Act is replaced by the following:
(ii) the least of the amounts, if any, determined under paragraphs 125(1)(a) to (c) in respect of the corporation for the year, and
(4) Subsection (1) applies to taxation years that begin on or after May 2, 2006.
(5) Subsections (2) and (3) apply to the 2008 and subsequent taxation years.
33. (1) The portion of subsection 125(1) of the Act before paragraph (a) is replaced by the following:
Marginal note:Small business deduction
125. (1) There may be deducted from the tax otherwise payable under this Part for a taxation year by a corporation that was, throughout the taxation year, a Canadian-controlled private corporation, an amount equal to the corporation’s small business deduction rate for the taxation year multiplied by the least of
(2) Section 125 of the Act is amended by adding the following after subsection (1):
Marginal note:Small business deduction rate
(1.1) For the purpose of subsection (1), a corporation’s small business deduction rate for a taxation year is the total of
(a) that proportion of 16% that the number of days in the taxation year that are before 2008 is of the number of days in the taxation year,
(b) that proportion of 16.5% that the number of days in the taxation year that are in 2008 is of the number of days in the taxation year, and
(c) that proportion of 17% that the number of days in the taxation year that are after 2008 is of the number of days in the taxation year.
(3) Subsection 125(2) of the Act is replaced by the following:
Marginal note:Business limit
(2) For the purpose of this section, a corporation’s business limit for a taxation year is $400,000 unless the corporation is associated in the taxation year with one or more other Canadian-controlled private corporations, in which case, except as otherwise provided in this section, its business limit is nil.
(4) Paragraph 125(3)(a) of the Act is replaced by the following:
(a) if the total of the percentages assigned in the agreement does not exceed 100%, $400,000 multiplied by the percentage assigned to that corporation in the agreement; and
(5) The description of M in the definition “specified partnership income” in subsection 125(7) of the Act is replaced by the following:
M
is the lesser of
(i) $400,000, and
(ii) the product obtained when $1,096 is multiplied by the total of all amounts each of which is the number of days in a fiscal period of the partnership that ends in the year, and
(6) Subsections (1) and (2) apply to the 2008 and subsequent taxation years.
(7) Subsection (3) applies to the 2007 and subsequent taxation years except that, for a 2007 or 2008 taxation year that began before 2007, the reference in subsection 125(2) of the Act, as enacted by subsection (3), to “$400,000” is to be read as a reference to the total of
(a) that proportion of $300,000 that the number of days in the taxation year that are before 2007 is of the number of days in the taxation year, and
(b) that proportion of $400,000 that the number of days in the taxation year that are after 2006 is of the number of days in the taxation year.
(8) Subsection (4) applies to the 2007 and subsequent taxation years except that, for a 2007 or 2008 taxation year that began before 2007, the reference in subsection 125(3) of the Act, as enacted by subsection (4), to “$400,000” is to be read as a reference to “the amount that would, if the corporation were not associated in the year with any other corporation, be its business limit for the year determined without reference to subsections (5) and (5.1)”.
(9) Subsection (5) applies to partnership fiscal periods that end after 2006.
(10) In applying subsection 125(5) of the Act to a corporation for a 2007 or 2008 taxation year, of the corporation, that began before 2007, subparagraph 125(5)(a)(i) of the Act is to be read as follows:
(i) the amount that would have been its business limit determined under subsection (3) or (4) for the first such taxation year ending in the calendar year if the reference to $300,000 in subsection (3), as it applied in respect of that first such taxation year, had been read in the same manner as it is read in respect of the particular taxation year ending in the calendar year, and
34. (1) The portion of paragraph 127(5)(a) of the Act before clause (ii)(B) is replaced by the following:
(a) the total of
(i) the taxpayer’s investment tax credit at the end of the year in respect of property acquired before the end of the year, of the taxpayer’s apprenticeship expenditure for the year or a preceding taxation year, of the taxpayer’s flow-through mining expenditure for the year or a preceding taxation year, of the taxpayer’s pre-production mining expenditure for the year or a preceding taxation year or of the taxpayer’s SR&ED qualified expenditure pool at the end of the year or at the end of a preceding taxation year, and
(ii) the lesser of
(A) the taxpayer’s investment tax credit at the end of the year in respect of property acquired in a subsequent taxation year, of the taxpayer’s apprenticeship expenditure for a subsequent taxation year, of the taxpayer’s flow-through mining expenditure for a subsequent taxation year, of the taxpayer’s pre-production mining expenditure for a subsequent taxation year or of the taxpayer’s SR&ED qualified expenditure pool at the end of the subsequent taxation year to the extent that an investment tax credit was not deductible under this subsection for the subsequent taxation year, and
(2) Subsection 127(7) of the Act is replaced by the following:
Marginal note:Investment tax credit of testamentary trust
(7) If, in a particular taxation year of a taxpayer who is a beneficiary under a testamentary trust or under an inter vivos trust that is deemed to be in existence by section 143, an amount is determined in respect of the trust under paragraph (a), (a.1), (a.4), (b) or (e.1) of the definition “investment tax credit” in subsection (9) for its taxation year that ends in that particular taxation year, the trust may, in its return of income for its taxation year that ends in that particular taxation year, designate the portion of that amount that can, having regard to all the circumstances including the terms and conditions of the trust, reasonably be considered to be attributable to the taxpayer and was not designated by the trust in respect of any other beneficiary of the trust, and that portion shall be added in computing the investment tax credit of the taxpayer at the end of that particular taxation year and shall be deducted in computing the investment tax credit of the trust at the end of its taxation year that ends in that particular taxation year.
(3) The portion of subsection 127(8) of the Act before paragraph (a) is replaced by the following:
Marginal note:Investment tax credit of partnership
(8) Subject to subsection (28), where, in a particular taxation year of a taxpayer who is a member of a partnership, an amount would be determined in respect of the partnership, for its taxation year that ends in the particular taxation year, under paragraph (a), (a.1), (a.4), (b) or (e.1) of the definition “investment tax credit” in subsection (9), if
(4) Subsection 127(8.1) of the Act is replaced by the following:
Marginal note:Investment tax credit of limited partner
(8.1) Notwithstanding subsection (8), if a taxpayer is a limited partner of a partnership at the end of a fiscal period of the partnership, the amount, if any, determined under subsection (8) to be added in computing the taxpayer’s investment tax credit at the end of the taxpayer’s taxation year in which that fiscal period ends shall not exceed the lesser of
(a) the portion of the amount that would, if this section were read without reference to this subsection, be determined under subsection (8) to be the amount to be added in computing the taxpayer’s investment tax credit at the end of the taxpayer’s taxation year in which that fiscal period ends as is considered to have arisen because of the expenditure by the partnership of an amount equal to the taxpayer’s expenditure base (as determined under subsection (8.2) in respect of the partnership) at the end of that fiscal period, and
(b) the taxpayer’s at-risk amount in respect of the partnership at the end of that fiscal period.
(5) Subparagraph 127(8.2)(b)(i) of the Act is amended by striking out the word “or” at the end of clause (A) and by adding the following after that clause:
(A.1) an amount that would be the apprenticeship expenditure of the partnership if the reference to “$2,000” in paragraph (a) of the definition “apprenticeship expenditure” in subsection (9) were read as a reference to “$20,000” and paragraph (b) of that definition were read without reference to “10% of”, or
(6) Subsection 127(8.3) of the Act is replaced by the following:
Marginal note:Investment tax credit — allocation of unallocated partnership ITCs
(8.3) For the purpose of subsection (8), and subject to subsection (8.4), if a taxpayer is a member of a partnership (other than a specified member) throughout a fiscal period of the partnership, there shall be added to the amount that can reasonably be considered to be that member’s share of the amount determined under subsection (8) the amount, if any, that is such portion of the amount determined under subsection (8.31) in respect of that fiscal period as is reasonable in the circumstances (having regard to the investment in the partnership, including debt obligations of the partnership, of each of those members of the partnership who was a member of the partnership throughout the fiscal period of the partnership and who was not a specified member of the partnership during the fiscal period of the partnership).
Marginal note:Amount of unallocated partnership ITC
(8.31) For the purpose of subsection (8.3), the amount determined under this subsection in respect of a fiscal period of a partnership is the amount, if any, by which
(a) the total of all amounts each of which is an amount that would, if the partnership were a person and its fiscal period were its taxation year, be determined in respect of the partnership under paragraph (a), (a.1), (a.4), (b) or (e.1) of the definition “investment tax credit” in subsection (9) for a taxation year that is the fiscal period,
exceeds
(b) the total of
(i) the total of all amounts each of which is the amount determined under subsection (8) in respect of the fiscal period to be the share of the total determined under paragraph (a) of a partner of the partnership (other than a member of the partnership who was at any time in the fiscal period of the partnership a specified member of the partnership),
(ii) the total of all amounts each of which is the amount determined under subsection (8), with reference to subsection (8.1), in respect of the fiscal period to be the share of the total determined under paragraph (a) of a partner of the partnership who was at any time in the fiscal period of the partnership a specified member of the partnership, and
(iii) the amount, if any, by which
(A) the amount that would be determined under subparagraph (i) in respect of the partners referred to in subparagraph (ii) if subparagraph (i) applied only to those partners and those partners were not specified members of the partnership,
exceeds
(B) the amount determined under subparagraph (ii) in respect of those partners.
(7) The definition “investment tax credit” in subsection 127(9) of the Act is amended by adding the following after paragraph (a.3):
(a.4) the total of all amounts each of which is an apprenticeship expenditure of the taxpayer for the taxation year in respect of an eligible apprentice,
(8) Subsection 127(9) of the Act is amended by adding the following in alphabetical order:
“apprenticeship expenditure”
« dépense d’apprentissage »
“apprenticeship expenditure” of a taxpayer for a taxation year in respect of an eligible apprentice is the lesser of
(a) $2,000, and
(b) 10% of the eligible salary and wages payable by the taxpayer in the taxation year to the eligible apprentice in respect of the eligible apprentice’s employment, in the taxation year and on or after May 2, 2006, by the taxpayer in a business carried on in Canada by the taxpayer in the taxation year;
“eligible apprentice”
« apprenti admissible »
“eligible apprentice” means an individual who is employed in a prescribed trade in Canada during the first two years of the individual’s apprenticeship contract, which is registered with Canada or a province under an apprenticeship program designed to certify or license individuals in the trade;
“eligible salary and wages”
« traitement et salaire admissibles »
“eligible salary and wages” payable by a taxpayer to an eligible apprentice means the amount, if any, that is the salary and wages payable by the taxpayer to the eligible apprentice in respect of the first 24 months of the apprenticeship (other than remuneration that is based on profits, bonuses, amounts described in section 6 or 7, and amounts deemed to be incurred by subsection 78(4));
(9) The portion of subsection 127(10.2) of the Act before paragraph (a) of the description of A is replaced by the following:
Marginal note:Expenditure limit determined
(10.2) For the purpose of subsection (10.1), a corporation’s expenditure limit for a particular taxation year is the amount determined by the formula
($6,000,000 - 10A) × B/C
where
A
is the greater of $400,000 and either
(10) Subsection 127(11.1) of the Act is amended by striking out the word “and” at the end of paragraph (c.3) and by adding the following after that paragraph:
(c.4) the amount of a taxpayer’s apprenticeship expenditure for a taxation year is deemed to be the amount of the taxpayer’s apprenticeship expenditure for the year otherwise determined less the amount of any government assistance or non-government assistance in respect of the expenditure for the year that, at the time of the filing of the taxpayer’s return of income for the year, the taxpayer has received, is entitled to receive or can reasonably be expected to receive; and
(11) Section 127 of the Act is amended by adding the following after subsection (11.3):
Marginal note:Special rule for eligible salary and wages — apprentices
(11.4) For the purpose of the definition “eligible salary and wages” in subsection (9), the eligible salary and wages payable by a taxpayer in a taxation year to an eligible apprentice in respect of the eligible apprentice’s employment in the taxation year is, if the eligible apprentice is employed by any other taxpayer who is related to the taxpayer (including a partnership that has a member that is related to the taxpayer) in the calendar year that includes the end of the taxpayer’s taxation year, deemed to be nil unless the taxpayer is designated in prescribed form by all of those related taxpayers to be the only employer of the eligible apprentice for the purpose of the taxpayer applying that definition to the salary and wages payable by the taxpayer to the eligible apprentice in that taxation year, in which case
(a) the eligible salary and wages payable by the taxpayer in the taxation year to the eligible apprentice in respect of the eligible apprentice’s employment in the taxation year shall be the amount determined without reference to this subsection; and
(b) the eligible salary and wages payable to the eligible apprentice by each of the other related taxpayers in their respective taxation years that end in the calendar year is deemed to be nil.
(12) Subsections (1) to (8), (10) and (11) apply to taxation years that end on or after May 2, 2006 except that, in respect of a taxpayer’s taxation year that ends in 2006, subsections 127(8.3) and (8.31) of the Act, as enacted by subsection (6), shall be read as follows:
(8.3) Where
(a) the amount that would, if the partnership were a person and its fiscal period were its taxation year, be determined in respect of the partnership under paragraph (a), (a.1), (a.4), (b) or (e.1) of the definition “investment tax credit” in subsection (9) for a taxation year
exceeds
(b) the total of all amounts each of which is the amount determined, under subsections (8) and (8.1), to be the share thereof of a limited partner of the partnership,
such portion of the excess as is reasonable in the circumstances (having regard to the investment in the partnership, including debt obligations of the partnership, of each of those members of the partnership who was a member of the partnership throughout the fiscal period of the partnership and who was not a limited partner of the partnership during the fiscal period of the partnership) shall, for the purposes of subsection (8), be considered to be the amount that may reasonably be considered to be that member’s share of the amount described in paragraph (a).
(13) Subsection (9) applies to the 2007 and subsequent taxation years except that, for a 2007 or 2008 taxation year that immediately follows a taxation year that ended before 2007, the reference in the formula in subsection 127(10.2) of the Act, as enacted by subsection (9), to “$6,000,000” is to be read as a reference to “$5,000,000” and the reference to “$400,000” in the description of A is to be read as a reference to “$300,000”.
34.1 (1) Subparagraph 127.52(1)(h)(i) of the Act is replaced by the following:
(i) the amounts deducted under any of subsections 110(2), 110.6(2), (2.1), (2.2), (3) and (12) and 110.7(1),
(2) Subsection (1) applies to taxation years that end on or after May 2, 2006.
35. (1) Paragraph 127.531(a) of the Act is replaced by the following:
(a) an amount deducted under subsection 118(1), (2) or (10), 118.01(2), 118.02(2), 118.03(2) or 118.3(1) or any of sections 118.5 to 118.7 in computing the individual’s tax payable for the year under this Part; or
(2) Subsection (1) applies to the 2006 and subsequent taxation years except that, in its application to the 2006 taxation year, paragraph 127.531(a) of the Act, as enacted by subsection (1), is to be read without its reference to subsection 118.03(2).
36. (1) Clause 128(2)(e)(iii)(A) of the Act is replaced by the following:
(A) under section 118, 118.01, 118.02, 118.03, 118.2, 118.3, 118.5, 118.6, 118.8 or 118.9,
(2) Subsection (1) applies to the 2006 and subsequent taxation years except that, in its application to the 2006 taxation year, clause 128(2)(e)(iii)(A) of the Act, as enacted by subsection (1), is to be read without its reference to section 118.03.
37. (1) The portion of subsection 137(3) of the Act before paragraph (a) is replaced by the following:
Marginal note:Additional deduction
(3) There may be deducted from the tax otherwise payable under this Part for a taxation year by a corporation that was, throughout the year, a credit union, an amount equal to the amount determined by multiplying the rate that would, if subsection 125(1.1) applied to the corporation for the year, be its small business deduction rate for the year within the meaning assigned by that subsection, by the amount, if any, by which the lesser of
(2) Subsection (1) applies to the 2008 and subsequent taxation years.
38. (1) Subsection 137.1(9) of the Act is replaced by the following:
Marginal note:Special tax rate
(9) The tax payable under this Part by a corporation for a taxation year throughout which it was a deposit insurance corporation (other than a corporation incorporated under the Canada Deposit Insurance Corporation Act) is the amount determined by the formula:
(38% - A) × B
where
A
is the rate that would, if subsection 125(1.1) applied to the corporation for the taxation year, be the corporation’s small business deduction rate for the taxation year within the meaning assigned by that subsection; and
B
is the corporation’s taxable income for the taxation year.
(2) Subsection (1) applies to the 2008 and subsequent taxation years.
39. (1) Section 147.2 of the Act is amended by adding the following after subsection (6):
Marginal note:Letter of credit
(7) For the purposes of this section and any regulations made under subsection (2) or under subsection 147.1(18), an amount paid to a registered pension plan by the issuer of a letter of credit issued in connection with an employer’s funding obligations under a defined benefit provision of the plan is deemed to be an eligible contribution made to the plan in respect of the provision by the employer with respect to the employer’s employees or former employees, if
(a) the amount is paid under the letter of credit;
(b) the use of the letter of credit is permitted under the Pension Benefits Standards Act, 1985 or a similar law of a province; and
(c) the amount would have been an eligible contribution under subsection (2) if
(i) it had been paid to the plan by the employer, and
(ii) this section were read without reference to this subsection.
(2) Subsection (1) applies after 2005.
40. (1) Subsections 190.1(1.1) and (1.2) of the Act are repealed.
(2) The portion of subsection 190.1(3) of the Act after paragraph (b) is repealed.
(3) Subsection 190.1(4) of the Act is amended by striking out the word “and” at the end of paragraph (a), by adding the word “and” at the end of paragraph (b) and by adding the following after paragraph (b):
(c) an amount may be claimed under paragraph (3)(b) in computing a corporation’s tax payable under this Part for a taxation year that ends before July 1, 2006 in respect of its unused Part I tax credit for a taxation year that ends after July 1, 2006 (referred to in this paragraph as the “credit taxation year”) only to the extent that the unused Part I tax credit exceeds the amount, if any, by which
(i) the amount that would, if this Part were read as it applied to the 2005 taxation year, be the corporation’s tax payable under this Part for the credit taxation year
exceeds
(ii) the corporation’s tax payable under this Part for the credit taxation year.
(4) Subsections (1) to (3) apply in respect of taxation years that end on or after July 1, 2006.
41. (1) Subsections 190.15(1) to (3) of the Act are replaced by the following:
Marginal note:Capital deduction
190.15 (1) For the purposes of this Part, the capital deduction of a corporation for a taxation year during which it was at any time a financial institution is $1 billion unless the corporation was related to another financial institution at the end of the year, in which case, subject to subsection (4), its capital deduction for the year is nil.
Marginal note:Related financial institution
(2) A corporation that is a financial institution at any time during a taxation year and that was related to another financial institution at the end of the year may file with the Minister an agreement in prescribed form on behalf of the related group of which the corporation is a member under which an amount that does not exceed $1 billion is allocated among the members of the related group for the taxation year.
Marginal note:Allocation by Minister
(3) The Minister may request a corporation that is a financial institution at any time during a taxation year and that was related to any other financial institution at the end of the year to file with the Minister an agreement referred to in subsection (2) and, if the corporation does not file such an agreement within 30 days after receiving the request, the Minister may allocate an amount among the members of the related group of which the corporation is a member for the year not exceeding $1 billion.
(2) Subsection (1) applies to taxation years that end on or after July 1, 2006.
42. (1) Sections 190.16 and 190.17 of the Act are replaced by the following:
Transitional Provisions
Marginal note:Application to taxation year including July 1, 2006
190.16 (1) If a taxation year of a corporation begins before and ends on or after July 1, 2006, notwithstanding any other provision of this Part, the tax payable under this Part by the corporation for the taxation year is equal to the total of
(a) that proportion of the amount that would be the tax payable by the corporation under this Part for the taxation year, if this Part were read as it applied to the 2005 taxation year, that the number of days in the taxation year that are before that day is of the number of days in the taxation year, and
(b) that proportion of the amount that would, if this Part were read without reference to this section, be the tax payable by the corporation under this Part for the taxation year that the number of days in the taxation year that are on or after that day is of the number of days in the taxation year.
Marginal note:Proportionate allocation
(2) Any allocation made for the purpose of paragraph (1)(a) under subsection 190.15(2) or (3) shall be in the same proportion as the allocation, if any, made for the purpose of paragraph (1)(b) under subsection 190.15(2) or (3).
Marginal note:Capital deduction deemed
(3) For the purpose of applying subsection 190.15(5) to a corporation for a taxation year that is described in that subsection in circumstances where the “first such taxation year” referred to in that subsection is a taxation year to which subsection (1) applies, the capital deduction of the corporation for that “first such taxation year” is deemed to be the total of
(a) that proportion of the capital deduction amount allocated to the corporation for the purposes of paragraph (1)(a) that the number of days in the taxation year that are before July 1, 2006 is of the number of days in the taxation year, and
(b) that proportion of the capital deduction amount allocated to the corporation for the purposes of paragraph (1)(b) that the number of days in the taxation year that are after June 30, 2006 is of the number of days in the taxation year.
(2) Subsection (1) applies to taxation years that end on or after July 1, 2006.
PART 2R.S., c. 1 (5th Supp.) AMENDMENTS TO THE INCOME TAX ACT (DIVIDEND TAXATION)
43. (1) Subsection 15(1.1) of the Income Tax Act is replaced by the following:
Marginal note:Conferring of benefit
(1.1) Notwithstanding subsection (1), if in a taxation year a corporation has paid a stock dividend to a person and it may reasonably be considered that one of the purposes of that payment was to significantly alter the value of the interest of any specified shareholder of the corporation, the fair market value of the stock dividend shall, except to the extent that it is otherwise included in computing that person’s income under any of paragraphs 82(1)(a), (a.1) and (c) to (e), be included in computing the income of that person for the year.
(2) Subsection (1) applies to dividends paid after 2005.
43.1 (1) Subparagraph 74.4(2)(b)(ii) of the French version of the Act is replaced by the following:
(ii) les sommes incluses dans le revenu du particulier pour l’année en application des paragraphes 82(1) ou 90(1) au titre de dividendes imposables qu’il a reçus au cours de l’année, sauf les dividendes réputés reçus en vertu de l’article 84, soit sur les actions reçues de la société en contrepartie du transfert ou en remboursement du prêt qui sont, au moment de la réception des dividendes, une contrepartie exclue, soit sur des actions y substituées qui sont, à ce moment, une contrepartie exclue;
(2) Paragraph 74.4(2)(f) of the English version of the Act is replaced by the following:
(f) all amounts included in the individual’s income for the taxation year pursuant to subsection 82(1) or 90(1) in respect of taxable dividends received (other than dividends deemed by section 84 to have been received) by the individual in the year on shares that were received from the corporation as consideration for the transfer or as repayment for the loan that were excluded consideration at the time the dividends were received or on shares substituted therefor that were excluded consideration at that time, and
(3) Subsections (1) and (2) apply to amounts received after 2005.
44. (1) Subsection 82(1) of the Act is replaced by the following:
Marginal note:Taxable dividends received
82. (1) In computing the income of a taxpayer for a taxation year, there shall be included the total of the following amounts:
(a) the amount, if any, by which
(i) the total of all amounts, other than eligible dividends and amounts described in paragraph (c), (d) or (e), received by the taxpayer in the taxation year from corporations resident in Canada as, on account of, in lieu of payment of or in satisfaction of, taxable dividends,
exceeds
(ii) if the taxpayer is an individual, the total of all amounts paid by the taxpayer in the taxation year that are deemed by subsection 260(5) to have been received by another person as taxable dividends (other than eligible dividends);
(a.1) the amount, if any, by which
(i) the total of all amounts, other than amounts included in computing the income of the taxpayer because of paragraph (c), (d) or (e), received by the taxpayer in the taxation year from corporations resident in Canada as, on account of, in lieu of payment of or in satisfaction of, eligible dividends,
exceeds
(ii) if the taxpayer is an individual, the total of all amounts paid by the taxpayer in the taxation year that are deemed by subsection 260(5) to have been received by another person as eligible dividends;
(b) if the taxpayer is an individual, other than a trust that is a registered charity, the total of
(i) 25% of the amount determined under paragraph (a) in respect of the taxpayer for the taxation year, and
(ii) 45% of the amount determined under paragraph (a.1) in respect of the taxpayer for the taxation year;
(c) all taxable dividends received by the taxpayer in the taxation year, from corporations resident in Canada, under dividend rental arrangements of the taxpayer;
(d) all taxable dividends (other than taxable dividends described in paragraph (c)) received by the taxpayer in the taxation year from corporations resident in Canada that are not taxable Canadian corporations; and
(e) if the taxpayer is a trust, all amounts each of which is all or part of a taxable dividend (other than a taxable dividend described in paragraph (c) or (d)) that was received by the trust in the taxation year on a share of the capital stock of a taxable Canadian corporation and that can reasonably be considered to have been included in computing the income of a beneficiary under the trust who was non-resident at the end of the taxation year.
(2) Subsection 82(3) of the Act is replaced by the following:
Marginal note:Dividends received by spouse or common-law partner
(3) Where the amount that would, but for this subsection, be deductible under subsection 118(1) by reason of paragraph 118(1)(a) in computing a taxpayer’s tax payable under this Part for a taxation year that is less than the amount that would be so deductible if no amount were required by subsection (1) to be included in computing the income for the year of the taxpayer’s spouse or common-law partner and the taxpayer so elects in the taxpayer’s return of income for the year under this Part, all amounts described in paragraph (1)(a) or (a.1) received in the year from taxable Canadian corporations by the taxpayer’s spouse or common-law partner are deemed to have been so received by that taxpayer and not by the spouse or common-law partner.
(3) Subsections (1) and (2) apply to amounts received or paid after 2005.
45. (1) Paragraph 87(2)(z.2) of the Act is replaced by the following:
Marginal note:Application of Parts III and III.1
(z.2) for the purposes of Parts III and III.1, the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;
(2) Subsection 87(2) of the Act is amended by striking out the word “and” at the end of paragraph (tt) and by adding the following after paragraph (uu):
Marginal note:General rate income pool
(vv) if the new corporation is a Canadian-controlled private corporation or a deposit insurance corporation in its first taxation year, in computing its general rate income pool at the end of that first taxation year there shall be added the total of all amounts determined under subsection 89(5) in respect of the corporation for that first taxation year; and
Marginal note:Low rate income pool
(ww) if the new corporation is neither a Canadian-controlled private corporation nor a deposit insurance corporation in its first taxation year, there shall be added in computing its low rate income pool at any time in that first taxation year the total of all amounts determined under subsection 89(9) in respect of the corporation for that first taxation year.
(3) Subsections (1) and (2) apply to amalgamations that occur, and to windings-up that begin, after 2005.
46. (1) The portion of paragraph 88(1)(e.2) of the Act before subparagraph (i) is replaced by the following:
(e.2) paragraphs 87(2)(c), (d.1), (e.1), (e.3), (g) to (l), (l.3) to (u), (x), (z.1), (z.2), (aa), (cc), (ll), (nn), (pp), (rr) and (tt) to (ww), subsection 87(6) and, subject to section 78, subsection 87(7) apply to the winding-up as if the references in those provisions to
(2) Paragraph 88(1)(e.2) of the Act is amended by adding the following after subparagraph (viii):
(ix) “subsection 89(5)” and “subsection 89(9)” were read as “subsection 89(6)” and “subsection 89(10)”, respectively,
(3) Subsections (1) and (2) apply to windings-up that begin after 2005.
47. (1) Subsection 89(1) of the Act is amended by adding the following in alphabetical order:
“eligible dividend”
« dividende déterminé »
“eligible dividend” means a taxable dividend that is received by a person resident in Canada, paid after 2005 by a corporation resident in Canada and designated, as provided under subsection (14), to be an eligible dividend;
“excessive eligible dividend designation”
« désignation excessive de dividende déterminé »
“excessive eligible dividend designation”, made by a corporation in respect of an eligible dividend paid by the corporation at any time in a taxation year, means
(a) unless paragraph (c) applies to the dividend, if the corporation is in the taxation year a Canadian-controlled private corporation or a deposit insurance corporation, the amount, if any, determined by the formula
(A - B) × C/A
where
A
is the total of all amounts each of which is the amount of an eligible dividend paid by the corporation in the taxation year,
B
is the greater of nil and the corporation’s general rate income pool at the end of the taxation year, and
C
is the amount of the eligible dividend,
(b) unless paragraph (c) applies to the dividend, if the corporation is not a corporation described in paragraph (a), the amount, if any, determined by the formula
A × B/C
where
A
is the lesser of
(i) the total of all amounts each of which is an eligible dividend paid by the corporation at that time, and
(ii) the corporation’s low rate income pool at that time,
B
is the amount of the eligible dividend, and
C
is the amount determined under subparagraph (i) of the description of A, and
(c) an amount equal to the amount of the eligible dividend, if it is reasonable to consider that the eligible dividend was paid in a transaction, or as part of a series of transactions, one of the main purposes of which was to artificially maintain or increase the corporation’s general rate income pool, or to artificially maintain or decrease the corporation’s low rate income pool;
“general rate income pool”
« compte de revenu à taux général »
“general rate income pool” at the end of a particular taxation year, of a taxable Canadian corporation that is a Canadian-controlled private corporation or a deposit insurance corporation in the particular taxation year, is the positive or negative amount determined by the formula
A - B
where
A
is the positive or negative amount that would, before taking into consideration the specified future tax consequences for the particular taxation year, be determined by the formula
C + 0.68(D - E - F) + G + H - I
where
C
is the corporation’s general rate income pool at the end of its preceding taxation year,
D
is
(a) unless paragraph (b) applies, the corporation’s taxable income for the particular taxation year, and
(b) if the corporation is a deposit insurance corporation in the particular taxation year, nil,
E
is the amount determined by multiplying the amount, if any, deducted by the corporation under subsection 125(1) for the particular taxation year by the quotient obtained by dividing 100 by the rate of the deduction provided under that subsection for the particular taxation year,
F
is
(a) if the corporation is a Canadian-controlled private corporation in the particular taxation year, the lesser of the corporation’s aggregate investment income for the particular taxation year and the corporation’s taxable income for the particular taxation year, and
(b) in any other case, nil,
G
is the total of all amounts each of which is
(a) an eligible dividend received by the corporation in the particular taxation year, or
(b) an amount deductible under section 113 in computing the taxable income of the corporation for the particular taxation year,
H
is the total of all amounts determined under subsections (4) to (6) in respect of the corporation for the particular taxation year, and
I
is
(a) unless paragraph (b) applies, the amount, if any, by which
(i) the total of all amounts each of which is the amount of an eligible dividend paid by the corporation in its preceding taxation year
exceeds
(ii) the total of all amounts each of which is an excessive eligible dividend designation made by the corporation in its preceding taxation year, or
(b) if subsection (4) applies to the corporation in the particular taxation year, nil, and
B
is 68% of the amount, if any, by which
(a) the total of the corporation’s full rate taxable incomes (as would be defined in the definition “full rate taxable income” in subsection 123.4(1), if that definition were read without reference to its subparagraphs (a)(i) to (iii)) for the corporation’s preceding three taxation years, determined without taking into consideration the specified future tax consequences, for those preceding taxation years, that arise in respect of the particular taxation year,
exceeds
(b) the total of the corporation’s full rate taxable incomes (as would be defined in the definition “full rate taxable income” in subsection 123.4(1), if that definition were read without reference to its subparagraphs (a)(i) to (iii)) for those preceding taxation years;
“low rate income pool”
« compte de revenu à taux réduit »
“low rate income pool”, at any particular time in a particular taxation year, of a corporation (in this definition referred to as the “non-CCPC”) that is resident in Canada and is in the particular taxation year neither a Canadian-controlled private corporation nor a deposit insurance corporation, is the amount determined by the formula
(A + B + C + D + E + F) - (G + H)
where
A
is the non-CCPC’s low rate income pool at the end of its preceding taxation year,
B
is the total of all amounts each of which is an amount deductible under section 112 in computing the non-CCPC’s taxable income for the year in respect of a taxable dividend (other than an eligible dividend) that became payable, in the particular taxation year but before the particular time, to the non-CCPC by a corporation resident in Canada,
C
is the total of all amounts determined under subsections (8) to (10) in respect of the non-CCPC for the particular taxation year,
D
is
(a) if the non-CCPC would, but for paragraph (d) of the definition “Canadian-controlled private corporation” in subsection 125(7), be a Canadian-controlled private corporation in its preceding taxation year, 80% of its aggregate investment income for its preceding taxation year, and
(b) in any other case, nil,
E
is
(a) if the non-CCPC was not a Canadian-controlled private corporation in its preceding taxation year, 80% of the amount determined by multiplying the amount, if any, deducted by the corporation under subsection 125(1) for that preceding taxation year by the quotient obtained by dividing 100 by the rate of the deduction provided under that subsection for that preceding taxation year, and
(b) in any other case, nil,
F
is
(a) if the non-CCPC was an investment corporation in its preceding taxation year, four times the amount, if any, deducted by it under subsection 130(1) for its preceding taxation year, and
(b) in any other case, nil,
G
is the total of all amounts each of which is a taxable dividend (other than an eligible dividend, a capital gains dividend within the meaning assigned by subsection 130.1(4) or 131(1) or a taxable dividend deductible by the non-CCPC under subsection 130.1(1) in computing its income for the particular taxation year or for its preceding taxation year) that became payable, in the particular taxation year but before the particular time, by the non-CCPC, and
H
is the total of all amounts each of which is an excessive eligible dividend designation made by the non-CCPC in the particular taxation year but before the particular time;
(2) Section 89 of the Act is amended by adding the following after subsection (3):
Marginal note:GRIP addition — becoming CCPC
(4) If, in a particular taxation year, a corporation is a Canadian-controlled private corporation or a deposit insurance corporation but was, in its preceding taxation year, a corporation resident in Canada other than a Canadian-controlled private corporation or a deposit insurance corporation, there may be included in computing the corporation’s general rate income pool at the end of the particular taxation year, the amount determined by the formula
A + B + C - D - E - F - G - H
where
A
is the total of all amounts each of which is the cost amount to the corporation of a property immediately before the end of its preceding taxation year;
B
is the amount of any money of the corporation on hand immediately before the end of its preceding taxation year;
C
is the amount, if any, by which
(a) the total of all amounts that, if the corporation had had unlimited income for its preceding taxation year from each business carried on, and from each property held, by it in that preceding taxation year and had realized an unlimited amount of capital gains for that preceding taxation year, would have been deductible under subsection 111(1) in computing its taxable income for that preceding taxation year
exceeds
(b) the total of all amounts deducted under subsection 111(1) in computing the corporation’s taxable income for that preceding taxation year;
D
is the total of all amounts each of which is the amount of any debt owing by the corporation, or of any other obligation of the corporation to pay any amount, that was outstanding immediately before the end of its preceding taxation year;
E
is the paid up capital, immediately before the end of its preceding taxation year, of all of the issued and outstanding shares of the capital stock of the corporation;
F
is the total of all amounts each of which is a reserve deducted in computing the corporation’s income for its preceding taxation year;
G
is the corporation’s capital dividend account, if any, immediately before the end of its preceding taxation year; and
H
is the corporation’s low rate income pool immediately before the end of its preceding taxation year.
Marginal note:GRIP addition — post-amalgamation
(5) If a Canadian-controlled private corporation or a deposit insurance corporation (in this subsection referred to as the “new corporation”) is formed as a result of an amalgamation (within the meaning assigned by subsection 87(1)), there shall be included in computing the new corporation’s general rate income pool at the end of its first taxation year the total of all amounts each of which is
(a) in respect of a predecessor corporation that was, in its taxation year that ended immediately before the amalgamation (in this paragraph referred to as its “last taxation year”), a Canadian-controlled private corporation or a deposit insurance corporation, the positive or negative amount determined in respect of the predecessor corporation by the formula
A - B
where
A
is the predecessor corporation’s general rate income pool at the end of its last taxation year, and
B
is the amount, if any, by which
(i) the total of all amounts each of which is an eligible dividend paid by the predecessor corporation in its last taxation year
exceeds
(ii) the total of all amounts each of which is an excessive eligible dividend designation made by the predecessor corporation in its last taxation year; or
(b) in respect of a predecessor corporation (in this paragraph referred to as the “non-CCPC predecessor”) that was, in its taxation year that ended immediately before the amalgamation (in this paragraph referred to as its “last taxation year”), not a Canadian-controlled private corporation or a deposit insurance corporation, the amount determined by the formula
A + B + C - D - E - F - G - H
where
A
is the total of all amounts each of which is the cost amount to the non-CCPC predecessor of a property immediately before the end of its last taxation year,
B
is the amount of any money of the non-CCPC predecessor on hand immediately before the end of its last taxation year,
C
is the amount, if any, by which
(i) the total of all amounts that, if the non-CCPC predecessor had had unlimited income for its last taxation year from each business carried on, and from each property held, by it in that last taxation year and had realized an unlimited amount of capital gains for that last taxation year, would have been deductible under subsection 111(1) in computing its taxable income for that last taxation year
exceeds
(ii) the total of all amounts deducted under subsection 111(1) in computing the non-CCPC predecessor’s taxable income for its last taxation year,
D
is the total of all amounts each of which is the amount of any debt owing by the non-CCPC predecessor, or of any other obligation of the non-CCPC predecessor to pay any amount, that was outstanding immediately before the end of its last taxation year,
E
is the paid up capital, immediately before the end of its last taxation year, of all of the issued and outstanding shares of the capital stock of the non-CCPC predecessor,
F
is the total of all amounts each of which is a reserve deducted in computing the non-CCPC predecessor’s income for its last taxation year,
G
is the non-CCPC predecessor’s capital dividend account, if any, immediately before the end of its last taxation year, and
H
is the non-CCPC predecessor’s low rate income pool immediately before the end of its last taxation year.
Marginal note:GRIP addition — post-winding-up
(6) If subsection 88(1) applies to the winding-up of a subsidiary into a parent (within the meanings assigned by that subsection) that is a Canadian-controlled private corporation or a deposit insurance corporation, there shall be included in computing the parent’s general rate income pool at the end of its taxation year that immediately follows the taxation year during which it receives the assets of the subsidiary on the winding-up
(a) if the subsidiary was, in its taxation year during which its assets were distributed to the parent on the winding-up (in this paragraph referred to as its “last taxation year”), a Canadian-controlled private corporation or a deposit insurance corporation, the positive or negative amount determined by the formula
A - B
where
A
is the subsidiary’s general rate income pool at the end of its last taxation year, and
B
is the amount, if any, by which
(i) the total of all amounts each of which is an eligible dividend paid by the subsidiary in its last taxation year
exceeds
(ii) the total of all amounts each of which is an excessive eligible dividend designation made by the subsidiary in its last taxation year; and
(b) in any other case, the amount determined by the formula
A + B + C - D - E - F - G - H
where
A
is the total of all amounts each of which is the cost amount to the subsidiary of a property immediately before the end of its taxation year during which its assets were distributed to the parent on the winding-up (in this paragraph referred to as its “last taxation year”),
B
is the amount of any money of the subsidiary on hand immediately before the end of its last taxation year,
C
is the amount, if any, by which
(i) the total of all amounts that, if the subsidiary had had unlimited income for its last taxation year from each business carried on, and from each property held, by it in that last taxation year and had realized an unlimited amount of capital gains for that last taxation year, would have been deductible under subsection 111(1) in computing its taxable income for that last taxation year
exceeds
(ii) the total of all amounts deducted under subsection 111(1) in computing the subsidiary’s taxable income for its last taxation year,
D
is the total of all amounts each of which is the amount of any debt owing by the subsidiary, or of any other obligation of the subsidiary to pay any amount, that was outstanding immediately before the end of its last taxation year,
E
is the paid up capital, immediately before the end of its last taxation year, of all of the issued and outstanding shares of the capital stock of the subsidiary,
F
is the total of all amounts each of which is a reserve deducted in computing the subsidiary’s income for its last taxation year,
G
is the subsidiary’s capital dividend account, if any, immediately before the end of its last taxation year, and
H
is the subsidiary’s low rate income pool immediately before the end of its last taxation year.
Marginal note:GRIP addition for 2006
(7) If a corporation was (or, but for an election under subsection (11), would have been), throughout its first taxation year that includes any part of January 1, 2006, a Canadian-controlled private corporation, its general rate income pool at the end of its immediately preceding taxation year is deemed to be the greater of nil and the amount determined by the formula
A - B
where
A
is the total of
(a) 63% of the total of all amounts each of which is the corporation’s full rate taxable income (as defined in subsection 123.4(1)), for a taxation year of the corporation that ended after 2000 and before 2004, determined before taking into consideration the specified future tax consequences for that taxation year,
(b) 63% of the total of all amounts each of which is the corporation’s full rate taxable income (as would be defined in subsection 123.4(1), if that definition were read without reference to its subparagraphs (a)(i) and (ii)), for a taxation year of the corporation that ended after 2003 and before 2006, determined before taking into consideration the specified future tax consequences for that taxation year, and
(c) all amounts each of which was deductible under subsection 112(1) in computing the corporation’s taxable income for a taxation year of the corporation (in this paragraph referred to as the “particular corporation”) that ended after 2000 and before 2006, and is in respect of a dividend received from a corporation (in this paragraph referred to as the “payer corporation”) that was, at the time it paid the dividend, connected (within the meaning assigned by subsection 186(4)) with the particular corporation, to the extent that it is reasonable to consider, having regard to all the circumstances (including but not limited to other shareholders having received dividends from the payer corporation), that the dividend was attributable to an amount that is, or if this subsection applied to the payer corporation would be, described in this paragraph or in paragraph (a) or (b) in respect of the payer corporation; and
B
is the total of all amounts each of which is a taxable dividend paid by the corporation in those taxation years.
Marginal note:LRIP addition — ceasing to be CCPC
(8) If, in a particular taxation year, a corporation is neither a Canadian-controlled private corporation nor a deposit insurance corporation but was, in its preceding taxation year, a Canadian-controlled private corporation or a deposit insurance corporation, there shall be included in computing the corporation’s low rate income pool at any time in the particular taxation year the amount determined by the formula
A + B + C - D - E - F - G - H
where
A
is the total of all amounts each of which is the cost amount to the corporation of a property immediately before the end of its preceding taxation year;
B
is the amount of any money of the corporation on hand immediately before the end of its preceding taxation year;
C
is the amount, if any, by which
(a) the total of all amounts that, if the corporation had had unlimited income for its preceding taxation year from each business carried on, and from each property held, by it in that preceding taxation year and had realized an unlimited amount of capital gains for that preceding taxation year, would have been deductible under subsection 111(1) in computing its taxable income for that preceding taxation year
exceeds
(b) the total of all amounts deducted under subsection 111(1) in computing the corporation’s taxable income for its preceding taxation year;
D
is the total of all amounts each of which is the amount of any debt owing by the corporation, or of any other obligation of the corporation to pay any amount, that was outstanding immediately before the end of its preceding taxation year;
E
is the paid up capital, immediately before the end of its preceding taxation year, of all of the issued and outstanding shares of the capital stock of the corporation;
F
is the total of all amounts each of which is a reserve deducted in computing the corporation’s income for its preceding taxation year;
G
is
(a) if the corporation is not a private corporation in the particular taxation year, the corporation’s capital dividend account, if any, immediately before the end of its preceding taxation year, and
(b) in any other case, nil; and
H
is the positive or negative amount determined by the formula
I - J
where
I
is the corporation’s general rate income pool at the end of its preceding taxation year, and
J
is the amount, if any, by which
(a) the total of all amounts each of which is an eligible dividend paid by the corporation in its preceding taxation year
exceeds
(b) the total of all amounts each of which is an excessive eligible dividend designation made by the corporation in its preceding taxation year.
Marginal note:LRIP addition — amalgamation
(9) If a corporation that is resident in Canada and that is neither a Canadian-controlled private corporation nor a deposit insurance corporation (in this subsection referred to as the “new corporation”) is formed as a result of the amalgamation or merger of two or more corporations one or more of which is a taxable Canadian corporation, there shall be included in computing the new corporation’s low rate income pool at any time in its first taxation year the total of all amounts each of which is
(a) in respect of a predecessor corporation that was, in its taxation year that ended immediately before the amalgamation, neither a Canadian-controlled private corporation nor a deposit insurance corporation, the predecessor corporation’s low rate income pool at the end of that taxation year; and
(b) in respect of a predecessor corporation (in this paragraph referred to as the “CCPC predecessor”) that was, throughout its taxation year that ended immediately before the amalgamation (in this paragraph referred to as its “last taxation year”), a Canadian-controlled private corporation or a deposit insurance corporation, the amount determined by the formula
A + B + C - D - E - F - G - H
where
A
is the total of all amounts each of which is the cost amount to the CCPC predecessor of a property immediately before the end of its last taxation year,
B
is the amount of any money of the CCPC predecessor on hand immediately before the end of its last taxation year,
C
is the amount, if any, by which
(i) the total of all amounts that, if the CCPC predecessor had had unlimited income for its last taxation year from each business carried on, and from each property held, by it in that last taxation year and had realized an unlimited amount of capital gains for that last taxation year, would have been deductible under subsection 111(1) in computing its taxable income for that last taxation year
exceeds
(ii) the total of all amounts deducted under subsection 111(1) in computing the CCPC predecessor’s taxable income for its last taxation year,
D
is the total of all amounts each of which is the amount of any debt owing by the CCPC predecessor, or of any other obligation of the CCPC predecessor to pay any amount, that was outstanding immediately before the end of its last taxation year,
E
is the paid up capital, immediately before the end of its last taxation year, of all of the issued and outstanding shares of the capital stock of the CCPC predecessor,
F
is the total of all amounts each of which is a reserve deducted in computing the CCPC predecessor’s income for its last taxation year,
G
is
(i) if the new corporation is not a private corporation in its first taxation year, the CCPC predecessor’s capital dividend account, if any, immediately before the end of its last taxation year, and
(ii) in any other case, nil, and
H
is the positive or negative amount determined by the formula
I - J
where
I
is the CCPC predecessor’s general rate income pool at the end of its last taxation year, and
J
is the amount, if any, by which
(i) the total of all amounts each of which is an eligible dividend paid by the CCPC predecessor in its last taxation year
exceeds
(ii) the total of all amounts each of which is an excessive eligible dividend designation made by the CCPC predecessor in its last taxation year.
Marginal note:LRIP addition — winding-up
(10) If, in a particular taxation year, a corporation (in this subsection referred to as the “parent”) is neither a Canadian-controlled private corporation nor a deposit insurance corporation and in the particular taxation year all or substantially all of the assets of another corporation (in this subsection referred to as the “subsidiary”) were distributed to the parent on a dissolution or winding-up of the subsidiary, there shall be included in computing the parent’s low rate income pool at any time in the particular taxation year that is at or after the end of the subsidiary’s taxation year (in this subsection referred to as the subsidiary’s “last taxation year”) during which its assets were distributed to the parent on the winding-up,
(a) if the subsidiary was, in its last taxation year, neither a Canadian-controlled private corporation nor a deposit insurance corporation, the subsidiary’s low rate income pool immediately before the end of that taxation year; and
(b) in any other case, the amount determined by the formula
A + B + C - D - E - F - G - H
where
A
is the total of all amounts each of which is the cost amount to the subsidiary of a property immediately before the end of its last taxation year,
B
is the amount of any money of the subsidiary on hand immediately before the end of its last taxation year,
C
is the amount, if any, by which
(i) the total of all amounts that, if the subsidiary had had unlimited income for its last taxation year from each business carried on, and from each property held, by it in that last taxation year and had realized an unlimited amount of capital gains for that last taxation year, would have been deductible under subsection 111(1) in computing its taxable income for that last taxation year
exceeds
(ii) the total of all amounts deducted under subsection 111(1) in computing the subsidiary’s taxable income for its last taxation year,
D
is the total of all amounts each of which is the amount of any debt owing by the subsidiary, or of any other obligation of the subsidiary to pay any amount, that was outstanding immediately before the end of its last taxation year,
E
is the paid up capital, immediately before the end of its last taxation year, of all of the issued and outstanding shares of the capital stock of the subsidiary,
F
is the total of all amounts each of which is a reserve deducted in computing the subsidiary’s income for its last taxation year,
G
is
(i) if the parent is not a private corporation in the particular taxation year, the subsidiary’s capital dividend account, if any, immediately before the end of its last taxation year, and
(ii) in any other case, nil, and
H
is the positive or negative amount determined by the formula
I - J
where
I
is the subsidiary’s general rate income pool at the end of its last taxation year, and
J
is the amount, if any, by which
(i) the total of all amounts each of which is an eligible dividend paid by the subsidiary in its last taxation year
exceeds
(ii) the total of all amounts each of which is an excessive eligible dividend designation made by the subsidiary in its last taxation year.
Marginal note:Election: non-CCPC
(11) Subject to subsection (12), a corporation that files with the Minister on or before its filing-due date for a particular taxation year an election in prescribed form to have this subsection apply is deemed for the purposes described in paragraph (d) of the definition “Canadian-controlled private corporation” in subsection 125(7) not to be a Canadian-controlled private corporation at any time in or after the particular taxation year.
Marginal note:Revoking election
(12) If a corporation files with the Minister on or before its filing-due date for a particular taxation year a notice in prescribed form revoking, as of the end of the particular taxation year, an election described in subsection (11), the election ceases to apply to the corporation at the end of the particular taxation year.
Marginal note:Repeated elections — consent required
(13) If a corporation has, under subsection (12), revoked an election, any subsequent election under subsection (11) or subsequent revocation under subsection (12) is invalid unless
(a) the Minister consents in writing to the subsequent election or the subsequent revocation, as the case may be; and
(b) the corporation complies with any conditions imposed by the Minister.
Marginal note:Dividend designation
(14) A corporation designates a dividend it pays at any time to be an eligible dividend by notifying in writing at that time each person or partnership to whom it pays all or any part of the dividend that the dividend is an eligible dividend.
Meaning of expression “deposit insurance corporation”
(15) For the purposes of paragraphs 87(2)(vv) and (ww) (including, for greater certainty, in applying those paragraphs as provided under paragraph 88(1)(e.2)), the definitions “excessive eligible dividend designation”, “general rate income pool”, and “low rate income pool” in subsection (1) and subsections (4) to (6) and (8) to (10), a corporation is a deposit insurance corporation if it would be a deposit insurance corporation as defined in the definition “deposit insurance corporation” in subsection 137.1(5) were that definition read without reference to its paragraph (b) and were this Act read without reference to subsection 137.1(5.1).
(3) Subsections (1) and (2) apply to taxation years that end after 2005 except that
(a) subsection 89(7) of the Act, as enacted by subsection (2), applies only to the first taxation year of a corporation that includes any part of January 1, 2006;
(b) in respect of a dividend paid before this Act is assented to, a designation under subsection 89(14) of the Act, as enacted by subsection (2), is deemed to have been made in a timely manner if it is made on or before the day that is 90 days after the day on which this Act is assented to; and
(c) in applying the definition “low rate income pool” in subsection 89(1) of the Act, as enacted by subsection (1), for taxation years that began before 2006, the description of B in that definition shall be read as follows:
B
is the total of all amounts each of which is an amount deductible under section 112 in computing the non-CCPC’s taxable income for the year in respect of a taxable dividend (other than an eligible dividend) that became payable, in the particular taxation year and after 2005, but before the particular time, to the non-CCPC by a corporation resident in Canada,
48. (1) Subsection 121 of the Act is replaced by the following:
Marginal note:Deduction for taxable dividends
121. There may be deducted from the tax otherwise payable under this Part by an individual for a taxation year the total of
(a) 2/3 of the amount, if any, that is required by subparagraph 82(1)(b)(i) to be included in computing the individual’s income for the year; and
(b) 11/18 of the amount, if any, that is required by subparagraph 82(1)(b)(ii) to be included in computing the individual’s income for the year.
(2) Subsection (1) applies to dividends paid after 2005.
49. (1) The definition “Canadian-controlled private corporation” in subsection 125(7) of the Act is amended by striking out the word “or” at the end of paragraph (b), by adding the word “or” at the end of paragraph (c) and by adding the following after paragraph (c):
(d) in applying subsection (1), paragraphs 87(2)(vv) and (ww) (including, for greater certainty, in applying those paragraphs as provided under paragraph 88(1)(e.2)), the definitions “excessive eligible dividend designation”, “general rate income pool” and “low rate income pool” in subsection 89(1) and subsections 89(4) to (6), (8) to (10) and 249(3.1), a corporation that has made an election under subsection 89(11) and that has not revoked the election under subsection 89(12);
(2) Subsection (1) applies to taxation years that end after 2005.
50. (1) Paragraph 127.52(1)(f) of the Act is replaced by the following:
(f) subsection 82(1) were read without reference to paragraph 82(1)(b);
(2) Subsection (1) applies to dividends paid after 2005.
51. (1) The Act is amended by adding the following after section 185:
PART III.1 ADDITIONAL TAX ON EXCESSIVE ELIGIBLE DIVIDEND DESIGNATIONS
Marginal note:Tax on excessive eligible dividend designations
185.1 (1) A corporation that has made an excessive eligible dividend designation in respect of an eligible dividend paid by it at any time in a taxation year shall, on or before the corporation’s balance-due day for the taxation year, pay a tax under this Part for the taxation year equal to the total of
(a) 20% of the excessive eligible dividend designation, and
(b) if the excessive eligible dividend designation arises because of the application of paragraph (c) of the definition “excessive eligible dividend designation” in subsection 89(1), 10% of the excessive eligible dividend designation.
Marginal note:Election to treat excessive eligible dividend designation as an ordinary dividend
(2) If, in respect of an excessive eligible dividend designation that is not described in paragraph (1)(b) and that is made by a corporation in respect of an eligible dividend (in this subsection and subsection (3) referred to as the “original dividend”) paid by it at a particular time, the corporation would, if this Act were read without reference to this subsection, be required to pay a tax under subsection (1), and it elects in prescribed manner on or before the day that is 90 days after the day of mailing the notice of assessment in respect of that tax that would otherwise be payable under subsection (1), the following rules apply:
(a) notwithstanding the definition “eligible dividend” in subsection 89(1), the amount of the original dividend paid by the corporation is deemed to be the amount, if any, by which
(i) the amount of the original dividend, determined without reference to this subsection
exceeds
(ii) the amount claimed by the corporation in the election not exceeding the excessive eligible dividend designation, determined without reference to this subsection;
(b) an amount equal to the amount claimed by the corporation in the election is deemed to be a separate taxable dividend (other than an eligible dividend) that was paid by the corporation immediately before the particular time;
(c) each shareholder of the corporation who at the particular time held any of the issued shares of the class of shares in respect of which the original dividend was paid is deemed
(i) not to have received the original dividend, and
(ii) to have received at the particular time
(A) as an eligible dividend, the shareholder’s pro rata portion of the amount of any dividend determined under paragraph (a), and
(B) as a taxable dividend (other than an eligible dividend) the shareholder’s pro rata portion of the amount of any dividend determined under paragraph (b); and
(d) a shareholder’s pro rata portion of a dividend paid at any time on a class of the shares of the capital stock of a corporation is that proportion of the dividend that the number of shares of that class held by the shareholder at that time is of the number of shares of that class outstanding at that time.
Marginal note:Concurrence with election
(3) An election under subsection (2) in respect of an original dividend is valid only if
(a) it is made with the concurrence of the corporation and all its shareholders
(i) who received or were entitled to receive all or any portion of the original dividend, and
(ii) whose addresses were known to the corporation; and
(b) either
(i) it is made on or before the day that is 30 months after the day on which the original dividend was paid, or
(ii) each shareholder described in subparagraph (a)(i) concurs with the election, in which case, notwithstanding subsections 152(4) to (5), any assessment of the tax, interest and penalties payable by each of those shareholders for any taxation year shall be made that is necessary to take the corporation’s election into account.
Marginal note:Exception for non-taxable shareholders
(4) If each shareholder who, in respect of an election made under subsection (2), is deemed by subsection (2) to have received a dividend at a particular time is also, at the particular time, a person all of whose taxable income is exempt from tax under Part I,
(a) subsection (3) does not apply to the election; and
(b) the election is valid only if it is made on or before the day that is 30 months after the day on which the original dividend was paid.
Marginal note:Return
185.2 (1) Every corporation resident in Canada that pays a taxable dividend (other than a capital gains dividend within the meaning assigned by subsection 130.1(4) or 131(1)) in a taxation year shall file with the Minister, not later than the corporation’s filing-due date for the taxation year, a return for the year under this Part in prescribed form containing an estimate of the taxes payable by it under this Part for the taxation year.
Marginal note:Provisions applicable to Part
(2) Subsections 150(2) and (3), sections 151, 152, 158 and 159, subsections 161(1) and (11), sections 162 to 167 and Division J of Part I are applicable to this Part with such modifications as the circumstances require.
Marginal note:Joint and several liability from excessive eligible dividend designations
(3) Without limiting the liability of any person under any other provision of this Act, if a Canadian-controlled private corporation or a deposit insurance corporation pays an eligible dividend in respect of which it has made an excessive eligible dividend designation to a shareholder with whom it does not deal at arm’s length, the shareholder is jointly and severally, or solidarily, liable with the corporation to pay that proportion of the corporation’s tax payable under this Part because of the designation that the amount of the eligible dividend received by the shareholder is of the total of all amounts each of which is a dividend in respect of which the designation was made.
Marginal note:Assessment
(4) The Minister may, at any time after the last day on which a corporation may make an election under subsection 185.1(2) in respect of an excessive eligible dividend designation, assess a person in respect of any amount payable under subsection (3) in respect of the designation, and the provisions of Division I of Part I (including, for greater certainty, the provisions in respect of interest payable) apply, with any modifications that the circumstances require, to an assessment made under this subsection as though it were made under section 152.
Marginal note:Rules applicable
(5) If under subsection (3) a corporation and a shareholder have become jointly and severally, or solidarily, liable to pay part or all of the corporation’s tax payable under this Part in respect of an excessive eligible dividend designation described in subsection (3),
(a) a payment at any time by the shareholder on account of the liability shall, to the extent of the payment, discharge their liability after that time; and
(b) a payment at any time by the corporation on account of its liability shall discharge the shareholder’s liability only to the extent of the amount determined by the formula
(A - B) × C/D
where
A
is the total of
(i) the amount of the corporation’s liability, immediately before that time, under this Part in respect of the designation, and
(ii) the amount of the payment,
B
is the amount of the corporation’s liability, immediately before that time, under this Act,
C
is the amount of the eligible dividend received by the shareholder, and
D
the total of all amounts each of which is a dividend in respect of which the designation was made.
(2) Subsection (1) applies to taxation years that end after 2005 except that, in respect of a dividend paid before this Act is assented to, an election under subsection 185.1(2) of the Act, as enacted by subsection (1), is deemed to have been made in a timely manner if it is made on or before the day that is 30 months after the day on which this Act is assented to.
52. (1) Subsection 248(1) of the Act is amended by adding the following in alphabetical order:
“aggregate investment income”
« revenu de placement total »
“aggregate investment income” has the meaning assigned by subsection 129(4);
“eligible dividend”
« dividende déterminé »
“eligible dividend” has the meaning assigned by subsection 89(1);
“excessive eligible dividend designation”
« désignation excessive de dividende déterminé »
“excessive eligible dividend designation” has the meaning assigned by subsection 89(1);
“general rate income pool”
« compte de revenu à taux général »
“general rate income pool” has the meaning assigned by subsection 89(1);
“low rate income pool”
« compte de revenu à taux réduit »
“low rate income pool” has the meaning assigned by subsection 89(1);
(2) Subsection (1) applies to taxation years that end after 2005.
53. (1) Section 249 of the Act is amended by adding the following after subsection (3):
Marginal note:Year end on status change
(3.1) If at any time a corporation becomes or ceases to be a Canadian-controlled private corporation, otherwise than because of an acquisition of control to which subsection (4) would, if this Act were read without reference to this subsection, apply,
(a) subject to paragraph (c), the corporation’s taxation year that would, if this Act were read without reference to this subsection, include that time is deemed to end immediately before that time;
(b) a new taxation year of the corporation is deemed to begin at that time;
(c) notwithstanding subsections (1) and (3), the corporation’s taxation year that would, if this Act were read without reference to this subsection, have been its last taxation year that ended before that time is deemed instead to end immediately before that time if
(i) were this Act read without reference to this paragraph, that taxation year would, otherwise than because of paragraph 128(1)(d), section 128.1 and paragraphs 142.6(1)(a) or 149(10)(a), have ended within the 7-day period that ended immediately before that time,
(ii) within that 7-day period no person or group of persons acquired control of the corporation, and the corporation did not become or cease to be a Canadian-controlled private corporation, and
(iii) the corporation elects, in its return of income under Part I for that taxation year to have this paragraph apply; and
(d) for the purpose of determining the corporation’s fiscal period after that time, the corporation is deemed not to have established a fiscal period before that time.
(2) Subsection (1) applies to taxation years that end after 2005.
54. (1) Section 260 of the Act is amended by adding the following after subsection (1):
Marginal note:Eligible dividend
(1.1) This subsection applies to an amount if the amount is received by a person who is resident in Canada, the amount is deemed under subsection (5) to be a taxable dividend, and the amount is either
(a) received as compensation for an eligible dividend, within the meaning assigned by subsection 89(1); or
(b) received as compensation for a taxable dividend (other than an eligible dividend) paid by a corporation to a non-resident shareholder in circumstances where it is reasonable to consider that the corporation would, if that shareholder were resident in Canada, have designated the dividend to be an eligible dividend under subsection 89(14).
(2) The portion of subsection 260(5) of the Act after paragraph (b) is replaced by the following:
as compensation for a taxable dividend paid on a share of the capital stock of a public corporation that is a qualified security shall, to the extent of the amount of that dividend, be deemed to have been received as a taxable dividend and, if subsection (1.1) applies to the amount, as an eligible dividend on the share from the corporation.
(3) Subsections (1) and (2) apply to amounts received as compensation for dividends paid after 2005.
PART 3 AMENDMENTS RELATING TO THE EXCISE DUTIES ON CANADIAN WINE AND BEER
2002, c. 22Excise Act, 2001
55. (1) Section 87 of the Excise Act, 2001 is amended by striking out the word “and” at the end of paragraph (a) and by adding the following after that paragraph:
(a.1) in the case of wine on which duty is not imposed because of paragraph 135(2)(a), before the wine is
(i) removed from the licensee’s premises,
(ii) consumed, or
(iii) made available for sale on the premises; and
(2) Subsection (1) is deemed to have come into force on July 1, 2006.
56. (1) Subsection 134(3) of the Act is replaced by the following:
Marginal note:Exceptions
(3) Subsection (1) does not apply to
(a) wine that is produced in Canada and composed wholly of agricultural or plant product grown in Canada; and
(b) wine that is produced by an individual for their personal use and that is consumed in the course of that use.
(2) Subsection (1) applies to wine taken for use after June 2006.
57. (1) Paragraph 135(2)(a) of the Act is replaced by the following:
(a) produced in Canada and composed wholly of agricultural or plant product grown in Canada;
(a.1) produced and packaged by an individual for their personal use; or
(2) Subsection (1) applies to wine packaged after June 2006.
R.S., c. E-14Excise Act
58. (1) Section 2 of the Excise Act is amended by adding the following in alphabetical order:
“person”
« personne »
“person” means an individual, a partnership, a corporation, a trust, the estate of a deceased individual, a government or a body that is a society, a union, a club, an association, a commission or another organization of any kind;
(2) Subsection (1) is deemed to have come into force on July 1, 2006.
59. (1) The Act is amended by adding the following after section 2.1:
Marginal note:Related persons
2.2 For the purposes of this Act, persons are related to each other if they are related persons within the meaning of subsections 251(2) to (6) of the Income Tax Act, except that
(a) a reference in those subsections to “corporation” shall be read as a reference to “corporation or partnership”; and
(b) a reference in those subsections to “shares” or “shareholders” shall, in respect of a partnership, be read as a reference to “rights” or “partners”, respectively.
Marginal note:Associated persons
2.3 (1) For the purposes of this Act, a particular corporation is associated with another corporation if, by reason of subsections 256(1) to (6) of the Income Tax Act, the particular corporation is associated with the other corporation for the purposes of that Act.
Marginal note:Corporations controlled by same person or group
(2) For the purposes of this Act, a person other than a corporation is associated with a particular corporation if the particular corporation is controlled by the person or by a group of persons of which the person is a member and each of whom is associated with each of the others.
Marginal note:Partnership or trust
(3) For the purposes of this Act, a person is associated with
(a) a partnership if the total of the shares of the profits of the partnership to which the person and all other persons who are associated with the person are entitled is more than half of the total profits of the partnership, or would be more than half of the total profits of the partnership if it had profits; and
(b) a trust if the total of the values of the interests in the trust of the person and all other persons who are associated with the person is more than half of the total value of all interests in the trust.
Marginal note:Association with third person
(4) For the purposes of this Act, a person is associated with another person if each of them is associated with the same third person.
Marginal note:Exception
2.4 If a corporation that is a licensed brewer would otherwise be related to another corporation that is also a licensed brewer by reason that the corporations are controlled by individuals connected by blood relationship, marriage or common-law partnership or adoption, the corporations are deemed not to be related for the purposes of section 170.1 if it is established that they deal with each other at arm’s length.
(2) Subsection (1) is deemed to have come into force on July 1, 2006.
60. (1) Subsection 170(1) of the Act is replaced by the following:
Marginal note:Duties
170. (1) There shall be imposed, levied and collected on every hectolitre of beer or malt liquor the duties of excise set out in Part II of the schedule, which duties shall be paid to the collector as provided in this Act.
(2) Subsection (1) is deemed to have come into force on July 1, 2006.
61. (1) The Act is amended by adding the following after section 170:
Marginal note:Reduced rates — production
170.1 (1) With respect to the first 75,000 hectolitres of beer and malt liquor brewed in Canada per year by a licensed brewer and any person related or associated with the brewer, there shall be imposed, levied and collected on each of those hectolitres the duties of excise set out in Part II.1 of the schedule, which duties shall be paid to the collector as provided in this Act, and section 170 does not apply to those hectolitres.
Marginal note:Reduced rates — packaging
(2) If the beer or malt liquor described by subsection (1) is packaged by a licensed brewer (in this subsection, referred to as the “packaging brewer”) other than the licensed brewer or related or associated person referred to in that subsection, there shall be imposed, levied and collected on every hectolitre of beer or malt liquor packaged by the packaging brewer duties of excise at the rates that applied to the beer or malt liquor under subsection (1).
Marginal note:Exclusion of exports and de-alcoholized beer
(3) In subsection (1), the reference to “first 75,000 hectolitres of beer and malt liquor brewed in Canada” does not include
(a) beer or malt liquor that is exported or deemed to be exported under section 173; and
(b) beer or malt liquor containing not more than 0.5 % absolute ethyl alcohol by volume.
Marginal note:Treatment of contract production
(4) If, at any time, beer or malt liquor is brewed by a licensed brewer for another licensed brewer under an agreement with the other brewer, subsection (1) applies as though it had been brewed by the brewer who has brewed the greater volume of beer and malt liquor during the year up to that time.
Marginal note:Election for related or associated licensees
(5) If a licensed brewer is related or associated with one or more other licensed brewers, each of the brewers must file with the Minister an election in a form and manner satisfactory to the Minister that allocates the 75,000 hectolitre quantity amongst the brewers. The election must be filed no later than the filing due date of the first return in which the brewer reports duties that are imposed, levied and collected under subsection (1).
Marginal note:Brewer formed by business combination
(6) For the purposes of this section, if, in a year, two or more brewers (each of which is referred to in this subsection as a “predecessor brewer”) are amalgamated, merged or otherwise combined to form a new brewer, the following rules apply:
(a) the aggregate production of beer and malt liquor of the new and predecessor brewers for that year will be used for the purposes of applying subsection (1);
(b) the new brewer must determine the amount of duty that would have been imposed, levied and collected under subsection (1) on the aggregate production; and
(c) the new brewer is liable for and must, within 60 days of the combination, report and pay any difference between the amount calculated under paragraph (b) and the amounts paid by the predecessor brewers.
(2) Subsection (1) is deemed to have come into force on July 1, 2006, except that, for 2006, every reference to “75,000” in section 170.1 of the Act, as enacted by subsection (1), shall be read as a reference to “37,500”.
62. (1) The schedule to the Act is amended by replacing the reference “(Sections 135, 170, 185 and 200)” after the heading “SCHEDULE” with the reference “(Sections 135, 170, 170.1, 185 and 200)”.
(2) Subsection (1) is deemed to have come into force on July 1, 2006.
63. (1) The schedule to the Act is amended by adding the following after Part II:
II.1 CANADIAN BEER
1. On the first 2,000 hectolitres of beer and malt liquor brewed in Canada,
(a) if it contains more than 2.5% absolute ethyl alcohol by volume, $3.122 per hectolitre;
(b) if it contains more than 1.2% absolute ethyl alcohol by volume but not more than 2.5% absolute ethyl alcohol by volume, $1.561 per hectolitre; and
(c) if it contains not more than 1.2% absolute ethyl alcohol by volume, $0.2591 per hectolitre.
2. On the next 3,000 hectolitres of beer and malt liquor brewed in Canada,
(a) if it contains more than 2.5% absolute ethyl alcohol by volume, $6.244 per hectolitre;
(b) if it contains more than 1.2% absolute ethyl alcohol by volume but not more than 2.5% absolute ethyl alcohol by volume, $3.122 per hectolitre; and
(c) if it contains not more than 1.2% absolute ethyl alcohol by volume, $0.5182 per hectolitre.
3. On the next 10,000 hectolitres of beer and malt liquor brewed in Canada,
(a) if it contains more than 2.5% absolute ethyl alcohol by volume, $12.488 per hectolitre;
(b) if it contains more than 1.2% absolute ethyl alcohol by volume but not more than 2.5% absolute ethyl alcohol by volume, $6.244 per hectolitre; and
(c) if it contains not more than 1.2% absolute ethyl alcohol by volume, $1.0364 per hectolitre.
4. On the next 35,000 hectolitres of beer and malt liquor brewed in Canada,
(a) if it contains more than 2.5% absolute ethyl alcohol by volume, $21.854 per hectolitre;
(b) if it contains more than 1.2% absolute ethyl alcohol by volume but not more than 2.5% absolute ethyl alcohol by volume, $10.927 per hectolitre; and
(c) if it contains not more than 1.2% absolute ethyl alcohol by volume, $1.8137 per hectolitre.
5. On the next 25,000 hectolitres of beer and malt liquor brewed in Canada,
(a) if it contains more than 2.5% absolute ethyl alcohol by volume, $26.537 per hectolitre;
(b) if it contains more than 1.2% absolute ethyl alcohol by volume but not more than 2.5% absolute ethyl alcohol by volume, $13.269 per hectolitre; and
(c) if it contains not more than 1.2% absolute ethyl alcohol by volume, $2.2024 per hectolitre.
(2) Subsection (1) is deemed to have come into force on July 1, 2006, except that, for 2006,
(a) the reference to “35,000” in section 4 of Part II.1 of the schedule to the Act, as enacted by subsection (1), shall be read as a reference to “22,500”; and
(b) section 5 of Part II.1 of the schedule to the Act, as enacted by subsection (1), does not apply.
