SCHEDULE VIII

AN ACT TO AMEND THE INCOME TAX ACT, THE CANADA PENSION PLAN, THE INCOME TAX CONVENTIONS INTERPRETATION ACT, THE TAX REBATE DISCOUNTING ACT, THE UNEMPLOYMENT INSURANCE ACT AND CERTAIN RELATED ACTS

[1993, c. 24, assented to 10th June, 1993]

PART I

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

INCOME TAX ACT

1. (1) Paragraph 6(1)(e.1) of the Income Tax Act

Goods and services tax

    (e.1) the total of all amounts each of which is 7% of the amount, if any, by which

      (i) an amount (in this paragraph referred to as the ``benefit amount'') that would be required under paragraph (a) or (e) to be included in computing the taxpayer's income for the year in respect of a supply, other than a zero-rated supply or an exempt supply, (within the meanings assigned by Part IX of the Excise Tax Act) of property or a service if no amount were paid to the employer or to a person related to the employer in respect of the amount that would be so required to be included

    exceeds

      (ii) the amount, if any, included in the benefit amount that can reasonably be attributed to tax imposed under an Act of the legislature of a province that is a prescribed tax for the purposes of section 154 of the Excise Tax Act;

(2) Subsection (1) applies to the 1991 and subsequent taxation years except that, in applying paragraph 6(1)(e.1) of the Act, as enacted by subsection (1), to the 1991 taxation year, it shall be read as follows:

    (e.1) the total of all amounts each of which is 7% of the amount, if any, by which

      (i) an amount required under paragraph (a) or (e) to be included in computing the taxpayer's income for the year in respect of a supply, other than a zero-rated supply or an exempt supply, (within the meanings assigned by Part IX of the Excise Tax Act) of property or a service

    exceeds

      (ii) the amount, if any, included in the amount that is required to be so included under paragraph (a) or (e), as the case may be, that can reasonably be attributed to tax imposed under an Act of the legislature of a province that is a prescribed tax for the purposes of section 154 of the Excise Tax Act;

2. (1) Subparagraph 8(1)(m.2)(iii) of the Act is amended by striking out the word ``or'' at the end of clause (A), by adding the word ``or'' at the end of clause (B) and by adding the following after clause (B):

        (C) the plan is a prescribed plan or arrangement;

(2) Subsection (1) applies to the 1992 and subsequent taxation years.

3. (1) Paragraph 12(1)(p) of the Act is replaced by the following:

Certain payments to farmers

    (p) any amount received by the taxpayer in the year as a stabilization payment, or as a refund of a levy, under the Western Grain Stabilization Act or as a payment, or a refund of a premium, in respect of the gross revenue insurance program established under the Farm Income Protection Act;

(2) Subsection 12(1) of the Act is amended by striking out the word ``and'' at the end of paragraph (x.1), by adding the word ``and'' at the end of paragraph (y) and by adding the following after paragraph (y):

Amateur athlete trust payments

    (z) any amount in respect of an amateur athlete trust required by section 143.1 to be included in computing the taxpayer's income for the year.

(3) Subsection 12(2.2) of the Act is replaced by the following:

Deemed outlay or expense

(2.2) Where

    (a) in a taxation year a taxpayer receives an amount that would, but for this subsection, be included under paragraph (1)(x) in computing the taxpayer's income for the year in respect of an outlay or expense (other than an outlay or expense in respect of the cost of property of the taxpayer) made or incurred by the taxpayer before the end of the following taxation year, and

    (b) the taxpayer elects under this subsection on or before the day on or before which the taxpayer's return of income under this Part for the year is required to be filed, or would be required to be filed if tax under this Part were payable by the taxpayer for the year or, where the outlay or expense is made or incurred in the following taxation year, for that following year,

the amount of the outlay or expense shall be deemed for the purpose of computing the taxpayer's income, other than for the purposes of this subsection and paragraphs (1)(x) and 20(1)(hh), to have always been the amount, if any, by which

    (c) the amount of the outlay or expense

exceeds

    (d) the lesser of the amount elected by the taxpayer under this subsection and the amount so received by the taxpayer,

and, notwithstanding subsections 152(4) to (5), such assessment or reassessment of the taxpayer's tax, interest and penalties under this Act for any taxation year shall be made as is necessary to give effect to the election.

(4) Subsection 12(3) of the Act is replaced by the following:

Interest income

(3) Notwithstanding paragraph (1)(c), in computing the income for a taxation year of a corporation, partnership, unit trust or any trust of which a corporation or a partnership is a beneficiary, there shall be included any interest on a debt obligation (other than interest in respect of an income bond, an income debenture, a small business development bond, a small business bond or a net income stabilization account) that accrues to it to the end of the year, or becomes receivable or is received by it before the end of the year, to the extent that the interest was not included in computing its income for a preceding taxation year.

(5) Subsection 12(9.1) of the Act is replaced by the following:

Exclusion of proceeds of disposition

(9.1) Where a taxpayer disposes of an interest in a debt obligation that is a debt obligation in respect of which the proportion of the payments of principal to which the taxpayer is entitled is not equal to the proportion of the payments of interest to which the taxpayer is entitled, such portion of the proceeds of disposition received by the taxpayer as can reasonably be considered to represent a recovery of the cost to the taxpayer of the interest in the debt obligation shall, notwithstanding any other provision of this Act, not be included in computing the income of the taxpayer, and for the purpose of this subsection, a debt obligation includes, for greater certainty, all of the issuer's obligations to pay principal and interest under that obligation.

(6) Section 12 of the Act is amended by adding the following after subsection (10.1):

NISA receipts

(10.2) There shall be included in computing a taxpayer's income for a taxation year from a property the total of all amounts each of which is the amount determined by the formula

A - B

where

A is an amount paid at a particular time in the year out of the taxpayer's NISA Fund No. 2; and

B is the amount, if any, by which

        (a) the total of all amounts each of which is deemed by subsection 104(5.1) or (14.1) to have been paid out of the taxpayer's NISA Fund No. 2 before the particular time, or is deemed by subsection 70(5.4) or 73(5) to have been paid out of another person's NISA Fund No. 2 on being transferred to the taxpayer's NISA Fund No. 2 before the particular time,

      exceeds

        (b) the total of all amounts each of which is the amount by which an amount otherwise determined under this subsection in respect of a payment out of the taxpayer's NISA Fund No. 2 before the particular time was reduced because of this description.

Amount credited or added not included in income

(10.3) Notwithstanding any other provision of this Act, an amount credited or added to a taxpayer's NISA Fund No. 2 shall not be included in computing the taxpayer's income solely because of that crediting or adding.

(7) The definition ``investment contract'' in subsection 12(11) of the Act is amended by striking out the word ``or'' at the end of paragraph (i) and by replacing paragraph (j) with the following:

      (j) an obligation in respect of a net income stabilization account, and

      (k) a prescribed contract.

(8) Subsections (1), (4), (6) and (7) apply to the 1991 and subsequent taxation years.

(9) Subsection (2) applies to the 1988 and subsequent taxation years.

(10) Subsection (3) applies to amounts received after January 1990.

(11) Subsection (5) applies to dispositions of debt obligations occurring after October 16, 1991.

4. (1) Subsection 13(30) of the Act is replaced by the following:

Transfers of property

(30) Notwithstanding subsections (27) to (29), for the purpose of subsection (26), property of a taxpayer shall be deemed to have become available for use by the taxpayer at the earlier of the time the property was acquired by the taxpayer and, if applicable, a prescribed time, where

    (a) the property was acquired

      (i) from a person with whom the taxpayer was not dealing at arm's length (otherwise than because of a right referred to in paragraph 251(5)(b)) at the time the property was acquired by the taxpayer, or

      (ii) in the course of a reorganization in respect of which, if a dividend were received by a corporation in the course of the reorganization, subsection 55(2) would not apply to the dividend because of paragraph 55(3)(b); and

    (b) before the property was acquired by the taxpayer, it became available for use (determined without reference to paragraphs (27)(c) and (28)(d)) by the person from whom it was acquired.

(2) Subsection (1) applies to property acquired after 1989.

5. (1) The portion of subsection 15(1) of the Act before paragraph (a) is replaced by the following:

Benefit conferred on shareholder

15. (1) Where at any time in a taxation year a benefit is conferred on a shareholder, or on a person in contemplation of the person becoming a shareholder, by a corporation otherwise than by

(2) Paragraph 15(1)(c) of the Act is replaced by the following:

    (c) conferring, on all owners of common shares of the capital stock of the corporation at that time, a right in respect of each common share, that is identical to every other right conferred at that time in respect of each other such share, to acquire additional shares of the capital stock of the corporation, and for the purpose of this paragraph, rights shall not be considered identical if the cost of acquiring the rights differs, or

(3) Subsection 15(1.4) of the Act is replaced by the following:

Idem

(1.4) Where the amount or value (in this subsection referred to as the ``benefit amount'') of a benefit would be required under subsection (1) to be included in computing a taxpayer's income for a taxation year in respect of a supply, other than a zero-rated supply or an exempt supply, (within the meanings assigned by Part IX of the Excise Tax Act) of property or a service, if no amount were paid to the corporation or to a person related to the corporation in respect of the amount that would be so required to be included, there shall be included in computing the taxpayer's income for the year the total of all amounts each of which is an amount determined by the formula

0.07(A - B)

where

A is the amount that would be so required under subsection (1) to be included in computing the taxpayer's income for the year; and

B is the amount, if any, included in the benefit amount that can reasonably be attributed to tax imposed under an Act of the legislature of a province that is a prescribed tax for the purposes of section 154 of the Excise Tax Act.

(4) Subsections (1) and (2) apply to benefits conferred on or after December 20, 1991.

(5) Subsection (3) applies to the 1991 and subsequent taxation years except that, in applying subsection 15(1.4) of the Act, as enacted by subsection (3), to the 1991 taxation year, it shall be read as follows:

(1.4) Where the amount or value (in this subsection referred to as the ``benefit amount'') of a benefit is required under subsection (1) to be included in computing a taxpayer's income for a taxation year in respect of a supply, other than a zero-rated supply or an exempt supply, (within the meanings assigned by Part IX of the Excise Tax Act) of property or a service, there shall be included in computing the taxpayer's income for the year the total of all amounts each of which is an amount determined by the formula

0.07(A - B)

where

A is an amount required under subsection (1) to be included in computing the taxpayer's income for the year in respect of a supply (other than a zero-rated supply or an exempt supply, within the meanings assigned by Part IX of the Excise Tax Act) of property or a service; and

B is an amount, if any, included in the benefit amount that can reasonably be attributed to tax imposed under an Act of the legislature of a province that is a prescribed tax for the purposes of section 154 of the Excise Tax Act.

6. (1) Sections 15.1 and 15.2 of the Act are replaced by the following:

Interest on small business development bonds

15.1 (1) Any amount received by a taxpayer as or on account of interest on a small business development bond shall, except for the purposes of Part IV, be deemed to have been received as a taxable dividend.

Rules for small business development bonds

(2) Where a corporation (in this section referred to as the ``issuer'') has issued an obligation that is at any time a small business development bond, notwithstanding any other provision of this Act,

    (a) in computing the issuer's income for a taxation year, no deduction shall be made in respect of any amount paid or payable (depending on the method regularly followed in computing the issuer's income) as or on account of interest on the obligation in respect of a period that includes that time;

    (b) except for the purpose of subsection 129(1), to the extent that any amount paid by the issuer as or on account of interest on the obligation is not allowed as a deduction because of paragraph (a), it shall, when paid, be deemed to have been paid as a taxable dividend; and

    (c) except for the purposes of paragraph 125(1)(b), the issuer's taxable income for any taxation year that includes a period throughout which the obligation was a small business development bond but

      (i) the issuer was not an eligible small business corporation, or

      (ii) all or substantially all of the proceeds from the issue of the obligation cannot reasonably be regarded as having been used by the issuer or a corporation with which it was not dealing at arm's length in the financing of an active business carried on in Canada immediately before the obligation was issued

    shall be deemed to be an amount equal to the total of

      (iii) the amount paid or payable (depending on the method regularly followed in computing the issuer's income) as or on account of interest on the obligation in respect of that period, and

      (iv) the issuer's taxable income otherwise determined for the year.

Definitions

(3) In this section,

``eligible small business corporation''
« société admissible exploitant une petite entreprise »

``eligible small business corporation'' at any time means a taxable Canadian corporation that at that time is

      (a) a small business corporation, or

      (b) a cooperative corporation (within the meaning assigned by subsection 136(2)) all or substantially all of the assets of which are used in an active business carried on by it in Canada;

``joint election''
« choix conjoint »

``joint election'' means an election that is made in prescribed form, containing prescribed information, jointly by the issuer of an obligation and the person who is the holder of the obligation at the time of the election, that is filed with the Minister by the holder, and in which the holder and the issuer elect that this section apply to the obligation;

``majority interest partner''
« associé détenant une participation majoritaire »

``majority interest partner'' of a partnership means a taxpayer who, if subsection 97(3.1) applied to this section, would be deemed to be a majority interest partner of the partnership;

``qualifying debt obligation''
« créance admissible »

``qualifying debt obligation'' of a corporation at a particular time means an obligation that is a bond, debenture, bill, note, mortgage or similar obligation issued after December 11, 1979 and before 1988 or after February 25, 1992 and before 1993,

      (a) the principal amount of which is not less than $10,000 or more than $500,000,

      (b) that is issued for a term of not more than 5 years and, except in the event of a failure or default under the terms or conditions of the obligation, not less than one year, and

      (c) that was issued not more than 5 years before the particular time,

    if the obligation is issued by the corporation

      (d) as part of a proposal to, or an arrangement with, its creditors that has been approved by a court under the Bankruptcy and Insolvency Act,

      (e) at a time when all or substantially all of its assets are under the control of a receiver, receiver-manager, sequestrator or trustee in bankruptcy, or

      (f) at a time when, because of financial difficulty, the corporation is in default, or could reasonably be expected to default, on a debt held by a person with whom the corporation was dealing at arm's length and the obligation is issued, in whole or in part, directly or indirectly in exchange or substitution for that debt;

``small business development bond''
« obligation pour le développe-
ment de la petite entreprise
»

``small business development bond'' at any time means

      (a) an obligation that is at that time a qualifying debt obligation issued after 1981 and before 1988 by a Canadian-controlled private corporation in respect of which a joint election was made within 90 days after the later of its issue date and March 30, 1983,

      (b) an obligation that is at that time a qualifying debt obligation issued after February 25, 1992 by a Canadian-controlled private corporation in respect of which a joint election was made within 90 days after its issue date, or

      (c) an obligation that is at that time a qualifying debt obligation issued by a Canadian-controlled private corporation if

        (i) it is reasonable to consider that the corporation and the holder of the obligation intended that this section apply to the obligation, having regard to such factors as may be relevant, including the rate of interest stipulated under the terms of the obligation and the manner in which the corporation and the holder have treated the obligation for the purposes of this Act, and

        (ii) the holder files with the Minister a joint election in respect of the obligation within 90 days after the date of notification by the Minister that a joint election in respect of the obligation has not been filed.

Money borrowed

(4) Notwithstanding any other provision of this Act, an amount paid or payable by a taxpayer pursuant to a legal obligation to pay interest on borrowed money used for the purpose of acquiring a small business development bond shall be deemed to be an amount paid or payable, as the case may be, on borrowed money used for the purpose of earning income from a business or property.

False declaration

(5) Where the Minister establishes that an issuer has knowingly or under circumstances amounting to gross negligence made a false declaration in a joint election in respect of an obligation, the reference in subparagraph (2)(c)(iii) to ``the amount paid or payable'' shall in respect of the obligation be read as a reference to ``3 times the amount paid or payable''.

Disqualifi-
cation

(6) Where at a particular time an issuer makes a joint election in respect of an obligation and

    (a) the issuer or any other corporation associated at the time the obligation was issued with the issuer,

    (b) an individual who controls or is a member of a related group that controls the issuer, or

    (c) a partnership any member of which, who is a majority interest partner of the partnership, controls, or is a member of a related group that controls, the issuer

had at or before the particular time made a joint election in respect of any small business development bond or small business bond, as the case may be, for the purposes of this section, the issuer shall be deemed not to be an eligible small business corporation in respect of the obligation.

Exception

(7) Subsection (6) does not apply in respect of an obligation issued at any time where the issue price of the obligation does not exceed the amount, if any, by which

    (a) $500,000

exceeds

    (b) the total of all amounts each of which is the principal amount outstanding immediately after that time in respect of

      (i) another obligation that is a small business development bond issued by

        (A) the issuer, or

        (B) a corporation associated with the issuer, or

      (ii) a small business bond issued by

        (A) an individual who controls, or is a member of a related group that controls, the issuer, or

        (B) a partnership any member of which, who is a majority interest partner of the partnership, controls, or is a member of a related group that controls, the issuer.

Interest on small business bond

15.2 (1) Any amount received by a taxpayer as or on account of interest on a small business bond shall, except for the purposes of Part IV, be deemed to have been received as a taxable dividend from a taxable Canadian corporation.

Rules for small business bonds

(2) Where an individual or a partnership (in this section referred to as the ``issuer'') has issued an obligation that is at any time a small business bond, notwithstanding any other provision of this Act,

    (a) in computing the issuer's income for a taxation year, no deduction shall be made in respect of any amount paid or payable (depending on the method regularly followed in computing the issuer's income) as or on account of interest on the bond in respect of a period that includes that time; and

    (b) for any taxation year that includes a period throughout which the obligation was a small business bond but

      (i) the issuer was not an eligible issuer, or

      (ii) all or substantially all of the proceeds from the issue of the obligation were not used by the issuer in the financing of an active business carried on by the issuer in Canada immediately before the time of the issue of the obligation,

    there shall be added to the tax otherwise payable under this Part by the issuer for that taxation year an amount equal to 29% of the amount of interest paid or payable (depending on the method regularly followed in computing the issuer's income) in respect of the bond for that period.

Definitions

(3) In this section,

``eligible issuer''
« émetteur admissible »

``eligible issuer'' at any time means

      (a) an individual (other than a trust) who is resident in Canada and who

        (i) has not made a joint election before that time in respect of a small business bond,

        (ii) is not a majority interest partner of a partnership that has made a joint election before that time in respect of a small business bond, and

        (iii) neither controls nor is a member of a related group that controls

          (A) a corporation that has made a joint election before that time in respect of a small business development bond, or

          (B) a corporation that is associated with a corporation referred to in clause (A), or

      (b) a partnership

        (i) each member of which is an individual (other than a trust) who is resident in Canada,

        (ii) each majority interest partner, if any, of which is an eligible issuer, and

        (iii) that has not made a joint election before that time in respect of a small business bond;

``joint election''
« choix conjoint »

``joint election'' means an election that is made in prescribed form, containing prescribed information, jointly by the issuer of an obligation and the person who is the holder of the obligation at the time of the election, that is filed with the Minister by the holder and in which the holder and the issuer elect that the provisions of this section apply to that obligation;

``majority interest partner''
« associé détenant une participation majoritaire »

``majority interest partner'' of a partnership means a taxpayer who, if subsection 97(3.1) applied to this section, would be deemed to be a majority interest partner of the partnership;

``qualifying debt obligation''
« créance admissible »

``qualifying debt obligation'' of an issuer at a particular time means an obligation that is a bill, note, mortgage or similar obligation issued after November 12, 1981 and before 1988 or after February 25, 1992 and before 1993,

      (a) the principal amount of which is not less than $10,000 or more than $500,000,

      (b) that is issued for a term of not more than 5 years and, except in the event of a failure or default under the terms or conditions of the obligation, not less than one year, and

      (c) that was issued not more than 5 years before the particular time,

    if the obligation is issued

      (d) as part of a proposal to, or an arrangement with, the issuer's creditors that has been approved by a court under the Bankruptcy and Insolvency Act,

      (e) at a time when all or substantially all of the issuer's assets are under the control of a receiver, receiver-manager, sequestrator or trustee in bankruptcy, or

      (f) at a time when, because of financial difficulty, the issuer is in default, or could reasonably be expected to default, on a debt incurred in the course of the issuer's business and held by a person with whom the issuer was dealing at arm's length or, where the issuer is a partnership, by a person with whom each member of the partnership was dealing at arm's length, and it is issued, in whole or in part, directly or indirectly in exchange or substitution for that debt,

    and the funds from the issue of the obligation are used in Canada in a business of the issuer carried on immediately before the time of issue;

``small business bond''
« obligation pour la petite entreprise »

``small business bond'' at any time means

      (a) an obligation that is at that time a qualifying debt obligation, issued by an individual or a partnership, in respect of which a joint election was made within 90 days after its issue date, or

      (b) an obligation that is at that time a qualifying debt obligation issued by an individual or a partnership if

        (i) it is reasonable to consider that the issuer and the holder of the obligation intended that this section apply to the obligation, having regard to such factors as may be relevant, including the rate of interest stipulated under the terms of the obligation and the manner in which the issuer and the holder have treated the obligation for the purposes of this Act, and

        (ii) the holder files with the Minister a joint election in respect of the obligation within 90 days after the date of notification by the Minister that a joint election in respect of the obligation has not been filed under paragraph (a).

Status of interest

(4) Notwithstanding any other provision of this Act, an amount paid or payable by a taxpayer pursuant to a legal obligation to pay interest on borrowed money used for the purpose of acquiring a small business bond shall be deemed to be an amount paid or payable, as the case may be, on borrowed money used for the purpose of earning income from a business or property.

False declaration

(5) Where the Minister establishes that an issuer has knowingly or under circumstances amounting to gross negligence made a false declaration in a joint election in respect of an obligation, the reference in paragraph (2)(b) to ``29%'' shall, in respect of the obligation, be read as a reference to ``87%''.

Partnerships

(6) For the purpose of paragraph (2)(b), in the case of an issuer that is a partnership, the expression ``tax otherwise payable under this Part by the issuer'' shall be read as a reference to the ``tax otherwise payable under this Part by each member of the partnership'' and each member shall add to that member's tax otherwise payable under this Part for the taxation year that includes the period described in paragraph (2)(b) the amount that can reasonably be regarded as that member's share of the amount determined under that paragraph with respect to the partnership.

Deemed eligible issuer

(7) Where, but for subparagraphs (a)(i), (ii) and (iii) and (b)(ii) of the definition ``eligible issuer'' in subsection (3), an individual or a partnership would be an ``eligible issuer'', the individual or partnership shall be deemed to be an eligible issuer in respect of a small business bond at any time where the issue price of the bond does not exceed the amount, if any, by which

    (a) $500,000

exceeds

    (b) where the issuer is an individual, the total of all amounts each of which is the principal amount outstanding immediately after that time in respect of

      (i) another obligation that is a small business bond issued by

        (A) the individual, or

        (B) a partnership of which the individual is a majority interest partner, or

      (ii) a small business development bond issued by

        (A) a corporation that is controlled by the individual or by a related group of which the individual is a member, or

        (B) a corporation that is associated with a corporation referred to in clause (A), or

    (c) where the issuer is a partnership, the total of all amounts each of which is the principal amount outstanding immediately after that time in respect of

      (i) another obligation that is a small business bond issued by

        (A) the partnership,

        (B) an individual who is a majority interest partner of the partnership, or

        (C) a partnership of which the individual referred to in clause (B) is a majority interest partner, or

      (ii) a small business development bond issued by

        (A) a corporation that is controlled by the individual referred to in clause (i)(B) or by a related group of which the individual is a member, or

        (B) a corporation that is associated with a corporation referred to in clause (A).

(2) Subsection (1) applies to obligations issued after February 25, 1992 except that, for the purposes of the definition ``small business development bond'' in subsection 15.1(3) of the Act, as enacted by subsection (1), and the definition ``small business bond'' in subsection 15.2(3) of the Act, as enacted by subsection (1), an election made in respect of an obligation after February 25, 1992 and before September 9, 1993 shall be deemed to have been made within 90 days after the day the obligation was issued.

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

Idem

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

(2) Section 16 of the Act is amended by adding the following after subsection (5):

Indexed debt obligations

(6) For the purposes of this Act, where at any time in a taxpayer's taxation year

    (a) an interest in an indexed debt obligation is held by the taxpayer,

      (i) an amount determined in prescribed manner shall be deemed to be received and receivable by the taxpayer in the year as interest in respect of the obligation, and

      (ii) an amount determined in prescribed manner shall be deemed to be paid and payable in respect of the year by the taxpayer as interest under a legal obligation of the taxpayer to pay interest on borrowed money used for the purpose of earning income from a business or property;

    (b) an indexed debt obligation is an obligation of the taxpayer,

      (i) an amount determined in prescribed manner shall be deemed to be payable in respect of the year by the taxpayer as interest in respect of the obligation, and

      (ii) an amount determined in prescribed manner shall be deemed to be received and receivable by the taxpayer in the year as interest in respect of the obligation; and

    (c) the taxpayer pays or credits an amount in respect of an amount determined under subparagraph (b)(i) in respect of an indexed debt obligation, the payment or crediting shall be deemed to be a payment or crediting of interest on the obligation.

(3) Subsection (1) applies to the 1991 and subsequent taxation years.

(4) Subsection (2) applies to debt obligations issued after October 16, 1991.

8. (1) The portion of subsection 18(5) of the Act before the definition ``outstanding debts to specified non-residents'' is replaced by the following:

Definitions

(5) Notwithstanding any other provision of this Act (other than subsection (5.1)), in this subsection and subsections (4) to (6),

(2) Paragraph (b) of the definition ``outstanding debts to specified non-residents'' in subsection 18(5) of the Act is replaced by the following:

      (b) any amount outstanding at the particular time as or on account of a debt or other obligation to pay an amount to a non-resident insurance corporation where the amount outstanding at the particular time was, in the non-resident insurance corporation's taxation year that included the particular time, included, for the purposes of section 138, as property used by it in the year in, or held by it in the year in the course of, carrying on an insurance business through a permanent establishment (within the meaning assigned for the purpose of subsection 112(2)) in Canada,

(3) The definition ``specified shareholder'' in subsection 18(5) of the Act is replaced by the following:

``specified shareholder''
« actionnaire déterminé »

``specified shareholder'' of a corporation at any time means a person who at that time, either alone or together with persons with whom that person is not dealing at arm's length, owns

      (a) shares of the capital stock of the corporation that give the holders thereof 25% or more of the votes that could be cast at an annual meeting of the shareholders of the corporation, or

      (b) shares of the capital stock of the corporation having a fair market value of 25% or more of the fair market value of all of the issued and outstanding shares of the capital stock of the corporation,

    and, for the purpose of determining whether a particular person is a specified shareholder of a corporation at any time, where the particular person or a person with whom the particular person is not dealing at arm's length has at that time a right under a contract, in equity or otherwise, either immediately or in the future and either absolutely or contingently

      (c) to, or to acquire, shares in a corporation or to control the voting rights of shares in a corporation, or

      (d) to cause a corporation to redeem, acquire or cancel any of its shares (other than shares held by the particular person or a person with whom the particular person is not dealing at arm's length),

    the particular person or the person with whom the particular person is not dealing at arm's length, as the case may be, shall be deemed at that time to own the shares referred to in paragraph (c) and the corporation referred to in paragraph (d) shall be deemed at that time to have redeemed, acquired or cancelled the shares referred to in paragraph (d), unless the right is not exercisable at that time because the exercise thereof is contingent on the death, bankruptcy or permanent disability of an individual.

(4) Section 18 of the Act is amended by adding the following after subsection (5):

Person deemed not to be specified shareholder

(5.1) For the purposes of subsections (4) to (6), where

    (a) a particular person would, but for this subsection, be a specified shareholder of a corporation at any time,

    (b) there was in effect at that time an agreement or arrangement under which, on the satisfaction of a condition or the occurrence of an event that it is reasonable to expect will be satisfied or will occur, the particular person will cease to be a specified shareholder, and

    (c) the purpose for which the particular person became a specified shareholder was the safeguarding of rights or interests of the particular person or a person with whom the particular person is not dealing at arm's length in respect of any indebtedness owing at any time to the particular person or a person with whom the particular person is not dealing at arm's length,

the particular person shall be deemed not to be a specified shareholder of the corporation at that time.

(5) Paragraph 18(9)(b) of the Act is replaced by the following:

    (b) such portion of each outlay or expense (other than an outlay or expense of a corporation, partnership or trust as, on account of, in lieu of payment of or in satisfaction of, interest) made or incurred as would, but for paragraph (a), be deductible in computing a taxpayer's income for a taxation year shall be deductible in computing the taxpayer's income for the subsequent year to which it can reasonably be considered to relate;

(6) Section 18 of the Act is amended by adding the following after subsection (9.1):

Interest on debt obligations

(9.2) For the purposes of this Part, the amount of interest payable on borrowed money or on an amount payable for property (in this subsection and subsections (9.3) to (9.8) referred to as the ``debt obligation'') by a corporation, partnership or trust (in this subsection and subsections (9.3) to (9.7) referred to as the ``borrower'') in respect of a taxation year shall, notwithstanding subparagraph (9.1)(f)(i), be deemed to be an amount equal to the lesser of

    (a) the amount of interest, not in excess of a reasonable amount, that would be payable on the debt obligation by the borrower in respect of the year if no amount had been paid before the end of the year in satisfaction of the obligation to pay interest on the debt obligation in respect of the year and if the amount outstanding at each particular time in the year that is after 1991 on account of the principal amount of the debt obligation were the amount, if any, by which

      (i) the amount outstanding at the particular time on account of the principal amount of the debt obligation

    exceeds the total of

      (ii) all amounts each of which is an amount paid before the particular time in satisfaction, in whole or in part, of the obligation to pay interest on the debt obligation in respect of a period or part thereof that is after 1991, after the beginning of the year, and after the time the amount was so paid (other than a period or part thereof that is in the year where no such amount was paid before the particular time in respect of a period, or part of a period, that is after the end of the year), and

      (iii) the amount, if any, by which

        (A) the total of all amounts of interest payable on the debt obligation (determined without reference to this subsection) by the borrower in respect of taxation years ending after 1991 and before the year (to the extent that the interest does not exceed a reasonable amount)

      exceeds

        (B) the total of all amounts of interest deemed by this subsection to have been payable on the debt obligation by the borrower in respect of taxation years ending before the year, and

    (b) the amount, if any, by which

      (i) the total of all amounts of interest payable on the debt obligation (determined without reference to this subsection) by the borrower in respect of the year or taxation years ending after 1991 and before the year (to the extent that the interest does not exceed a reasonable amount)

    exceeds

      (ii) the total of all amounts of interest deemed by this subsection to have been payable on the debt obligation by the borrower in respect of taxation years ending before the year.

Idem

(9.3) Where at any time in a taxation year of a borrower a debt obligation of the borrower has been settled or extinguished and the total of

    (a) all amounts each of which is an amount paid before that time in satisfaction, in whole or in part, of the obligation to pay interest on the debt obligation in respect of a period or part thereof that is after that time, and

    (b) all amounts of interest payable on the debt obligation (determined without reference to subsection (9.2)) by the borrower in respect of taxation years ending after 1991 and before that time, or in respect of periods, or parts of periods, that are in such years and before that time (to the extent that the interest does not exceed a reasonable amount),

exceeds the total of

    (c) all amounts of interest deemed by subsection (9.2) to have been payable on the debt obligation by the borrower in respect of taxation years ending before that time, and

    (d) the amount of interest that would be deemed by subsection (9.2) to have been payable on the debt obligation by the borrower in respect of the year if the year had ended immediately before that time,

(which excess is in this subsection referred to as the ``excess amount''), the following rules apply:

    (e) for the purpose of applying paragraph 79(c) in respect of the borrower, where the debt obligation was extinguished in circumstances to which section 79 applies, the amount outstanding at that time on account of the principal amount of the debt obligation shall be deemed to be the amount, if any, by which

      (i) the amount outstanding at that time on account of the principal amount of the debt obligation

    exceeds

      (ii) the excess amount, and

    (f) for the purpose of applying section 80 in respect of the borrower, where the debt obligation was settled or extinguished in circumstances to which that section applies, the debt obligation shall be deemed to have been settled or extinguished by the payment of an amount equal to the total of

      (i) the amount, if any, of the payment made to settle or extinguish the debt obligation (determined without reference to this subsection), and

      (ii) the excess amount.

Idem

(9.4) Where an amount is paid at any time by a person or partnership in respect of a debt obligation of a borrower

    (a) as, on account of, in lieu of payment of or in satisfaction of, interest on the debt obligation in respect of a period or part thereof that is after 1991 and after that time, or

    (b) as consideration for a reduction in the rate of interest payable on the debt obligation (excluding, for greater certainty, a payment described in paragraph (9.1)(a) or (b)) in respect of a period or part thereof that is after 1991 and after that time,

that amount shall be deemed, for the purposes of subsection (9.5) and, subject to that subsection, for the purposes of clause (9.2)(a)(iii)(A), subparagraph (9.2)(b)(i), paragraph (9.3)(b) and subsection (9.6), to be an amount of interest payable on the debt obligation by the borrower in respect of that period or part thereof and shall be deemed, for the purposes of subparagraph (9.2)(a)(ii) and paragraph (9.3)(a), to be an amount paid at that time in satisfaction of the obligation to pay interest on the debt obligation in respect of that period or part thereof.

Idem

(9.5) Where the amount of interest payable on a debt obligation (determined without reference to subsection (9.2)) by a borrower in respect of a particular period or part thereof that is after 1991 can reasonably be regarded as an amount payable as consideration for

    (a) a reduction in the amount of interest that would otherwise be payable on the debt obligation in respect of a subsequent period, or

    (b) a reduction in the amount that was or may be paid before the beginning of a subsequent period in satisfaction of the obligation to pay interest on the debt obligation in respect of that subsequent period

(determined without reference to the existence of, or the amount of any interest paid or payable on, any other debt obligation), that amount shall, for the purposes of clause (9.2)(a)(iii)(A), subparagraph (9.2)(b)(i), paragraph (9.3)(b) and subsection (9.6), be deemed to be an amount of interest payable on the debt obligation by the borrower in respect of the subsequent period and not to be an amount of interest payable on the debt obligation by the borrower in respect of the particular period and shall, when paid, be deemed for the purposes of subparagraph (9.2)(a)(ii) and paragraph (9.3)(a) to be an amount paid in satisfaction of the obligation to pay interest on the debt obligation in respect of the subsequent period.

Idem

(9.6) Where the liability in respect of a debt obligation of a person or partnership is assumed by a borrower at any time,

    (a) the amount of interest payable on the debt obligation (determined without reference to subsection (9.2)) by any person or partnership in respect of a period shall, to the extent that that period is included in a taxation year of the borrower ending after 1991, be deemed, for the purposes of clause (9.2)(a)(iii)(A), subparagraph (9.2)(b)(i) and paragraph (9.3)(b), to be an amount of interest payable on the debt obligation by the borrower in respect of that year, and

    (b) the application of subsections (9.2) and (9.3) to the borrower in respect of the debt obligation after that time shall be determined on the assumption that subsection (9.2) applied to the borrower in respect of the debt obligation before that time,

and, for the purposes of this subsection, where the borrower came into existence at a particular time that is after the beginning of the particular period beginning at the beginning of the first period in respect of which interest was payable on the debt obligation by any person or partnership and ending at the particular time, the borrower shall be deemed

    (c) to have been in existence throughout the particular period, and

    (d) to have had, throughout the particular period, taxation years ending on the day of the year on which its first taxation year ended.

Idem

(9.7) Where the amount paid by a borrower at any particular time, in satisfaction of the obligation to pay a particular amount of interest on a debt obligation in respect of a subsequent period or part thereof, exceeds the particular amount of that interest, discounted

    (a) for the particular period beginning at the particular time and ending at the end of the subsequent period or part thereof, and

    (b) at the rate or rates of interest applying under the debt obligation during the particular period (or, where the rate of interest of any part of the particular period is not fixed at the particular time, at the prescribed rate of interest in effect at the particular time),

that excess shall

    (c) for the purposes of applying subsections (9.2) to (9.6) and (9.8), be deemed to be neither an amount of interest payable on the debt obligation nor an amount paid in satisfaction of the obligation to pay interest on the debt obligation, and

    (d) be deemed to be a payment described in paragraph (9.1)(d) in respect of the debt obligation.

Idem

(9.8) Nothing in any of subsections (9.2) to (9.7) shall be construed as providing that

    (a) the total of all amounts each of which is the amount of interest payable on a debt obligation by an individual (other than a trust), or deemed by subsection (9.2) to be payable on the debt obligation by a corporation, partnership or trust, in respect of a taxation year ending after 1991 and before any particular time,

may exceed

    (b) the total of all amounts each of which is the amount of interest payable on the debt obligation (determined without reference to subsection (9.2)) by a person or partnership in respect of a taxation year ending after 1991 and before that particular time.

(7) Paragraph 18(11)(b) of the Act is replaced by the following:

    (b) paying a premium (within the meaning assigned by subsection 146(1) read without reference to the portion of the definition ``premium'' in that subsection following paragraph (b) of that definition) under a registered retirement savings plan after November 12, 1981;

(8) Subsection 18(11) of the Act is amended by striking out the word ``or'' at the end of paragraph (d), by adding the word ``or'' at the end of paragraph (e) and by replacing the portion after paragraph (e) with the following:

    (f) making a contribution to a net income stabilization account,

and, for the purposes of this subsection, to the extent that an indebtedness is incurred by a taxpayer in respect of a property and at any time that property or a property substituted therefor is used for any of the purposes referred to in this subsection, the indebtedness shall be deemed to be incurred at that time for that purpose.

(9) Subsections (1) and (4) apply to the 1993 and subsequent taxation years and, where a corporation so elected by notifying the Minister of National Revenue in writing before December 11, 1993, to its 1989 and subsequent taxation years.

(10) Subsection (2) applies to the 1991 and subsequent taxation years and, where a corporation so elected by notifying the Minister of National Revenue in writing before December 11, 1993, to its 1985 and subsequent taxation years.

(11) Subsection (3) applies to the 1993 and subsequent taxation years and, where a corporation so elected by notifying the Minister of National Revenue in writing before December 11, 1993, to its 1989 and subsequent taxation years.

(12) Subsection (5) applies to amounts paid as, on account of, in lieu of payment of or in satisfaction of, interest in respect of a period or part thereof that is after 1991.

(13) Subsections (6) and (7) apply to the 1992 and subsequent taxation years.

(14) Subsection (8) applies to the 1991 and subsequent taxation years.

9. (1) Paragraph 20(1)(ff) of the Act is replaced by the following:

Payments by farmers

    (ff) an amount paid by the taxpayer in the year as a levy under the Western Grain Stabilization Act, as a premium in respect of the gross revenue insurance program established under the Farm Income Protection Act or as an administration fee in respect of a net income stabilization account;

(2) Subsection 20(1) of the Act is amended by striking out the word ``and'' at the end of paragraph (oo) and by adding the following after paragraph (pp):

Disability-rela ted modifications to buildings

    (qq) an amount paid by the taxpayer in the year for prescribed renovations or alterations to a building used by the taxpayer primarily for the purpose of gaining or producing income from the building or from a business that are made to enable individuals who have a mobility impairment to gain access to the building or to be mobile within it; and

Disability-rela ted equipment

    (rr) an amount paid by the taxpayer in the year for prescribed devices or equipment acquired primarily to assist individuals who have a sight or hearing impairment.

(3) Subsection 20(12) of the Act is replaced by the following:

Foreign non-business income tax

(12) In computing a taxpayer's income for a taxation year from a business or property, there may be deducted such amount as the taxpayer claims not exceeding the non-business income tax paid by the taxpayer for the year to the government of a country other than Canada (within the meaning assigned by subsection 126(7) read without reference to paragraphs (c) and (e) of the definition ``non-business-income tax'' in that subsection) in respect of that income, other than any such tax, or part thereof, that can reasonably be regarded as having been paid by a corporation in respect of income from a share of the capital stock of a foreign affiliate of the corporation.

(4) Subsection 20(16.1) of the Act is replaced by the following:

Idem

(16.1) Subsection (16) does not apply in respect of a passenger vehicle of a taxpayer that has a cost to the taxpayer in excess of $20,000 or such other amount as is prescribed.

(5) Paragraph 20(21)(b) of the Act is replaced by the following:

    (b) the portion of an amount that was received or became receivable by the taxpayer in the particular year or a preceding taxation year that can reasonably be considered to be in respect of an amount described in paragraph (a) and that was not repaid by the taxpayer to the issuer of the debt obligation because of an adjustment in respect of interest received before the time of disposition by the taxpayer, or

(6) Subsection 20(24) of the Act is replaced by the following:

Amounts paid for undertaking future obligations

(24) Where an amount is included under paragraph 12(1)(a) in computing a taxpayer's income for a taxation year in respect of an undertaking to which that paragraph applies and the taxpayer paid a reasonable amount in a particular taxation year to another person as consideration for the assumption by that other person of the taxpayer's obligations in respect of the undertaking, if the taxpayer and the other person jointly so elect,

    (a) the payment may be deducted in computing the taxpayer's income for the particular year and no amount is deductible under paragraph (1)(m) or (m.1) in computing the taxpayer's income for that or any subsequent taxation year in respect of the undertaking; and

    (b) where the amount was received by the other person in the course of business, it shall be deemed to be an amount described in paragraph 12(1)(a).

(7) Subsections (1) and (6) apply to the 1991 and subsequent taxation years.

(8) Paragraph 20(1)(qq) of the Act, as enacted by subsection (2), applies to renovations and alterations made after 1990 except that, with respect to renovations and alterations made after 1990 and before February 26, 1992, the reference to ``prescribed renovations or alterations to a building'' in that paragraph shall be read as ``prescribed renovations or alterations to a building of the taxpayer''.

(9) Paragraph 20(1)(rr) of the Act, as enacted by subsection (2), applies to amounts paid after February 25, 1992.

(10) Subsection (3) applies to the 1992 and subsequent taxation years.

(11) Subsection (4) applies to taxation years and fiscal periods beginning after June 17, 1987 that end after 1987.

(12) Subsection (5) applies to dispositions occurring after December 20, 1991.

10. (1) Paragraph 24(2)(a) of the Act is replaced by the following:

    (a) in computing the individual's income for the individual's first taxation year ending after that time, subsection (1) shall be read without reference to paragraph (1)(a) and the reference in paragraph (1)(c) to ``the amount deducted by the taxpayer under paragraph (a)'' shall be read as a reference to ``an amount equal to the taxpayer's cumulative eligible capital in respect of the business immediately before that time'';

(2) Subsection 24(2) of the Act is amended by striking out the word ``and'' at the end of paragraph (b), by adding the word ``and'' at the end of paragraph (c) and by adding the following after paragraph (c):

    (d) for the purposes of determining after that time

      (i) the amount deemed by subparagraph 14(1)(a)(v) to be the spouse's taxable capital gain, and

      (ii) the amount to be included under paragraph 14(1)(b) in computing the income of the spouse or corporation

    in respect of any subsequent disposition of property of the business, there shall be added to the amount otherwise determined for Q in the second formula in the definition ``cumulative eligible capital'' in subsection 14(5) the amount, if any, determined for Q in that formula in respect of the business of the individual immediately before the individual ceased to carry on the business.

(3) Section 24 of the Act is amended by adding the following after subsection (2):

Where partnership has ceased to exist

(3) Notwithstanding subsection (1), where at any time a partnership ceases to exist in circumstances to which neither subsection 98(3) nor subsection 98(5) applies, there may be deducted, in computing the income for the first taxation year beginning after that time of a taxpayer who was a member of the partnership immediately before that time, an amount determined by the formula

A x B / C

where

A is the amount that would, had the partnership continued to exist, have been deductible under subsection (1) in computing its income;

B is the fair market value of the taxpayer's interest in the partnership immediately before that time; and

C is the fair market value of all interests in the partnership immediately before that time.

(4) Subsections (1) to (3) apply after July 13, 1990.

11. (1) Section 39 of the Act is amended by adding the following after subsection (12):

Repayment of assistance

(13) The total of all amounts paid by a taxpayer in a taxation year each of which is

    (a) such part of any assistance described in subparagraph 53(2)(k)(i) in respect of, or for the acquisition of, a capital property (other than depreciable property) by the taxpayer that was repaid by the taxpayer in the year where the repayment is made after the disposition of the property by the taxpayer and under an obligation to repay all or any part of that assistance, or

    (b) an amount repaid by the taxpayer in the year in respect of a capital property (other than depreciable property) acquired by the taxpayer that is repaid after the disposition thereof by the taxpayer and that would have been an amount described in subparagraph 53(2)(s)(ii) had the repayment been made before the disposition of the property,

shall be deemed to be a capital loss of the taxpayer for the year from the disposition of property by the taxpayer in the year and, for the purpose of section 110.6, that property shall be deemed to have been disposed of by the taxpayer in the year.

(2) Subsection (1) applies to the 1991 and subsequent taxation years.

12. (1) Subsection 40(5) of the Act is repealed.

(2) Subsection (1) applies to dispositions occurring after 1990.

13. (1) The Act is amended by adding the following after section 43:

Life estates in real property

43.1 (1) Notwithstanding any other provision of this Act, where at any time a taxpayer disposes of a remainder interest in real property (except as a result of a transaction to which subsection 73(3) would otherwise apply) to a person or partnership (other than a registered charity that is a charitable organization within the meaning assigned by subsection 149.1(1)) and retains a life estate or an estate pur autre vie (in this section called the ``life estate'') in the property, the taxpayer shall be deemed

    (a) to have disposed at that time of the life estate in the property for proceeds of disposition equal to its fair market value at that time; and

    (b) to have reacquired the life estate immediately after that time at a cost equal to the proceeds of disposition referred to in paragraph (a).

Idem

(2) Where, as a result of an individual's death, a life estate to which subsection (1) applied is terminated,

    (a) the holder of the life estate immediately before the death shall be deemed to have disposed of the life estate immediately before the death for proceeds of disposition equal to the adjusted cost base to that person of the life estate immediately before the death; and

    (b) where a person who is the holder of the remainder interest in the real property immediately before the death was not dealing at arm's length with the holder of the life estate, there shall, after the death, be added in computing the adjusted cost base to that person of the real property an amount equal to the lesser of

      (i) the adjusted cost base of the life estate in the property immediately before the death, and

      (ii) the amount, if any, by which the fair market value of the real property immediately after the death exceeds the adjusted cost base to that person of the remainder interest immediately before the death.

(2) Subsection (1) applies to dispositions and terminations occurring after December 20, 1991.

14. (1) Subsection 52(1) of the Act is replaced by the following:

Cost of certain property value of which included in income

52. (1) For the purposes of this subdivision, where a taxpayer acquired property after 1971 (other than an annuity contract or property acquired as described in subsection (2), (3) or (6)) and an amount in respect of the value thereof was included in computing the taxpayer's income otherwise than under section 7, the amount so included shall be added in computing the cost to the taxpayer of that property, except to the extent that the amount was otherwise added to the cost or included in computing the adjusted cost base to the taxpayer of the property.

(2) Subsection (1) applies after October 16, 1991.

15. (1) Paragraph 53(1)(e) of the Act is amended by adding the following after subparagraph (vii):

      (vii.1) a share of the taxpayer's Canadian development expense or Canadian oil and gas property expense that was deducted at or before that time in computing the adjusted cost base to the taxpayer of the interest because of subparagraph (2)(c)(ii) and in respect of which the taxpayer elected under paragraph (f) of the definition ``Canadian development expense'' in subsection 66.2(5) or paragraph (b) of the definition ``Canadian oil and gas property expense'' in subsection 66.4(5), as the case may be,

(2) Subsection 53(1) of the Act is amended by adding the following after paragraph (g):

    (g.1) where the property is an indexed debt obligation, any amount determined under subparagraph 16(6)(a)(i) in respect of the obligation and required to be included in computing the taxpayer's income for a taxation year beginning before that time;

(3) Subsection 53(1) of the Act is amended by striking out the word ``and'' at the end of paragraph (m), by adding the word ``and'' at the end of paragraph (n) and by adding the following after paragraph (n):

    (o) where the property is real property of the taxpayer, any amount required by paragraph 43.1(2)(b) to be added in computing the adjusted cost base to the taxpayer of the property.

(4) Subsection 53(2) of the Act is amended by adding the following after paragraph (l):

    (l.1) where the property is an indexed debt obligation,

      (i) any amount determined under subparagraph 16(6)(a)(ii) in respect of the obligation and deductible in computing the income of the taxpayer for a taxation year beginning before that time, and

      (ii) the amount of any payment that was received or that became receivable by the taxpayer at or before that time in respect of an amount that was added under paragraph (1)(g.1) to the cost to the taxpayer of the obligation;

(5) Subsection 53(2) 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 (s) and by adding the following after paragraph (s):

    (t) where the property is a right to acquire shares under an agreement, any amount required by paragraph 164(6.1)(b) to be deducted in computing the adjusted cost base to the taxpayer of the right.

(6) The portion of subsection 53(2.1) of the Act before paragraph (a) is replaced by the following:

Election

(2.1) For the purpose of paragraph (2)(s), where in a taxation year a taxpayer receives an amount that would, but for this subsection, be included in the taxpayer's income under paragraph 12(1)(x) in respect of the cost of a property (other than depreciable property) acquired by the taxpayer in the year, in the 3 taxation years preceding the year or in the taxation year following the year, the taxpayer may elect under this subsection on or before the date on or before which the taxpayer's return of income under this Part for the year is required to be filed or, where the property is acquired in the following year, for that following year, to reduce the cost of the property by such amount as the taxpayer specifies, not exceeding the least of

(7) Subsection (1) applies after July 1990.

(8) Subsections (2) and (4) apply to indexed debt obligations issued after October 16, 1991.

(9) Subsection (3) applies in computing the adjusted cost base of property after December 20, 1991.

(10) Subsection (5) applies after July 13, 1990.

(11) Subsection (6) applies to the 1991 and subsequent taxation years.

16. (1) The definition ``principal residence'' in section 54 of the Act is replaced by the following:

``principal residence''
« résidence ... »

``principal residence'' of a taxpayer for a taxation year means a particular property that is a housing unit, a leasehold interest in a housing unit or a share of the capital stock of a co-operative housing corporation acquired for the sole purpose of acquiring the right to inhabit a housing unit owned by the corporation and that is owned, whether jointly with another person or otherwise, in the year by the taxpayer, if

      (a) where the taxpayer is an individual other than a personal trust, the housing unit was ordinarily inhabited in the year by the taxpayer, by the taxpayer's spouse or former spouse or by a child of the taxpayer,

      (a.1) where the taxpayer is a personal trust, the housing unit was ordinarily inhabited in the calendar year ending in the year by a specified beneficiary of the trust for the year, by the spouse or former spouse of such a beneficiary or by a child of such a beneficiary, or

      (b) where the taxpayer is a personal trust or an individual other than a trust, the taxpayer

        (i) elected under subsection 45(2) that relates to the change in use of the particular property in the year or a preceding taxation year, other than an election rescinded under subsection 45(2) in the taxpayer's return of income for the year or a preceding taxation year, or

        (ii) elected under subsection 45(3) that relates to a change in use of the particular property in a subsequent taxation year,

    except that, subject to section 54.1, a particular property shall be considered not to be a taxpayer's principal residence for a taxation year

      (c) where the taxpayer is an individual other than a personal trust, unless the particular property was designated by the taxpayer in prescribed form and manner to be the taxpayer's principal residence for the year and no other property has been designated for the purposes of this definition for the year by the taxpayer, by a person who was throughout the year the taxpayer's spouse (other than a spouse who was throughout the year living apart from, and was separated under a judicial separation or written separation agreement from, the taxpayer), by a person who was the taxpayer's child (other than a child who was during the year a married person or 18 years or over) or, where the taxpayer was not during the year a married person or a person 18 years or over, by a person who was the taxpayer's

        (i) mother or father, or

        (ii) brother or sister, where that brother or sister was not during the year a married person or a person 18 years or over,

      (c.1) where the taxpayer is a personal trust, unless

        (i) the particular property was designated by the trust in prescribed form and manner to be the taxpayer's principal residence for the year,

        (ii) the trust specifies in the designation each individual (in this definition referred to as a ``specified beneficiary'' of the trust for the year) who, in the calendar year ending in the year,

          (A) is beneficially interested in the trust, and

          (B) except where the trust is entitled to designate it for the year solely because of paragraph (b), ordinarily inhabited the housing unit or has a spouse, former spouse or child who ordinarily inhabited the housing unit,

        (iii) no corporation (other than a registered charity) or partnership is beneficially interested in the trust at any time in the year, and

        (iv) no other property has been designated for the purpose of this definition for the calendar year ending in the year by any specified beneficiary of the trust for the year, by a person who was throughout that calendar year such a beneficiary's spouse (other than a spouse who was throughout that calendar year living apart from, and was separated pursuant to a judicial separation or written separation agreement from, the beneficiary), by a person who was such a beneficiary's child (other than a child who was during that calendar year a married person or a person 18 years or over) or, where such a beneficiary was not during that calendar year a married person or a person 18 years or over, by a person who was such a beneficiary's

          (A) mother or father, or

          (B) brother or sister, where that brother or sister was not during that calendar year a married person or a person 18 years or over, or

      (d) because of paragraph (b), if solely because of that paragraph the property would, but for this paragraph, have been a principal residence of the taxpayer for 4 or more preceding taxation years,

    and, for the purpose of this definition,

      (e) the principal residence of a taxpayer for a taxation year shall be deemed to include, except where the particular property consists of a share of the capital stock of a co-operative housing corporation, the land subjacent to the housing unit and such portion of any immediately contiguous land as can reasonably be regarded as contributing to the use and enjoyment of the housing unit as a residence, except that where the total area of the subjacent land and of that portion exceeds 1/2 hectare, the excess shall be deemed not to have contributed to the use and enjoyment of the housing unit as a residence unless the taxpayer establishes that it was necessary to such use and enjoyment, and

      (f) a particular property designated under paragraph (c.1) by a trust for a year shall be deemed to be property designated for the purposes of this definition by each specified beneficiary of the trust for the calendar year ending in the year;

(2) Subsection (1) applies to dispositions occurring after 1990.

17. (1) Paragraphs 56(1)(b) and (c) of the Act are replaced by the following:

Alimony

    (b) an amount received by the taxpayer in the year as alimony or other allowance payable on a periodic basis for the maintenance of the taxpayer, children of the taxpayer or both the taxpayer and the children if the taxpayer, because of the breakdown of the taxpayer's marriage, was living separate and apart from the spouse or former spouse who was required to make the payment at the time the payment was received and throughout the remainder of the year and the amount was received under a decree, order or judgment of a competent tribunal or under a written agreement;

(2) Paragraph 56(1)(c.1) of the Act is replaced by the following:

Maintenance

    (c) an amount received by the taxpayer in the year as an allowance payable on a periodic basis for the maintenance of the taxpayer, children of the taxpayer or both the taxpayer and the children if

      (i) at the time the amount was received and throughout the remainder of the year the taxpayer was living separate and apart from the person who was required to make the payment,

      (ii) the person who was required to make the payment is the natural parent of a child of the taxpayer, and

      (iii) the amount was received under an order made by a competent tribunal in accordance with the laws of a province;

(3) Subsection 56(1) of the Act is amended by adding the following after paragraph (c.1):

Reimburse-
ment of support payments

    (c.2) an amount received by the taxpayer in the year under a decree, order or judgment of a competent tribunal as a reimbursement of an amount deducted under paragraph 60(b) or (c), or under paragraph 60(c.1) as it applies, in computing the taxpayer's income for the year or a preceding taxation year to decrees, orders and judgments made before 1993;

(4) Subsection 56(1) of the Act is amended by adding the following after paragraph (h):

Home buyers' plan

    (h.1) amounts required by section 146.01 to be included in computing the taxpayer's income for the year;

(5) Paragraph 56(1)(l.1) of the Act is replaced by the following:

Idem

    (l.1) amounts received by the taxpayer in the year as an award or a reimbursement in respect of legal expenses (other than those relating to a division or settlement of property arising out of, or on a breakdown of, a marriage) paid to collect or establish a right to a retiring allowance or a benefit under a pension fund or plan (other than a benefit under the Canada Pension Plan or a provincial pension plan as defined in section 3 of that Act) in respect of employment;

(6) The portion of paragraph 56(4.1)(a) of the Act before subparagraph (i) is replaced by the following:

    (a) a particular individual (other than a trust) or a trust in which the particular individual is beneficially interested has, directly or indirectly by means of a trust or by any means whatever, received a loan from or become indebted to

(7) Subsection (1) applies to amounts received under a decree, order or judgment of a competent tribunal or under a written agreement, with respect to a breakdown of a marriage occurring after 1992.

(8) Subsection (2) applies to amounts received under an order made after 1992.

(9) Subsection (3) applies to payments received after 1990.

(10) Subsection (4) applies to the 1992 and subsequent taxation years.

(11) Subsection (5) applies after 1992.

(12) Subsection (6) applies after 1990.

18. (1) Section 56.1 of the Act is replaced by the following:

Maintenance

56.1 (1) Where a decree, order, judgment or written agreement described in paragraph 56(1)(b) or (c), or any variation thereof, provides for the periodic payment of an amount

    (a) to a taxpayer by a person who is

      (i) the taxpayer's spouse or former spouse, or

      (ii) where the amount is paid under an order made by a competent tribunal in accordance with the laws of a province, an individual of the opposite sex who is the natural parent of a child of the taxpayer, or

    (b) for the benefit of the taxpayer, children in the custody of the taxpayer or both the taxpayer and those children,

the amount or any part thereof, when paid, shall be deemed for the purposes of paragraphs 56(1)(b) and (c) to have been paid to and received by the taxpayer.

Agreement

(2) For the purposes of paragraphs 56(1)(b) and (c), the amount determined by the formula

A - B

where

A is the total of all amounts each of which is an amount (other than an amount to which paragraph 56(1)(b) or (c) otherwise applies) paid by a person in a taxation year, under a decree, order or judgment of a competent tribunal or under a written agreement, in respect of an expense (other than an expenditure in respect of a self-contained domestic establishment in which the person resides or an expenditure for the acquisition of tangible property that is not an expenditure on account of a medical or education expense or in respect of the acquisition, improvement or maintenance of a self-contained domestic establishment in which the taxpayer described in paragraph (a) or (b) resides) incurred in the year or the preceding taxation year for the maintenance of a taxpayer who is

      (a) that person's spouse or former spouse, or

      (b) where the amount is paid under an order made by a competent tribunal in accordance with the laws of a province, an individual of the opposite sex who is the natural parent of a child of the person,

    or for the maintenance of children in the taxpayer's custody or both the taxpayer and those children if, at the time the expense was incurred and throughout the remainder of the year, the taxpayer was living separate and apart from that person, and

B is the amount, if any, by which

      (a) the total of all amounts each of which is an amount included in the total determined for A in respect of the acquisition or improvement of a self-contained domestic establishment in which the taxpayer resides, including any payment of principal or interest in respect of a loan made or indebtedness incurred to finance, in any manner whatever, such acquisition or improvement

    exceeds

      (b) the total of all amounts each of which is an amount equal to 1/5 of the original principal amount of a loan or indebtedness described in paragraph (a),

shall, where the decree, order, judgment or written agreement, as the case may be, provides that this subsection and subsection 60.1(2) shall apply to any payment made thereunder, be deemed to be an amount paid by that person and received by the taxpayer as an allowance payable on a periodic basis.

Prior payments

(3) For the purposes of this section and section 56, where a decree, order or judgment of a competent tribunal or a written agreement made at any time in a taxation year provides that an amount received before that time and in the year or the preceding taxation year is to be considered to have been paid and received thereunder, the amount shall be deemed to have been received thereunder.

(2) Subsection (1) applies to amounts received under a decree, order or judgment made by a competent tribunal after 1992, or under a written agreement entered into after 1992.

19. (1) Subsection 58(5) of the English version of the Act is replaced by the following:

Spouses

(5) Where a taxpayer and the taxpayer's spouse each received annuity payments in respect of which they may deduct amounts under this section, the amount deductible shall be computed as if their annuities belonged to one person and may be deducted by either of them or be apportioned between them in such manner as is agreed to by them or, in case of disagreement, as the Minister determines.

(2) Subsection (1) applies after 1992.

20. (1) Paragraphs 60(b) and (c) of the Act are replaced by the following:

Alimony payments

    (b) an amount paid by the taxpayer in the year as alimony or other allowance payable on a periodic basis for the maintenance of the recipient, children of the recipient or both the recipient and the children, if the taxpayer, because of the breakdown of the taxpayer's marriage, was living separate and apart from the spouse or former spouse to whom the taxpayer was required to make the payment at the time the payment was made and throughout the remainder of the year and the amount was paid under a decree, order or judgment of a competent tribunal or under a written agreement;

(2) Paragraph 60(c.1) of the Act is replaced by the following:

Maintenance

    (c) an amount paid by the taxpayer in the year as an allowance payable on a periodic basis for the maintenance of the recipient, children of the recipient or both the recipient and the children, if

      (i) at the time the amount was paid and throughout the remainder of the year the taxpayer was living separate and apart from the recipient,

      (ii) the taxpayer is the natural parent of a child of the recipient, and

      (iii) the amount was received under an order made by a competent tribunal in accordance with the laws of a province;

(3) Section 60 of the Act is amended by adding the following after paragraph (c.1):

Repayment of support payments

    (c.2) an amount paid by the taxpayer in the year or one of the 2 preceding taxation years under a decree, order or judgment of a competent tribunal as a repayment of an amount included under paragraph 56(1)(b) or (c), or under paragraph 56(1)(c.1) (as it applies, in computing the taxpayer's income for the year or a preceding taxation year, to decrees, orders and judgments made before 1993) to the extent that it was not so deducted for a preceding taxation year;

(4) Paragraph 60(i) of the Act is replaced by the following:

Premium or payment under RRSP or RRIF

    (i) any amount that is deductible under section 146 or subsection 147.3(13.1) in computing the income of the taxpayer for the year;

(5) Subparagraph 60(j)(i) of the Act is replaced by the following:

      (i) a superannuation or pension benefit (other than any amount in respect of the benefit that is deducted in computing the taxable income of the taxpayer for a taxation year because of subparagraph 110(1)(f)(i) or a benefit that is part of a series of periodic payments) payable out of or under a pension plan that is not a registered pension plan, attributable to services rendered by the taxpayer or a spouse or former spouse of the taxpayer in a period throughout which that person was not resident in Canada, and included in computing the income of the taxpayer for the year because of subparagraph 56(1)(a)(i), or

(6) Section 60 of the Act is amended by adding the following after paragraph (j.01):

Payment to registered pension plan

    (j.02) an amount equal to the lesser of

      (i) the total of

        (A) all contributions made in the year by the taxpayer to registered pension plans in respect of eligible service of the taxpayer before 1990 under the plans, where the taxpayer was obliged under the terms of an agreement in writing entered into before March 28, 1988 to make the contributions, and

        (B) all amounts each of which is an amount paid in the year by the taxpayer to a registered pension plan as

          (I) a repayment under a prescribed statutory provision of an amount received from the plan that was included under subsection 56(1) in computing the taxpayer's income for a taxation year ending before 1990, where the taxpayer was obliged as a consequence of a written election made before March 28, 1988 to make the repayment, or

          (II) interest in respect of a repayment referred to in subclause (I),

      other than the portion of that total that is deductible under paragraph 8(1)(m) or paragraph (j.03) in computing the taxpayer's income for the year, and

      (ii) the total of all amounts each of which is an amount paid out of or under a registered pension plan as part of a series of periodic payments and included under subsection 56(1) in computing the taxpayer's income for the year, other than the portion of that total that can reasonably be considered to have been designated by the taxpayer for the purpose of paragraph (j.2);

Repayments of pre-1990 pension benefits

    (j.03) an amount equal to the lesser of

      (i) the total of all amounts each of which is an amount paid in the year or a preceding taxation year by the taxpayer to a registered pension plan that was not deductible in computing the taxpayer's income for a preceding taxation year and that was paid as

        (A) a repayment under a prescribed statutory provision of an amount received from the plan that was included under subsection 56(1) in computing the taxpayer's income for a taxation year ending before 1990, or

        (B) interest in respect of a repayment referred to in clause (A), and

      (ii) the amount, if any, by which $3,500 exceeds the amount deducted under paragraph 8(1)(m) in computing the taxpayer's income for the year;

Repayments of post-1989 pension benefits

    (j.04) the total of all amounts each of which is an amount paid in the year by the taxpayer to a registered pension plan as

      (i) a repayment under a prescribed statutory provision of an amount received from the plan that

        (A) was included under subsection 56(1) in computing the taxpayer's income for a taxation year ending after 1989, and

        (B) can reasonably be considered not to have been designated by the taxpayer for the purpose of paragraph (j.2), or

      (ii) interest in respect of a repayment referred to in subparagraph (i),

    except to the extent that the total was deductible under paragraph 8(1)(m) in computing the taxpayer's income for the year;

(7) Subclause 60(l)(ii)(A)(I) of the Act is replaced by the following:

          (I) for the taxpayer's life, or for the lives jointly of the taxpayer and the taxpayer's spouse either with a guaranteed period that is not greater than 90 years minus the age of the taxpayer or the age of the taxpayer's spouse, at the time of its acquisition or without a guaranteed period, or

(8) Clauses 60(l)(ii)(D) and (E) of the Act are replaced by the following:

        (D) annual or more frequent periodic payments

          (I) beginning not later than one year after the date of the payment referred to in clause (C), and

          (II) each of which is equal to all other such payments or not equal to all other such payments solely because of an adjustment that would, if the annuity were an annuity under a retirement savings plan, be in accordance with subparagraphs 146(3)(b)(iii) to (v), and

        (E) payments in full or partial commutation of the annuity and, where the commutation is partial,

          (I) equal annual or more frequent periodic payments thereafter, or

          (II) annual or more frequent periodic payments thereafter that are not equal solely because of an adjustment that would, if the annuity were an annuity under a retirement savings plan, be in accordance with subparagraphs 146(3)(b)(iii) to (v);

(9) The portion of subparagraph 60(o.1)(i) of the Act before clause (A) is replaced by the following:

      (i) the total of all legal expenses (other than those relating to a division or settlement of property arising out of, or on a breakdown of, a marriage) paid by the taxpayer in the year or in any of the 7 preceding taxation years to collect or establish a right to an amount of

(10) The portion of paragraph 60(s) of the Act before subparagraph (i) is replaced by the following:

Repayment of policy loan

    (s) the total of all repayments made by the taxpayer in the year in respect of a policy loan (within the meaning assigned by subsection 148(9)) made under a life insurance policy, not exceeding the amount, if any, by which

(11) Subsection (1) applies to amounts received under a decree, order or judgment of a competent tribunal or under a written agreement, with respect to a breakdown of a marriage occurring after 1992.

(12) Subsection (2) applies to orders made after 1992.

(13) Subsection (3) applies to payments made after 1990.

(14) Subsection (4) applies to the 1992 and subsequent taxation years.

(15) Subsections (5), (7) and (9) apply after 1992.

(16) Paragraphs 60(j.02) and (j.04) of the Act, as enacted by subsection (6), and subsection (8) apply to the 1990 and subsequent taxation years.

(17) Paragraph 60(j.03) of the Act, as enacted by subsection (6), applies to the 1991 and subsequent taxation years.

(18) Subsection (10) applies to repayments made after December 20, 1991.

21. (1) Paragraph 60.01(b) of the Act is replaced by the following:

    (b) the portion, if any, of the payment included under paragraph (a) that can reasonably be considered to derive from contributions to the foreign retirement arrangement made by a person other than the taxpayer or the taxpayer's spouse or former spouse,

(2) Subsection (1) applies after 1992.

22. (1) Section 60.1 of the Act is replaced by the following:

Maintenance payments

60.1 (1) Where a decree, order, judgment or written agreement described in paragraph 60(b) or (c), or any variation thereof, provides for the periodic payment of an amount by a taxpayer

    (a) to a person who is

      (i) the taxpayer's spouse or former spouse, or

      (ii) where the amount is paid under an order made by a competent tribunal in accordance with the laws of a province, an individual of the opposite sex who is the natural parent of a child of the taxpayer, or

    (b) for the benefit of the person, children in the custody of the person or both the person and those children,

the amount or any part thereof, when paid, shall be deemed for the purposes of paragraphs 60(b) and (c) to have been paid to and received by that person.

Agreement

(2) For the purposes of paragraphs 60(b) and (c), the amount determined by the formula

A - B

where

A is the total of all amounts each of which is an amount (other than an amount to which paragraph 60(b) or (c) otherwise applies) paid by a taxpayer in a taxation year, under a decree, order or judgment of a competent tribunal or under a written agreement, in respect of an expense (other than an expenditure in respect of a self-contained domestic establishment in which the taxpayer resides or an expenditure for the acquisition of tangible property that is not an expenditure on account of a medical or education expense or in respect of the acquisition, improvement or maintenance of a self-contained domestic establishment in which the person described in paragraph (a) or (b) resides) incurred in the year or the preceding taxation year for maintenance of a person who is

      (a) the taxpayer's spouse or former spouse, or

      (b) where the amount is paid under an order made by a competent tribunal in accordance with the laws of a province, an individual of the opposite sex who is the natural parent of a child of the taxpayer,

    or for the maintenance of children in the person's custody or both the person and those children if, at the time the expense was incurred and throughout the remainder of the year, the taxpayer was living separate and apart from that person, and

B is the amount, if any, by which

      (a) the total of all amounts each of which is an amount included in the total determined for A in respect of the acquisition or improvement of a self-contained domestic establishment in which that person resides, including any payment of principal or interest in respect of a loan made or indebtedness incurred to finance, in any manner whatever, such acquisition or improvement

    exceeds

      (b) the total of all amounts each of which is an amount equal to 1/5 of the original principal amount of a loan or indebtedness described in paragraph (a),

shall, where the decree, order, judgment or written agreement, as the case may be, provides that this subsection and subsection 56.1(2) shall apply to any payment made thereunder, be deemed to be an amount paid by the taxpayer and received by that person as an allowance payable on a periodic basis.

Prior payments

(3) For the purposes of this section and section 60, where a decree, order or judgment of a competent tribunal or a written agreement made at any time in a taxation year provides that an amount paid before that time and in the year or the preceding taxation year is to be considered to have been paid and received thereunder, the amount shall be deemed to have been paid thereunder.

(2) Subsection (1) applies to amounts paid under a decree, order or judgment made by a competent tribunal after 1992 or under a written agreement entered into after 1992.

23. (1) The portion of subsection 63(1) of the Act before paragraph (a) is replaced by the following:

Child care expenses

63. (1) Subject to subsection (2), where a prescribed form containing prescribed information is filed with a taxpayer's return of income (other than a return filed under subsection 70(2) or 104(23), paragraph 128(2)(e) or subsection 150(4)) under this Part for a taxation year, there may be deducted in computing the taxpayer's income for the year such amount as the taxpayer claims not exceeding the total of all amounts each of which is an amount paid, as or on account of child care expenses incurred for services rendered in the year in respect of an eligible child of the taxpayer,

(2) The portion of clause 63(1)(e)(ii)(A) of the Act before subclause (I) is replaced by the following:

        (A) the product obtained when $5,000 is multiplied by the number of eligible children of the taxpayer for the year each of whom

(3) Clause 63(1)(e)(ii)(B) of the Act is replaced by the following:

        (B) the product obtained when $3,000 is multiplied by the number of eligible children of the taxpayer for the year (other than those referred to in clause (A))

(4) The portion of subparagraph 63(2)(b)(i) of the Act before clause (A) is replaced by the following:

      (i) the product obtained when $150 is multiplied by the number of eligible children of the taxpayer for the year each of whom

(5) Subparagraph 63(2)(b)(ii) of the Act is replaced by the following:

      (ii) the product obtained when $90 is multiplied by the number of eligible children of the taxpayer for the year (other than those referred to in subparagraph (i))

(6) Subparagraph 63(2)(b)(vi) of the Act is replaced by the following:

      (vi) a person who, because of a breakdown of the person's marriage, was living separate and apart from the taxpayer at the end of the year and for a period of at least 90 days beginning in the year.

(7) The portion of subparagraph (c)(i) of the definition ``child care expense'' in subsection 63(3) of the Act after clause (B) is replaced by the following:

        $150, and

(8) Subparagraph (c)(ii) of the definition ``child care expense'' in subsection 63(3) of the Act is replaced by the following:

        (ii) in any other case, $90

(9) Subsection (1) applies to the 1992 and subsequent taxation years.

(10) Subsections (2) to (8) apply to the 1993 and subsequent taxation years.

24. (1) Paragraph (f) of the definition ``Canadian development expense'' in subsection 66.2(5) of the Act is replaced by the following:

      (f) subject to section 66.8, the taxpayer's share of any expense referred to in any of paragraphs (a) to (e) incurred by a partnership in a fiscal period thereof at the end of which the taxpayer was a member of the partnership, unless the taxpayer elects in respect of the share in prescribed form and manner on or before the day that is 6 months after the taxpayer's taxation year in which that period ends, or

(2) Subsection (1) applies to partnership fiscal periods ending after July 1990, except that an election referred to in paragraph (f) of the definition ``Canadian development expense'' in subsection 66.2(5) of the Act, as enacted by subsection (1), that was filed before December 11, 1993 shall be deemed to have been filed on a timely basis.

25. (1) Paragraph (b) of the definition ``Canadian oil and gas property expense'' in subsection 66.4(5) of the Act is replaced by the following:

      (b) subject to section 66.8, the taxpayer's share of any expense referred to in paragraph (a) incurred by a partnership in a fiscal period thereof at the end of which the taxpayer was a member of the partnership, unless the taxpayer elects in respect of the share in prescribed form and manner on or before the day that is 6 months after the taxpayer's taxation year in which that period ends, or

(2) Subsection (1) applies to partnership fiscal periods ending after July 1990, except that an election referred to in paragraph (b) of the definition ``Canadian oil and gas property expense'' in subsection 66.4(5) of the Act, as enacted by subsection (1), that was filed before December 11, 1993 shall be deemed to have been filed on a timely basis.

26. (1) Subsection 66.8(3) 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) a taxpayer's share of Canadian development expenses or Canadian oil and gas property expenses incurred by a partnership in a fiscal period in respect of which the taxpayer has elected in respect of the share under paragraph (f) of the definition ``Canadian development expense'' in subsection 66.2(5) or paragraph (b) of the definition ``Canadian oil and gas property expense'' in subsection 66.4(5), as the case may be, shall be deemed to be nil.

(2) Subsection (1) applies to partnership fiscal periods ending after July 1990.

27. (1) Section 69 of the Act is amended by adding the following after subsection (1.1):

Idem

(1.2) Where, at any time,

    (a) a taxpayer disposed of property for proceeds of disposition (determined without reference to this subsection) equal to or greater than the fair market value at that time of the property, and

    (b) there existed at that time an agreement under which a person with whom the taxpayer was not dealing at arm's length agreed to pay as rent, royalty or other payment for the use of or the right to use the property an amount less than the amount that would have been reasonable in the circumstances if the taxpayer and the person had been dealing at arm's length at the time the agreement was entered into,

the taxpayer's proceeds of disposition of the property shall be deemed to be the greater of

    (c) those proceeds determined without reference to this subsection, and

    (d) the fair market value of the property at the time of the disposition, determined without reference to the existence of the agreement.

(2) Subsection 69(13) of the Act is amended by adding the word ``and'' at the end of paragraph (a) and by repealing paragraph (b).

(3) Subsection (1) applies to dispositions occurring after December 20, 1991.

(4) Subsection (2) applies to an amalgamation or merger of a corporation occurring after the beginning of its first taxation year beginning after June 1988.

28. (1) Subsection 70(5) of the Act is replaced by the following:

Capital property of a deceased taxpayer

(5) Where in a taxation year a taxpayer dies,

    (a) the taxpayer shall be deemed to have disposed, immediately before death, of each property that was at that time a capital property of the taxpayer and to have received proceeds of disposition therefor equal to the fair market value of the property at that time;

    (b) any person who as a consequence of the death acquires any property that is deemed by paragraph (a) to have been disposed of by the taxpayer at any time shall be deemed to have acquired it immediately after that time at a cost equal to its fair market value at that time; and

    (c) where any depreciable property of the taxpayer of a prescribed class that is deemed by paragraph (a) to have been disposed of is acquired by any person as a consequence of the death and the amount that was the capital cost to the taxpayer of that property exceeds the amount determined under paragraph (b) to be the cost to that person thereof, for the purposes of sections 13 and 20 and any regulations made for the purpose of paragraph 20(1)(a),

      (i) the capital cost to that person of the property shall be deemed to be the amount that was the capital cost to the taxpayer of the property, and

      (ii) the excess shall be deemed to have been allowed to that person in respect of the property under regulations made for the purpose of paragraph 20(1)(a) in computing income for the taxation years ending before the person acquired the property.

(2) Subsection 70(5.1) of the Act is amended by striking out the word ``and'' at the end of paragraph (b), by adding the word ``and'' at the end of paragraph (c) and by adding the following after paragraph (c):

    (d) for the purposes of determining, after that time,

      (i) the amount deemed by subparagraph 14(1)(a)(v) to be the beneficiary's taxable capital gain, and

      (ii) the amount to be included under paragraph 14(1)(b) in computing the beneficiary's income

    in respect of any subsequent disposition of the property of the business, there shall be added to the amount determined for Q in the definition ``cumulative eligible capital'' in subsection 14(5) the amount determined by the formula

A x B / C

    where

    A is the amount, if any, determined for Q in that definition in respect of the business of the taxpayer immediately before that time,

    B is the fair market value immediately before that time of the particular property, and

    C is the fair market value immediately before that time of all eligible capital property of the taxpayer in respect of the business.

(3) Section 70 of the Act is amended by adding the following after subsection (5.3):

NISA on death

(5.4) Where a taxpayer who dies has at the time of death a net income stabilization account, all amounts held for or on behalf of the taxpayer in the taxpayer's NISA Fund No. 2 shall be deemed to have been paid out of that fund to the taxpayer immediately before that time.

(4) The portion of subsection 70(6) of the Act before paragraph (a) is replaced by the following:

Where transfer or distribution to spouse or spouse trust

(6) Where any property of a taxpayer who was resident in Canada immediately before the taxpayer's death that is a property to which subsection (5) would otherwise apply is, as a consequence of the death, transferred or distributed to

(5) Paragraph 70(6)(c) of the Act is replaced by the following:

    (c) paragraphs (5)(a) and (b) do not apply in respect of the property,

(6) Paragraph 70(6)(e) of the Act is replaced by the following:

    (e) where the property was depreciable property of the taxpayer of a prescribed class, paragraph (5)(c) applies as if the references therein to ``paragraph (a)'' and to ``paragraph (b)'' were read as references to ``paragraph (6)(d)''.

(7) Subsection 70(6.1) of the Act is repealed.

(8) Subsection 70(6.2) of the Act is replaced by the following:

Transfer or distribution of NISA to spouse or trust

(6.1) Where a property that is a net income stabilization account of a taxpayer is, on or after the taxpayer's death and as a consequence thereof, transferred or distributed to

    (a) the taxpayer's spouse, or

    (b) a trust, created by the taxpayer's will, under which

      (i) the taxpayer's spouse is entitled to receive all of the income of the trust that arises before the spouse's death, and

      (ii) no person except the spouse may, before the spouse's death, receive or otherwise obtain the use of any of the income or capital of the trust,

subsections (5.4) and 73(5) do not apply in respect of the taxpayer's NISA Fund No. 2 if it can be shown, within the period ending 36 months after the death of the taxpayer or, where written application therefor has been made to the Minister by the taxpayer's legal representative within that period, within such longer period as the Minister considers reasonable in the circumstances, that the property has vested indefeasibly in the spouse or trust, as the case may be.

Election

(6.2) Subsection (6) or (6.1) does not apply to any property of a deceased taxpayer in respect of which the taxpayer's legal representative elects, in the taxpayer's return of income under this Part (other than a return of income filed under subsection (2) or 104(23), paragraph 128(2)(e) or subsection 150(4)) for the year in which the taxpayer died, to have subsection (5) or (5.4), as the case may be, apply.

(9) The portion of subsection 70(7) of the Act before paragraph (a) is replaced by the following:

Special rules applicable in respect of trust for benefit of spouse

(7) Where a trust created by a taxpayer's will would, but for the payment of, or provision for payment of, any particular testamentary debts in respect of the taxpayer, be a trust to which subsection (6) or (6.1) applies,

(10) The portion of paragraph 70(7)(b) of the Act before subparagraph (iii) is replaced by the following:

    (b) where the taxpayer's legal representative so elects in the taxpayer's return (other than a return of income filed under subsection (2) or 104(23), paragraph 128(2)(e) or subsection 150(4)) and lists therein one or more properties (other than a net income stabilization account) that were, on or after the taxpayer's death and as a consequence thereof, transferred or distributed to the trust, the total fair market value of which properties immediately after the taxpayer's death was not less than the total of the non-qualifying debts in respect of the taxpayer,

      (i) subsection (6) does not apply in respect of the properties so listed, and

      (ii) notwithstanding the payment of, or provision for payment of, any such particular testamentary debts, the trust shall be deemed to be a trust described in subsection (6),

    except that, where the fair market value, immediately after the taxpayer's death, of all of the properties so listed exceeds the total of the non-qualifying debts in respect of the taxpayer (the amount of which excess is referred to in this subsection as the ``listed value excess'') and the taxpayer's legal representative designates in the taxpayer's return one property so listed (other than money) that is capital property other than depreciable property,

(11) The portion of subsection 70(9) of the Act before paragraph (b) is replaced by the following:

Transfer of farm property to child

(9) Where any land in Canada or depreciable property in Canada of a prescribed class of a taxpayer to which subsection (5) would otherwise apply was, before the taxpayer's death, used principally in the business of farming in which the taxpayer, the taxpayer's spouse or any of the taxpayer's children was actively engaged on a regular and continuous basis and the property is, as a consequence of the death, transferred or distributed to a child of the taxpayer who was resident in Canada immediately before the death and it can be shown, within the period ending 36 months after the death or, where written application therefor has been made to the Minister by the taxpayer's legal representative within that period, within such longer period as the Minister considers reasonable in the circumstances, that the property has vested indefeasibly in the child,

    (a) paragraphs (5)(a) and (b) do not apply in respect of the property,

(12) Paragraph 70(9)(c) of the Act is replaced by the following:

    (c) where the property was depreciable property of the taxpayer of a prescribed class, paragraph (5)(c) applies as if the references therein to ``paragraph (a)'' and to ``paragraph (b)'' were read as references to ``paragraph (9)(b)'',

(13) Paragraph 70(9.1)(a) of the Act is replaced by the following:

    (a) subsections 104(4) and (5) do not apply to the trust in respect of the property,

(14) The portion of subsection 70(9.2) of the Act before paragraph (b) is replaced by the following:

Transfer of family farm corporations and partnerships

(9.2) Where at any time property of a taxpayer that was, immediately before the taxpayer's death, 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 to which subsection (5) would otherwise apply is, as a consequence of the death, transferred or distributed to a child of the taxpayer who was resident in Canada immediately before the death and it can be shown, within the period ending 36 months after the death or, where written application therefor has been made to the Minister by the taxpayer's legal representative within that period, within such longer period as the Minister considers reasonable in the circumstances, that the property has vested indefeasibly in the child,

    (a) subsection (5) does not apply in respect of the property, and

(15) Subparagraph 70(9.3)(b)(i) of the Act is replaced by the following:

      (i) a share in the capital stock of a Canadian corporation that would be a share in the capital stock of a family farm corporation if 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, child or parent of the person was actively engaged on a regular and continuous basis'', or

(16) Paragraph 70(9.3)(c) of the Act is replaced by the following:

    (c) subsection 104(4) does not apply to the trust in respect of the property,

(17) The definition ``share of the capital stock of a family farm corporation'' in subsection 70(10) of the Act is replaced by the following:

``share of the capital stock of a family farm corporation''
« action du capital-action s d'une société agricole familiale »

``share of the capital stock of a family farm corporation'' of a person at a particular time means a share of the capital stock of a corporation owned by the person at that time where, 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 by

        (i) the corporation or any other corporation, a share of the capital stock of which was a share of the capital stock of a family farm corporation of the person or of a spouse, child or parent of the person,

        (ii) the person,

        (iii) a spouse, child or parent of the person, or

        (iv) a partnership, an interest in which was an interest in a family farm partnership of the person or of a spouse, child or parent of the person,

      principally in the course of carrying on the business of farming in Canada in which the person or a spouse, child or parent of the person was actively engaged on a regular and continuous basis,

      (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 (c), or

      (c) properties described in paragraph (a) or (b).

(18) 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''
« participatio n dans une société de personnes agricole familiale »

``interest in a family farm partnership'' of a person at a particular time means an interest owned by the person at that time in a partnership where, 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 by

        (i) the partnership,

        (ii) the person,

        (iii) a spouse, child or parent of the person, or

        (iv) a corporation a share of the capital stock of which was a share of the capital stock of a family farm corporation of the person or of a spouse, child or parent of the person,

      principally in the course of carrying on the business of farming in Canada in which the person or a spouse, child or parent of the person was actively engaged on a regular and continuous basis,

      (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 (c), or

      (c) properties described in paragraph (a) or (b).

(19) Section 70 of the Act is amended by adding the following after subsection (11):

Value of NISA

(12) For the purpose of the definition ``share of the capital stock of a family farm corporation'' in subsection 10, the fair market value of a net income stabilization account shall be deemed to be nil.

(20) Subsections (1), (4), (5), (6), (11), (12) and (14) apply to dispositions occurring after 1992.

(21) Subsection (2) applies to acquisitions occurring as a consequence of the death of a taxpayer after the beginning of the first fiscal period of the taxpayer's business beginning after 1987.

(22) Subsections (3), (8), (9) and (10) apply to the 1991 and subsequent taxation years.

(23) Subsection (7) applies to the 1990 and subsequent taxation years.

(24) Subsections (13) and (16) apply after December 20, 1991.

(25) Subsections (15), (17), (18) and (19) apply to the 1992 and subsequent taxation years.

29. (1) Subsection 73(1) of the Act is amended by adding the word ``or'' at the end of paragraph (b), by striking out the word ``or'' at the end of paragraph (c) and by repealing paragraph (d).

(2) The portion of subsection 73(3) of the Act before paragraph (a) is replaced by the following:

Inter vivos transfer of farm property to child

(3) For the purposes of this Part, where at any time any land in Canada or depreciable property in Canada of a prescribed class of a taxpayer or any eligible capital property in respect of a business carried on in Canada by a taxpayer is transferred by the taxpayer to a child of the taxpayer who was resident in Canada immediately before the transfer, and the property was, before the transfer, used principally in the business of farming in which the taxpayer, the taxpayer's spouse or any of the taxpayer's children was actively engaged on a regular and continuous basis,

(3) Clause 73(3)(b.1)(ii)(B) of the Act is replaced by the following:

        (B) the amount determined by the formula

4/3 (A x B / C )

        where

        A is the cumulative eligible capital of the taxpayer in respect of the busi ness,

        B is the fair market value of the property immediately before the transfer, and

        C is the fair market value immediately before that time of all eligible capital property of the taxpayer in respect of the business,

(4) The portion of paragraph 73(3)(d.1) of the Act after subparagraph (i) is replaced by the following:

      (ii) 4/3 of the amount determined by the formula

(A x 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 of the taxpayer immediately before the time of the transfer,

      B is the fair market value of the property immediately before that time,

      C is the fair market value immediately before that time of all eligible capital property of the taxpayer in respect of the business, and

      D is the amount, if any, included under subparagraph 14(1)(a)(iv) in computing the income of the taxpayer as a result of the disposition,

    and, for the purpose of determining at any subsequent time the child's cumulative eligible capital in respect of the business, an amount equal to 3/4 of the amount determined under subparagraph (ii) shall be added to the amount otherwise determined in respect thereof for P in the definition ``cumulative eligible capital'' in subsection 14(5);

(5) Subsection 73(3) of the Act is amended by adding the following after paragraph (d.1):

    (d.2) for the purposes of determining after the time of the transfer

      (i) the amount deemed by subparagraph 14(1)(a)(v) to be the child's taxable capital gain, and

      (ii) the amount to be included under paragraph 14(1)(b) in computing the child's income

    in respect of any subsequent disposition of the property of the business, there shall be added to the amount otherwise determined for Q in the definition ``cumulative eligible capital'' in subsection 14(5) the amount determined by the formula

A x B / C

    where

    A is the amount, if any, determined for Q in that definition in respect of the business of the taxpayer immediately before the time of the transfer,

    B is the fair market value immediately before that time of the property transferred, and

    C is the fair market value immediately before that time of all eligible capital property of the taxpayer in respect of the business; and

(6) Subsection 73(5) of the Act is replaced by the following:

Disposition of a NISA

(5) Where at any time a taxpayer disposes of an interest in the taxpayer's NISA Fund No. 2, an amount equal to the balance in the fund so disposed of shall be deemed to have been paid out of the fund at that time to the taxpayer except that,

    (a) where the interest is disposed of to the taxpayer's spouse, former spouse or an individual referred to in paragraph (1)(d) (as it applies to transfers of property that occurred before 1993) in settlement of rights arising out of their marriage, on or after the breakdown of the marriage, that amount shall not be deemed to have been paid to the taxpayer if

      (i) the disposition is made under a decree, order or judgment of a competent tribunal or, in the case of a spouse or former spouse, a written separation agreement, and

      (ii) the taxpayer elects in the taxpayer's return of income under this Part for the taxation year in which the property was disposed of to have this paragraph apply to the disposition; and

    (b) where the interest is disposed of to a taxable Canadian corporation in a transaction in respect of which an election is made under section 85, an amount equal to the proceeds of disposition in respect of that interest shall be deemed to be paid, at that time, to the taxpayer out of the taxpayer's NISA Fund No. 2.

Application of s. 70(10)

(6) The definitions in subsection 70(10) apply to this section.

(7) Subsection (1) applies to transfers of property occurring after 1992.

(8) Subsection (2) applies to transfers occurring after 1992.

(9) Subsections (3) to (5) apply to transfers by a taxpayer occurring after the beginning of the first fiscal period of the taxpayer's business beginning after 1987.

(10) Subsection (6) applies to dispositions occurring after 1990 except that, in applying subsection 73(5) of the Act, as enacted by subsection (6), before 1993, the reference therein to ``marriage'' shall be read as ``marriage or other conjugal relationship''.

30. (1) Subsection 74.5(10) of the Act is repealed.

(2) Subsection (1) applies after 1990.

31. (1) Paragraph (b) of the definition ``breeding animals'' in subsection 80.3(1) of the Act is replaced by the following:

      (b) deer, elk and other similar grazing ungulates, bovine cattle, bison, goats and sheep that are over 12 months of age and are kept for breeding;

(2) Subsection (1) applies to fiscal periods and taxation years ending after 1990.

32. (1) The portion of subsection 80.4(1) of the Act before paragraph (a) is replaced by the following:

Loans

80.4 (1) Where a person or partnership receives a loan or otherwise incurs a debt because of or as a consequence of a previous, the current or an intended office or employment of an individual, or because of the services performed or to be performed by a corporation carrying on a personal services business, the individual or corporation, as the case may be, shall be deemed to have received a benefit in a taxation year equal to the amount, if any, by which the total of

(2) Subsection (1) applies to taxation years beginning after 1991.

33. (1) The portion of paragraph 81(1)(h) of the Act before subparagraph (i) is replaced by the following:

Social assistance

    (h) where the taxpayer is an individual (other than a trust), a social assistance payment (other than a prescribed payment) ordinarily made on the basis of a means, needs or income test under a program provided for by an Act of Parliament or a law of a province, to the extent that it is received directly or indirectly by the taxpayer for the benefit of another individual (other than the taxpayer's spouse or a person who is related to the taxpayer or to the taxpayer's spouse), if

(2) Subsection (1) applies after 1992.

34. (1) Subsection 84.1(2) of the Act is amended by striking out the word ``and'' at the end of paragraph (c), by adding the word ``and'' at the end of paragraph (d) and by adding the following after paragraph (d):

    (e) for the purpose of paragraph (b),

      (i) a group of persons in respect of a corporation means any 2 or more persons each of whom owns shares of the capital stock of the corporation,

      (ii) a corporation that is controlled by one or more members of a particular group of persons in respect of that corporation shall be considered to be controlled by that group of persons, and

      (iii) a corporation may be controlled by a person or a particular group of persons notwithstanding that the corporation is also controlled or deemed to be controlled by another person or group of persons.

(2) Subsection (1) applies to dispositions occurring after December 20, 1991.

35. (1) The portion of paragraph 85(1)(c.1) of the Act before subparagraph (i) is replaced by the following:

    (c.1) where the property of the taxpayer was inventory, capital property (other than depreciable property of a prescribed class), a NISA Fund No. 2 or a property (other than capital property or an inventory) of the taxpayer that is a security or debt obligation used in the year in, or held in the year in the course of, carrying on the business of insurance or lending money, and the amount that the taxpayer and corporation have agreed on in their election in respect of the property is less than the lesser of

(2) Subsection 85(1) of the Act is amended by adding the following after paragraph (d):

    (d.1) for the purpose of determining after the time of the disposition the amount to be included under paragraph 14(1)(b) in computing the corporation's income, there shall be added to the amount otherwise determined for Q in the definition ``cumulative eligible capital'' in subsection 14(5) the amount determined by the formula

A x B / C

    where

    A is the amount, if any, determined for Q in that definition in respect of the taxpayer's business immediately before the time of the disposition,

    B is the fair market value immediately before that time of the eligible capital property disposed of to the corporation by the taxpayer, and

    C is the fair market value immediately before that time of all eligible capital property of the taxpayer in respect of the business;

(3) Paragraph 85(1.1)(f) of the Act is replaced by the following:

    (f) an inventory (other than real property, an interest in real property or an option in respect of real property);

(4) Subsection 85(1.1) of the Act is amended by striking out the word ``or'' at the end of paragraph (g), by adding the word ``or'' at the end of paragraph (h) and by adding the following after paragraph (h):

    (i) a NISA Fund No. 2.

(5) Subsections (1) and (4) apply to dispositions occurring after 1990.

(6) Subsection (2) applies to the disposition of property to a corporation occurring after the beginning of its first taxation year beginning after June 1988.

(7) Subsection (3) applies to dispositions occurring after December 20, 1991.

36. (1) The portion of subsection 85.1(1) of the Act before paragraph (a) is replaced by the following:

Share for share exchange

85.1 (1) Where shares of any particular class of the capital stock of a Canadian corporation (in this section referred to as the ``purchaser'') are issued to a taxpayer (in this section referred to as the ``vendor'') by the purchaser in exchange for a capital property of the vendor that is shares of any particular class of the capital stock (in this section referred to as the ``exchanged shares'') of another corporation that is a taxable Canadian corporation (in this section referred to as the ``acquired corporation''), subject to subsection (2),

(2) Subsection (1) applies to exchanges of shares occurring after December 20, 1991.

37. (1) Paragraph 87(1)(c) of the Act is replaced by the following:

    (c) all of the shareholders (except any predecessor corporation), who owned shares of the capital stock of any predecessor corporation immediately before the merger, receive shares of the capital stock of the new corporation because of the merger,

(2) The portion of subsection 87(1.4) of the Act before paragraph (a) is replaced by the following:

Definition of ``subsidiary wholly-owned corporation''

(1.4) Notwithstanding subsection 248(1), for the purposes of this subsection and subsections (1.1), (1.2) and (2.11), ``subsidiary wholly-owned corporation'' of a corporation (in this subsection referred to as the ``parent corporation'') means a corporation all the issued and outstanding shares of the capital stock of which belong to

(3) Paragraphs 87(2)(f) and (f.1) of the Act are replaced by the following:

Eligible capital property

    (f) for the purposes of determining under this Act any amount relating to cumulative eligible capital, an eligible capital amount, an eligible capital expenditure or eligible capital property, the new corporation shall be deemed to be the same corporation as, and a continuation of, each predecessor corporation;

(4) Paragraph 87(2)(j) of the Act is replaced by the following:

Idem

    (j) for the purposes of paragraphs 20(1)(m), (m.l) and (m.2) and subsection 20(24), the new corporation shall be deemed to be the same corporation as, and a continuation of, the predecessor corporation;

(5) Paragraph 87(2)(j.6) of the Act is replaced by the following:

Continuing corporation

    (j.6) for the purposes of paragraphs 12(1)(t) and (x), subsections 12(2.2) and 13(7.1), (7.4) and (24), paragraphs 13(27)(b) and (28)(c), subsections 13(29) and 18(9.1), paragraphs 20(1)(e) and (hh), section 32, paragraph 37(1)(c), subsection 39(13), subparagraphs 53(2)(c)(vi) and (h)(ii), paragraph 53(2)(s), subsections 53(2.1), 66(11.4), 66.7(11) and 152(4.3) and the determination of D in the definition ``undepreciated capital cost'' in subsection 13(21) and of L in the definition ``cumulative Canadian exploration expense'' in subsection 66.1(6), the new corporation shall be deemed to be the same corporation as, and a continuation of, each predecessor corporation;

(6) Subsection 87(2) of the Act is amended by adding the following after paragraph (j.9):

Idem

    (j.91) for the purposes of determining the amount deductible under subsection 181.1(4) or 190.1(3) by the new corporation for any taxation year, the new corporation shall be deemed to be the same corporation as, and a continuation of, each predecessor corporation;

(7) Paragraph 87(2)(l.3) of the Act is replaced by the following:

Replacement property

    (l.3) where before the amalgamation property of a predecessor corporation was unlawfully taken, lost, destroyed or taken under statutory authority, or was a former business property of the predecessor corporation, for the purposes of applying sections 13 and 44 and the definition ``former business property'' in subsection 248(1) to the new corporation in respect of the property and any replacement property acquired therefor, the new corporation shall be deemed to be the same corporation as, and a continuation of, the predecessor corporation;

(8) Paragraph 87(2)(aa) of the Act is replaced by the following:

Refundable dividend tax on hand

    (aa) where the new corporation was a private corporation continuously from the time of the amalgamation until the time immediately after the beginning of any taxation year, for the purpose of computing the refundable dividend tax on hand (within the meaning assigned by subsection 129(3)) of the new corporation at the end of that year there shall be added to the total determined under subsection 129(3) for that year, from which the total of amounts determined under paragraphs 129(3)(c) to (e) is subtracted, the total of all amounts each of which is the amount, if any, by which the refundable dividend tax on hand immediately before the amalgamation of a predecessor corporation that was a private corporation at that time exceeds its dividend refund (within the meaning assigned by subsection 129(1)) for its taxation year ending at that time, except that no amount shall be so added in respect of a predecessor corporation where subsection 129(1.2) would have applied to deem a dividend paid by the predecessor corporation immediately before the amalgamation not to be a taxable dividend for the purpose of subsection 129(1);

(9) Section 87 of the Act is amended by adding the following after subsection (2.1):

Losses, etc., on amalgamation with subsidiary wholly-owned corporation

(2.11) Where a new corporation is formed by the amalgamation of a particular corporation and one or more of its subsidiary wholly-owned corporations, the new corporation shall, for the purposes of applying section 111 and Part IV in respect of the particular corporation, be deemed to be the same corporation as, and a continuation of, the particular corporation.

(10) The portion of subsection 87(3) of the Act before paragraph (a) is replaced by the following:

Computation of paid-up capital

(3) Subject to subsection (3.1), where there is an amalgamation or a merger of 2 or more Canadian corporations, in computing at any particular time the paid-up capital in respect of any particular class of shares of the capital stock of the new corporation,

(11) Section 87 of the Act is amended by adding the following after subsection (3):

Election for non-applicatio n of subsection (3)

(3.1) Where,

    (a) there is an amalgamation of 2 or more corporations,

    (b) all of the issued shares, immediately before the amalgamation, of each class of shares (other than a class of shares all of the issued shares of which were cancelled on the amalgamation) of the capital stock of each predecessor corporation (in this subsection referred to as the ``exchanged class'') are converted into all of the issued shares, immediately after the amalgamation, of a separate class of shares of the capital stock of the new corporation (in this subsection referred to as the ``substituted class''),

    (c) immediately after the amalgamation, the number of shareholders of each substituted class, the number of shares of each substituted class owned by each shareholder, the number of issued shares of each substituted class, the terms and conditions of each share of a substituted class, and the paid-up capital of each substituted class determined without reference to the provisions of this Act are identical to the number of shareholders of the exchanged class from which the substituted class was converted, the number of shares of each such exchanged class owned by each shareholder, the number of issued shares of each such exchanged class, the terms and conditions of each share of such exchanged class, and the paid-up capital of each such exchanged class determined without reference to the provisions of this Act, respectively, immediately before the amalgamation, and

    (d) the new corporation elects in its return of income filed in accordance with section 150 for its first taxation year to have the provisions of this subsection apply,

for the purpose of computing at any particular time the paid-up capital in respect of any particular class of shares of the capital stock of the new corporation,

    (e) subsection (3) does not apply in respect of the amalgamation, and

    (f) each substituted class shall be deemed to be the same as, and a continuation of, the exchanged class from which it was converted.

(12) Paragraph 87(7)(a) of the Act is replaced by the following:

    (a) a debt or other obligation of a predecessor corporation that was outstanding immediately before the amalgamation became a debt or other obligation of the new corporation on the amalgamation, and

(13) Subsection 87(9) of the Act is amended by adding the following after paragraph (a.2):

    (a.3) for the purpose of applying subsection (5) in respect of the merger, the reference in that subsection to ``the new corporation'' shall be read as a reference to ``the parent'';

    (a.4) for the purpose of paragraph (c), any shares of the new corporation acquired by the parent on the merger shall be deemed to be new shares;

(14) Subsection (1) applies to amalgamations occurring after 1989.

(15) Subsections (2) and (9) apply to amalgamations occurring after 1989.

(16) Subsection (3) applies to amalgamations occurring after June 1988.

(17) Subsections (4) and (6) apply to amalgamations occurring and windings-up beginning after 1990.

(18) Subsection (5) applies after January 1990.

(19) Subsection (7) applies to amalgamations occurring and windings-up beginning after 1989.

(20) Subsection (8) applies to the computation of refundable dividend tax on hand (within the meaning assigned by subsection 129(3) of the Act, as amended by this Act) for the 1993 and subsequent taxation years.

(21) Subsections (10) and (11) apply to amalgamations occurring after 1990.

(22) Subsection (13) applies to amalgamations and mergers occurring after December 20, 1991.

38. (1) Paragraph 88(1)(a) of the Act is amended by adding the word ``and'' at the end of subparagraph (i) and by repealing subparagraph (ii).

(2) Clause 88(1)(c)(ii)(A) of the Act is replaced by the following:

        (A) the amount that would, but for subsection 69(11), be deemed by paragraph (a) to be the proceeds of disposition of the property

(3) Subsection 88(1) of the Act is amended by adding the following after paragraph (c):

    (c.1) for the purpose of determining after the winding-up the amount to be included under paragraph 14(1)(b) in computing the parent's income in respect of the business carried on by the subsidiary immediately before the winding-up, there shall be added to the amount otherwise determined for Q in the definition ``cumulative eligible capital'' in subsection 14(5) the amount, if any, determined for Q in that definition in respect of that business immediately before the disposition;

(4) Paragraph 88(1)(d.2) of the Act is replaced by the following:

    (d.2) in determining for the purposes of this paragraph and paragraphs (c) and (d) the time that a taxpayer last acquired control of the subsidiary, where control of the subsidiary was acquired from a person or group of persons (in this paragraph referred to as the ``vendor'') with whom the taxpayer was not (otherwise than because of a right referred to in paragraph 251(5)(b)) dealing at arm's length, the taxpayer shall be deemed to have last acquired control at the earlier of the time that the vendor last acquired control (within the meaning that would be assigned by subsection 186(2) if the reference therein to ``another corporation'' were read as a reference to ``a person'' and the references therein to ``the other corporation'' were read as references to ``the person'') of the subsidiary and the time that the vendor was deemed by this subsection to have last acquired control, except that, in determining the time that a particular taxpayer last acquired control of a corporation where at any time control of the corporation is acquired by the particular taxpayer because of a bequest or an inheritance of shares of the capital stock of the corporation, for the purposes of this paragraph and subsection 186(2) in its application to this paragraph, the particular taxpayer shall be deemed at that time, and at any time before that time, to have dealt at arm's length with the person who bequeathed the shares, or from whom the shares were inherited, and each other person who is related to that person;

(5) Paragraph 88(1)(e.5) of the Act is replaced by the following:

    (e.5) for the purpose of computing the refundable dividend tax on hand (within the meaning assigned by subsection 129(3)) of the parent at the end of any particular taxation year ending after the subsidiary was wound up, the amount, if any, by which

      (i) the subsidiary's refundable dividend tax on hand at the end of its taxation year during which it was wound up

    exceeds

      (ii) the subsidiary's dividend refund (within the meaning assigned by subsection 129(1)) for its taxation year referred to in subparagraph (i)

    shall, if

      (iii) the subsidiary was a private corporation at the end of the year during which it was wound up, and

      (iv) the parent was a private corporation

        (A) where the subsidiary was wound up in the particular year, at the time immediately after the winding-up, and

        (B) in any other case, continuously from the time of the winding-up until the time immediately after the beginning of the particular year,

    be added to the total determined for the particular year under subsection 129(3) from which the total of amounts determined under paragraphs 129(3)(c) to (e) is subtracted, except that no amount shall be so added in respect of the subsidiary where subsection 129(1.2) would have applied to deem a dividend paid by the subsidiary immediately before the winding-up not to be a taxable dividend for the purpose of subsection 129(1);

(6) Paragraph 88(1.3)(a) of the Act is replaced by the following:

    (a) it shall be deemed to have been in existence during the particular period beginning immediately before the end of the subsidiary's first expenditure year, gift year, foreign tax year or loss year, as the case may be, and ending immediately after it was incorporated or otherwise formed;

(7) Subsections (1) and (3) apply to distributions of property on the winding-up of a subsidiary in a taxation year of the subsidiary beginning after June 1988.

(8) Subsections (2) and (4) apply to windings-up beginning after December 20, 1991.

(9) Subsection (5) applies to the computation of refundable dividend tax on hand (within the meaning assigned by subsection 129(3) of the Act, as amended by this Act) for the 1993 and subsequent taxation years.

(10) Subsection (6) applies to windings-up beginning after 1988.

39. (1) Subsection 94(7) of the Act is repealed.

(2) Subsection (1) applies after 1990.

40. (1) Paragraph 96(1)(d) of the Act is replaced by the following:

    (d) each income or loss of the partnership for a taxation year were computed as if this Act were read without reference to paragraph 20(1)(v.1) and subsections 66.1(1), 66.2(1) and 66.4(1) and as if no deduction were permitted by section 29 of the Income Tax Application Rules, subsection 65(1) or section 66, 66.1, 66.2 or 66.4;

(2) The portion of subsection 96(3) of the Act before paragraph (a) is replaced by the following:

Election by members

(3) Where a taxpayer who was a member of a partnership during a fiscal period has, for any purpose relevant to the computation of the taxpayer's income from the partnership for the fiscal period, made or executed an election under or in respect of the application of any of subsections 13(4), (15) and (16) and 14(6), section 15.2, subsections 20(9) and 21(1) to (4), section 22, subsection 29(1), section 34 and subsections 44(1) and (6), 50(1) and 97(2) that, but for this subsection, would be a valid election,

(3) Subsection (1) applies to partnership fiscal periods beginning after December 20, 1991.

(4) Subsection (2) applies after February 25, 1992.

41. (1) The portion of paragraph 98(3)(b) of the Act before subparagraph (ii) is replaced by the following:

    (b) the cost to each such person of that person's undivided interest in each such property shall be deemed to be an amount equal to the total of

      (i) that person's percentage of the cost amount to the partnership of the property immediately before its distribution,

      (i.1) where the property is eligible capital property, that person's percentage of 4/3 of the amount, if any, determined for F in the definition ``cumulative eligible capital'' in subsection 14(5) in respect of the partnership's business immediately before the particular time, and

(2) Subsection 98(3) of the Act is amended by striking out the word ``and'' at the end of paragraph (e), by adding the word ``and'' at the end of paragraph (f) and by adding the following after paragraph (f):

    (g) where the property so distributed by the partnership was eligible capital property in respect of the business,

      (i) for the purposes of determining under this Act any amount relating to cumulative eligible capital, an eligible capital amount, an eligible capital expenditure or eligible capital property, each such person shall be deemed to have continued to carry on the business, in respect of which the property was eligible capital property and that was previously carried on by the partnership, until the time that the person disposes of the person's undivided interest in the property,

      (ii) for the purposes of determining the person's cumulative eligible capital in respect of the business, an amount equal to 3/4 of the amount determined under subparagraph (b)(i.1) in respect of the business shall be added to the amount otherwise determined in respect thereof for P in the definition ``cumulative eligible capital'' in subsection 14(5), and

      (iii) for the purposes of determining after the particular time

        (A) the amount deemed under subparagraph 14(1)(a)(v) to be the person's taxable capital gain, and

        (B) the amount to be included under paragraph 14(1)(b) in computing the income of the person

      in respect of any subsequent disposition of the property of the business, the amount determined for Q in the definition ``cumulative eligible capital'' in subsection 14(5) shall be deemed to be the amount, if any, of that person's percentage of the amount determined under that clause in respect of the partnership's business immediately before the particular time.

(3) The portion of paragraph 98(5)(b) of the Act before subparagraph (ii) is replaced by the following:

    (b) the cost to the proprietor of each such property shall be deemed to be an amount equal to the total of

      (i) the cost amount to the partnership of the property immediately before that time,

      (i.1) where the property is eligible capital property, 4/3 of the amount, if any, determined for F in the definition ``cumulative eligible capital'' in subsection 14(5) in respect of the partnership's business immediately before the particular time, and

(4) Subsection 98(5) of the Act is amended by striking out the word ``and'' at the end of paragraph (f), by adding the word ``and'' at the end of paragraph (g) and by adding the following after paragraph (g):

    (h) where the property so received by the proprietor is eligible capital property in respect of the business,

      (i) for the purpose of determining the proprietor's cumulative eligible capital in respect of the business, an amount equal to 3/4 of the amount determined under subparagraph (b)(i.1) in respect of the business shall be added to the amount otherwise determined in respect thereof for P in the definition ``cumulative eligible capital'' in subsection 14(5), and

      (ii) for the purposes of determining after the particular time

        (A) the amount deemed under subparagraph 14(1)(a)(v) to be the proprietor's taxable capital gain, and

        (B) the amount to be included under paragraph 14(1)(b) in computing the proprietor's income

      in respect of any subsequent disposition of property of the business, the amount determined for Q in the definition ``cumulative eligible capital'' in subsection 14(5) shall be deemed to be the amount, if any, determined for Q in that definition in respect of the partnership's business immediately before the particular time.

(5) Subsections (1) to (4) apply to acquisitions of property occurring as a consequence of a partnership ceasing to exist after the beginning of its first fiscal period beginning after 1987.

42. (1) Subsections 104(4) and (5) of the Act are replaced by the following:

Deemed disposition by trust

(4) Every trust shall, at the end of each of the following days, be deemed to have disposed of each property of the trust that was capital property (other than excluded property or depreciable property) or land included in the inventory of the trust for proceeds equal to its fair market value at the end of that day and to have reacquired the property immediately thereafter for an amount equal to that fair market value, and for the purposes of this Act those days are

    (a) where the trust

      (i) is a trust that was created by the will of a taxpayer who died after 1971 and that, at the time it was created, was a trust,

      (i.1) is a trust that was created by the will of a taxpayer who died after 1971 to which property was transferred in circumstances to which paragraph 70(5.2)(d) or (f) or (6)(d) applied and that, immediately after any such property vested indefeasibly in the trust as a consequence of the death of the taxpayer, was a trust, or

      (ii) is a trust that was created after June 17, 1971 by a taxpayer during the taxpayer's lifetime that, at any time after 1971, was a trust

    under which

      (iii) the taxpayer's spouse was entitled to receive all of the income of the trust that arose before the spouse's death, and

      (iv) no person except the spouse could, before the spouse's death, receive or otherwise obtain the use of any of the income or capital of the trust,

    the day on which the spouse dies;

    (a.1) where the trust is a pre-1972 spousal trust on January 1, 1993, the day that is the later of

      (i) the day on which the spouse referred to in the definition ``pre-1972 spousal trust'' in subsection 108(1) in respect of the trust dies, and

      (ii) January 1, 1993;

    (b) the day that is 21 years after the latest of

      (i) January 1, 1972,

      (ii) the day on which the trust was created, and

      (iii) where applicable, the day determined under paragraph (a) or (a.1); and

    (c) the day that is 21 years after any day (other than a day determined under paragraph (a) or (a.1)) that is, because of this subsection, a day on which the trust is deemed to have disposed of each such property.

Idem

(5) Every trust shall, at the end of each day determined under subsection (4) in respect of the trust, be deemed to have disposed of each property of the trust that was a depreciable property of a prescribed class of the trust for proceeds equal to its fair market value at the end of that day and to have reacquired the property immediately thereafter at a capital cost (in this subsection referred to as the ``deemed capital cost'') equal to that fair market value, except that

    (a) where the amount that was the capital cost to the trust of the property immediately before the end of the day (in this paragraph referred to as the ``actual capital cost'') exceeds the deemed capital cost to the trust of the property, for the purpose of sections 13 and 20 and any regulations made for the purpose of paragraph 20(1)(a) as they apply in respect of the property at any subsequent time,

      (i) the capital cost to the trust of the property shall be deemed to be the amount that was the actual capital cost to the trust of the property, and

      (ii) the excess shall be deemed to have been allowed to the trust in respect of the property under paragraph 20(1)(a) in computing income for taxation years before the reacquisition by the trust of the property, and any other amount allowed to the trust in respect of the property under that paragraph in computing income for those years shall be deemed to be nil;

    (b) for the purposes of this subsection, the reference to ``at the end of a taxation year'' in subsection 13(1) shall be read as a reference to ``at the particular time a trust is deemed by subsection 104(5) to have disposed of depreciable property of a prescribed class''; and

    (c) for the purpose of computing the excess, if any, referred to in subsection 13(1) at the end of the taxation year of a trust that included a day on which the trust is deemed by this subsection to have disposed of a depreciable property of a prescribed class, any amount that, on that day, was included in the trust's income for the year under subsection 13(1) as it reads because of paragraph (b), shall be deemed to be an amount included under section 13 in the trust's income for a preceding taxation year.

(2) Section 104 of the Act is amended by adding the following after subsection (5):

Idem

(5.1) Every trust that holds an interest in a NISA Fund No. 2 that was transferred to it in circumstances to which paragraph 70(6.1)(b) applied shall be deemed, at the end of the day on which the spouse referred to in that paragraph dies (in this subsection referred to as the ``spouse''), to have been paid an amount out of the fund equal to the amount, if any, by which

    (a) the balance at the end of that day in the fund so transferred

exceeds

    (b) such portion of the amount described in paragraph (a) as is deemed by subsection (14.1) to have been paid to the spouse.

(3) Section 104 of the Act is amended by adding the following after subsection (5.2):

Election

(5.3) Where a trust so elects in prescribed form filed with the Minister within 6 months after the end of a taxation year of the trust that includes a day (in this subsection referred to as the ``disposition day'') that would, but for this subsection, be determined in respect of the trust under paragraph (4)(a.1) in the case of a trust described in that paragraph, or under paragraph (4)(b) in any other case, and there is an exempt beneficiary under the trust on the disposition day,

    (a) for the purposes of subsections (4) to (5.2), paragraph (6)(b) and subsection 159(6.1), the day determined under paragraph (4)(a.1) or (b), as the case may be, in respect of the trust shall be deemed to be the first day of the first taxation year of the trust beginning after the first day after the disposition day throughout which there is no exempt beneficiary under the trust;

    (b) subsection 107(2) does not apply to a distribution made by the trust during the period

      (i) beginning immediately after the disposition day, and

      (ii) ending at the end of the first day after the disposition day that is determined in respect of the trust under subsection (4)

    to any beneficiary (other than an individual who is an exempt beneficiary under the trust immediately before the time of the distribution);

    (c) subject to paragraph (d), paragraph (e) of the definition ``disposition'' in section 54 does not apply to a transfer by the trust after the disposition day during the period

      (i) beginning immediately after the disposition day, and

      (ii) ending at the end of the first day after the disposition day that is determined in respect of the trust under subsection (4); and

    (d) where

      (i) property is transferred from the trust to another trust in circumstances to which paragraph (e) of the definition ``disposition'' in section 54 would, but for paragraph (c), apply,

      (ii) the other trust held no property immediately before the transfer, and

      (iii) the terms of the trust immediately before the transfer are identical to the terms of the other trust immediately after the transfer,

    paragraph (e) of the definition ``disposition'' in section 54 applies to the transfer and the other trust shall be deemed to be the same trust as, and a continuation of, the trust.

Exempt beneficiary

(5.4) For the purpose of subsection (5.3), an ``exempt beneficiary'' under a trust at a particular time is an individual who is alive and a beneficiary under the trust at the particular time, where

    (a) in the case of a trust that was created after February 11, 1991, the individual, or an individual who, otherwise than because of subsection 252(2), is the brother or sister of the individual, was alive at the earlier of

      (i) the time the trust was created, and

      (ii) the earliest of all times each of which is the time that another trust was created that, before the particular time and the end of the day that would, but for subsection (5.3), be determined in respect of the trust under paragraph (4)(a.1) or (b), transferred property to the trust either

        (A) directly, or

        (B) indirectly through one or more trusts,

      in circumstances in which subsection (5.8) applies; and

    (b) the individual or the individual's spouse or former spouse was

      (i) the designated contributor in respect of the trust, or

      (ii) a grandparent, parent, brother, sister, child, niece or nephew

        (A) of the designated contributor in respect of the trust, or

        (B) of the spouse or former spouse of the designated contributor in respect of the trust.

Beneficiary

(5.5) For the purpose of subsection (5.4), a beneficiary under a trust is an individual who is beneficially interested in the trust, except that an individual shall be deemed not to be a beneficiary under a trust at a particular time

    (a) where

      (i) the interests in the trust at the particular time of all individuals who would, if this Act were read without reference to this paragraph, be exempt beneficiaries under the trust are conditional on or subject to the exercise of a discretionary power by a person,

      (ii) by the exercise of (or the failure to exercise) such power under the terms of the trust after the particular time, all interests in the trust of

        (A) those individuals, and

        (B) other individuals who are children of deceased individuals who, if this Act were read without reference to this paragraph, would have been exempt beneficiaries under the trust at any time before the particular time

      may terminate before the time at which the last of those individuals and the other individuals dies and without any of those individuals or the other individuals enjoying any benefit under the trust after the particular time, and

      (iii) the trust was created after February 11, 1991 or subparagraph (ii) applies in respect of the trust because of a variation of the terms of the trust occurring after February 11, 1991; or

    (b) where it is reasonable to consider that one of the main purposes for the creation of the interest of the individual in the trust was to defer the day determined under paragraph (4)(a.1) or (b) in respect of the trust.

Designated contributor

(5.6) For the purpose of subsection (5.4), a designated contributor in respect of a trust is

    (a) where the trust is described in paragraph (4)(a) or was, on December 20, 1991, a pre-1972 spousal trust, the individual who created (or whose will created) the trust;

    (b) where paragraph (a) does not apply and the trust is a testamentary trust at the end of the taxation year for which it makes an election under subsection (5.3), the individual as a consequence of whose death the trust was created; and

    (c) in the case of any other trust, the individual who was, or who was related to, an individual beneficially interested in the trust and who is designated by the trust in its election under subsection (5.3)

      (i) where, at each time in the relevant period, the total amount of property transferred or loaned before that time by the designated individual (either directly or through another trust) to the trust

        (A) exceeded the total amount of property so transferred or loaned before that time by each other individual who was born before the designated individual and who, at any time, was related to any individual beneficially interested in the trust, and

        (B) was not less than the total amount of property so transferred or loaned before that time by each other individual who was born after the designated individual and who, at any time, was related to any individual beneficially interested in the trust,

      (ii) where

        (A) no individual may be designated in respect of the trust because of subparagraph (i),

        (B) the designated individual transferred or loaned property (either directly or through another trust) to the trust at any time before the end of the relevant period, and

        (C) the designated individual was born before all other individuals who

          (I) at any time were related to any individual beneficially interested in the trust or to any individual who transferred or loaned property to the trust before the end of the relevant period, and

          (II) transferred or loaned property (either directly or through another trust) to the trust at any time before the end of the relevant period, or

      (iii) where throughout the relevant period the property of the trust consisted primarily of

        (A) shares of the capital stock of a corporation

          (I) controlled, on the day that the trust was created or at the beginning of the relevant period, by the designated individual or by the designated individual and one or more other individuals born after, and related to, the designated individual, or

          (II) all or substantially all of the value of which throughout the relevant period derived from property transferred to the corporation by the designated individual or by the designated individual and one or more other individuals born after, and related to, the designated individual,

        (B) shares of the capital stock of a corporation all or substantially all of the value of which, throughout the part of the relevant period throughout which the shares were held by the trust, derived from shares described in clause (A),

        (C) property substituted for the shares described in clause (A) or (B),

        (D) property attributable to profits, gains or distributions in respect of property described in clause (A), (B) or (C), or

        (E) any combination of the properties described in clauses (A) to (D).

Idem

(5.7) For the purpose of subsection (5.6),

    (a) the relevant period in respect of a trust is the period that begins one year after the day on which the trust was created and ends at the end of the day that would, but for the election of the trust under subsection (5.3), be determined in respect of the trust under paragraph (4)(a.1) or (b), as the case may be;

    (b) 2 individuals shall be deemed to be related to each other where one of them is the aunt, great aunt, uncle or great uncle of the other individual;

    (c) an individual shall be deemed not to be a designated contributor in respect of a trust where it is reasonable to consider that one of the main purposes of a series of transactions or events that includes

      (i) an individual becoming a trustee in respect of trust property, or

      (ii) an acquisition of property or a borrowing by any individual

    was to defer the day determined under paragraph (4)(b) in respect of the trust; and

    (d) in determining whether all or substantially all of the value of shares of the capital stock of a corporation is derived from other property, the other property shall be deemed to include property substituted for the other property and property attributable to profits, gains or distributions in respect of the other property and the substituted property.

Trust transfers

(5.8) Where capital property (other than excluded property), land included in inventory, Canadian resource property or foreign resource property is transferred at a particular time by a trust (in this subsection referred to as the ``transferor trust'') to another trust (in this subsection referred to as the ``transferee trust'') in circumstances in which paragraph (e) of the definition ``disposition'' in section 54 or subsection 107(2) applies,

    (a) for the purposes of applying subsections (4) to (5.2) after the particular time,

      (i) subject to paragraph (b), the first day (in this subsection referred to as the ``disposition day'') ending at or after the particular time determined under subsection (4) in respect of the transferee trust shall be deemed to be the earliest of

        (A) the first day ending at or after the particular time that would be determined under subsection (4) in respect of the transferor trust without regard to the transfer and any transaction or event occurring after the particular time,

        (B) the first day ending at or after the particular time that would otherwise be determined under subsection (4) in respect of the transferee trust without regard to any transaction or event occurring after the particular time,

        (C) where the transferor trust is a trust that is described in paragraph (4)(a) or the definition ``pre-1972 spousal trust'' in subsection 108(1) and the spouse referred to in that paragraph or definition is alive at the particular time, the first day ending at or after the particular time, and

        (D) where

          (I) the disposition day would, but for the application of this subsection to the transfer, be determined under paragraph (5.3)(a) in respect of the transferee trust, and

          (II) the particular time is after the day that would, but for subsection (5.3), be determined under paragraph (4)(b) in respect of the transferee trust,

        the first day ending at or after the particular time, and

      (ii) where the disposition day determined in respect of the transferee trust under subparagraph (i) is earlier than the day referred to in clause (i)(B) in respect of the transferee trust, subsections (4) to (5.2) do not apply to the transferee trust on the day referred to in clause (i)(B) in respect of the transferee trust;

    (b) where the transferor trust is a trust (in this paragraph referred to as an ``eligible trust'') that is described in paragraph (4)(a) or the definition ``pre-1972 spousal trust'' in subsection 108(1) and the spouse referred to in that paragraph or definition is alive at the particular time, paragraph (a) does not apply in respect of the transfer where the transferee trust is an eligible trust; and

    (c) for the purposes of subsection (5.3), unless a day ending before the particular time has been determined under paragraph (4)(a.1) or (b) or would, but for subsection (5.3), have been so determined, a day determined under subparagraph (a)(i) shall be deemed to be a day determined under paragraph (4)(a.1) or (b), as the case may be, in respect of the transferee trust.

(4) Paragraph 104(6)(b) of the Act is replaced by the following:

    (b) in any other case, such amount as the trust claims not exceeding the amount, if any, by which

      (i) such part of the amount that, but for

        (A) this subsection,

        (B) subsections (5.1), (12), and 107(4),

        (C) the application of subsections (4), (5) and (5.2) in respect of a day determined under paragraph (4)(a), and

        (D) subsection 12(10.2), except to the extent that that subsection applies to amounts paid to a trust described in paragraph 70(6.1)(b) and before the death of the spouse referred to in that paragraph,

      would be its income for the year as became payable in the year to a beneficiary or was included under subsection 105(2) in computing the income of a beneficiary

    exceeds

      (ii) where the trust

        (A) is described in paragraph (4)(a) and was created after December 20, 1991, or

        (B) would be described in paragraph (4)(a) if the reference therein to ``at the time it was created'' were read as ``on December 20, 1991''

      and the spouse referred to in paragraph (4)(a) in respect of the trust is alive throughout the year, such part of the amount that, but for

        (C) this subsection,

        (D) subsections (12) and 107(4), and

        (E) subsection 12(10.2), except to the extent that that subsection applies to an amount paid to a trust described in paragraph 70(6.1)(b) and before the death of the spouse referred to in that paragraph,

      would be its income for the year as became payable in the year to a beneficiary (other than the spouse) or was included under subsection 105(2) in computing the income of a beneficiary (other than the spouse).

(5) Section 104 of the Act is amended by adding the following after subsection (14):

NISA election

(14.1) Where, at the end of the day on which a taxpayer dies and as a consequence of the death, an amount would, but for this subsection, be deemed by subsection (5.1) to have been paid to a trust out of the trust's interest in a NISA Fund No. 2 and the trust and the legal representative of the taxpayer so elect in prescribed manner, such portion of the amount as is designated in the election shall be deemed to have been paid to the taxpayer out of a NISA Fund No. 2 of the taxpayer immediately before the end of the day and, for the purpose of paragraph (a) of the description of B in subsection 12(10.2) in respect of the trust, the amount shall be deemed to have been paid out of the trust's NISA Fund No. 2 immediately before the end of the day.

(6) The portion of paragraph 104(15)(a) of the Act before subparagraph (i) is replaced by the following:

    (a) where the trust is a trust described in the definition ``pre-1972 spousal trust'' in subsection 108(1) at the end of the year or a trust described in paragraph (4)(a) and the taxpayer's spouse referred to in that definition or paragraph is alive at the end of the year, an amount equal to

(7) The description of F in paragraph 104(21.2)(b) of the Act is replaced by the following:

    F is the lesser of

        (i) the amount, if any, that would be determined under paragraph 3(b) in respect of capital gains and capital losses in respect of the trust for the designation year if

          (A) the only properties referred to in that paragraph were properties disposed of by it after 1984, other than qualified farm properties and other than qualified small business corporation shares disposed of by it after June 17, 1987, and

          (B) the trust's capital gains and capital losses for the year from dispositions of non-qualifying real property of the trust were equal to its eligible real property gains and eligible real property losses, respectively, for the year from those dispositions, and

        (ii) the amount that would be determined under subparagraph (i) if that subparagraph were read without reference to clause (i)(B), and

(8) Paragraphs 104(27)(c) and (d) of the Act are replaced by the following:

    (c) where

      (i) the benefit is an amount described in subparagraph (a)(i) of the definition ``pension income'' in subsection 118(7), and

      (ii) the beneficiary was a spouse of the settlor of the trust,

    the beneficiary's share of the benefit shall be deemed, for the purposes of subsections 118(3) and (7), to be a payment described in subparagraph (a)(i) of the definition ``pension income'' in subsection 118(7) that is included in computing the beneficiary's income for the particular year,

    (d) where the benefit

      (i) is a single amount (within the meaning assigned by subsection 147.1(1)), other than an amount that relates to an actuarial surplus, paid by a registered pension plan to the trust as a consequence of the death of the settlor of the trust who was, at the time of death, a spouse of the beneficiary, or

      (ii) would be an amount included in the total determined under paragraph 60(j) in respect of the beneficiary for the taxation year of the beneficiary in which the benefit was received by the trust if the benefit had been received by the beneficiary at the time it was received by the trust,

    the beneficiary's share of the benefit is, for the purposes of paragraph 60(j), an eligible amount in respect of the beneficiary for the particular year, and

(9) Paragraph 104(27.1)(e) of the Act is replaced by the following:

    (e) can reasonably be considered (having regard to all the circumstances including the terms and conditions of the trust arrangement) to be part of the amount that was included under subsection (13) in computing the income for a particular taxation year of a beneficiary under the trust who was, at the time of the settlor's death, a spouse of the settlor, and

(10) Paragraph 104(29)(b) of the Act is replaced by the following:

    (b) the total of all amounts each of which is an amount that is deductible (otherwise than because of the membership of the trust in a partnership) under paragraph 20(1)(v.1) in computing the income of the trust for the year or that would, but for section 80.2, be included in computing its income for the year,

(11) Subsection (1) applies to taxation years of trusts ending after February 11, 1991, except that

    (a) paragraph 104(4)(a) of the Act, as enacted by subsection (1), does not apply in respect of any trust described in paragraph 104(4)(a) because of subparagraph (i.1) where the spouse who was the beneficiary of that trust died before December 21, 1991; and

    (b) with respect to those days determined under subsection 104(4) of the Act, as enacted by subsection (1), that are before 1993, subsection 104(5) of the Act shall be read without reference to subsection (1), and the portion of subsection 104(5) of the Act before paragraph (c) shall be read as follows:

(5) Every trust shall, at the end of each day determined under subsection (4) in respect of the trust, be deemed to have disposed of all depreciable property of a prescribed class of the trust for proceeds equal to

    (a) where the fair market value of that property at the end of the day exceeds the undepreciated capital cost thereof to the trust at the end of the day, the amount of that undepreciated capital cost plus 1/2 of the excess, and

    (b) in any other case, the fair market value of that property at the end of that day plus 1/2 of the amount, if any, by which the undepreciated capital cost thereof to the trust at the end of that day exceeds that fair market value,

and to have reacquired each such depreciable property of that class immediately thereafter at a capital cost (in this subsection referred to as the ``deemed capital cost'') equal to that proportion of the proceeds determined under paragraph (a) or (b), as the case may be, that the amount that was the fair market value of that property is of the total of the amounts that were the fair market values of all properties of that class at the end of that day, except that

(12) Subsections (2), (4) and (5) apply to the 1991 and subsequent taxation years except that, for taxation years of trusts ending after 1990 and before December 21, 1991, paragraph 104(6)(b) of the Act, as enacted by subsection (4), shall be read as follows:

    (b) in any other case, such amount as the trust claims not exceeding such part of the amount that, but for

      (i) this subsection,

      (ii) subsections (5.1) and (12),

      (iii) subsections (4), (5) and (5.2) and 107(4), where the trust is a trust described in paragraph (4)(a), and

      (iv) subsection 12(10.2), except to the extent that that subsection applies to amounts paid to a trust described in paragraph 70(6.1)(b) and before the death of the spouse referred to in that paragraph,

    would be its income for the year as became payable in the year to a beneficiary or was included under subsection 105(2) in computing the income of a beneficiary.

(13) Subsections 104(5.3) to (5.7) of the Act, as enacted by subsection (3), apply after February 11, 1991.

(14) Subsection 104(5.8) of the Act, as enacted by subsection (3), applies in respect of property transferred after February 11, 1991, except that paragraph 104(5.8)(b) of the Act, as it applies to property transferred before December 21, 1991, shall be read as follows:

    (b) where the transferor trust or the transferee trust is a trust that is described in paragraph (4)(a) or the definition ``pre-1972 spousal trust'' in subsection 108(1) and the spouse referred to therein is alive at the particular time, paragraph (a) does not apply in respect of the transfer; and

(15) Subsection (6) applies to taxation years of trusts ending after December 20, 1991.

(16) Subsection (7) applies to the 1992 and subsequent taxation years.

(17) Subsections (8) and (9) apply after 1992.

(18) Subsection (10) applies to taxation years ending after December 20, 1991.

43. (1) Paragraph 107(2)(e) of the Act is repealed.

(2) Subsection 107(2) of the Act is amended by adding the following after paragraph (d):

    (f) where the property so distributed was eligible capital property of the trust in respect of a business of the trust,

      (i) where the eligible capital expenditure of the trust in respect of the property exceeds the cost at which the taxpayer is deemed by this subsection to have acquired the property, for the purposes of sections 14, 20 and 24,

        (A) the eligible capital expenditure of the taxpayer in respect of the property shall be deemed to be the amount that was the eligible capital expenditure of the trust in respect of the property, and

        (B) 3/4 of the excess shall be deemed to have been allowed under paragraph 20(1)(b) to the taxpayer in respect of the property in computing income for taxation years ending

          (I) before the acquisition by the taxpayer of the property, and

          (II) after the adjustment time of the taxpayer in respect of the business, and

      (ii) for the purposes of determining after that time

        (A) the amount deemed under subparagraph 14(1)(a)(v) to be the taxpayer's taxable capital gain, and

        (B) the amount to be included under paragraph 14(1)(b) in computing the income of the taxpayer

      in respect of any subsequent disposition of the property of the business, there shall be added to the amount otherwise determined for Q in the definition ``cumulative eligible capital'' in subsection 14(5) the amount determined by the formula

A x B / C

      where

      A is the amount, if any, determined for Q in that definition in respect of the business of the trust immediately before the distribution,

      B is the fair market value of the property so distributed immediately before the distribution, and

      C is the fair market value immediately before the distribution of all eligible capital property of the trust in respect of the business.

(3) The portion of subsection 107(2.01) of the Act before paragraph (a) is replaced by the following:

Distribution of principal residence

(2.01) Where a property that would, if a personal trust had designated the property under paragraph (c.1) of the definition ``principal residence'' in section 54, be a principal residence (within the meaning of that definition) of the trust for a taxation year, is at any time (in this subsection referred to as ``that time'') distributed by the trust to a taxpayer in circumstances to which subsection (2) applies and subsection (4) does not apply and the trust so elects in its return of income under this Part for the taxation year that includes that time,

(4) The portion of subsection 107(4) of the Act before paragraph (e) is replaced by the following:

Where trust in favour of spouse

(4) Where

    (a) at any time property of a trust is distributed by the trust to a beneficiary in circumstances to which subsection (2) would, but for this subsection, apply,

    (a.1) the trust is described in paragraph 104(4)(a),

    (a.2) the property so distributed by the trust was capital property, a Canadian resource property, a foreign resource property or property that was land included in the inventory of the trust,

    (b) the taxpayer to whom the property is so distributed is a person other than the spouse referred to in paragraph 104(4)(a) in respect of the trust, and

    (c) that spouse is alive on the day the property is so distributed,

notwithstanding paragraphs (2)(a) to (c), the following rules apply:

    (d) the trust shall be deemed to have disposed of the property and to have received proceeds of disposition therefor equal to its fair market value at that time,

(5) The portion of subsection 107(5) of the Act before paragraph (a) is replaced by the following:

Distribution to non-resident

(5) Where subsection (2) applies to the distribution by a trust of any property (other than a Canadian resource property, excluded property or property that would, if at no time in the taxation year of the trust in which it is so distributed the trust is resident in Canada, be taxable Canadian property) to a non-resident taxpayer (including a partnership other than a Canadian partnership) who is a beneficiary under the trust, notwithstanding paragraphs (2)(a) to (c),

(6) Subsection (1) applies to distributions occurring after July 13, 1990.

(7) Subsection (2) applies to distributions occurring after 1987.

(8) Subsection (3) applies to distributions occurring after 1990, except where a trust (other than a trust described in subsection 70(6) or 73(1) of the Act) elected to have subsection 107(2.01) of the Act, as amended by subsection (3), apply to a distribution by the trust occurring after 1990 and before June 11, 1993 by notifying the Minister of National Revenue in writing before December 11, 1993.

(9) Subsection (4) applies to distributions occurring after December 20, 1991, except that paragraph 107(4)(d) of the Act, as enacted by subsection (4), does not apply to distributions occurring before 1993.

(10) Subsection (5) applies to distributions occurring after 1991.

44. (1) The definition ``accumulating revenue'' in subsection 108(1) of the Act is replaced by the following:

``accumulatin g income''
« revenu ... »

``accumulating income'' of a trust for a taxation year means the amount that would be the income of the trust for the year if this Act were read without reference to

      (a) subsections 104(5.1) and (12),

      (b) where the trust

        (i) is a pre-1972 spousal trust at the end of the year,

        (ii) is described in paragraph 104(4)(a), or

        (iii) elected under subsection 104(5.3) for a preceding taxation year,

      subsections 104(4), (5), (5.2) and 107(4), and

      (c) subsection 12(10.2), except to the extent that that subsection applies to amounts paid to a trust to which paragraph 70(6.1)(b) applies and before the death of the spouse referred to in that paragraph;

(2) Subsection 108(1) of the Act is amended by adding the following in alphabetical order:

``eligible real property gain''
« gain ... »

``eligible real property gain'' of a trust has the meaning assigned by subsection 110.6(1);

``eligible real property loss''
« perte ... »

``eligible real property loss'' of a trust has the meaning assigned by subsection 110.6(1);

``excluded property''
« bien exclu »

``excluded property'' at a particular time means a share of the capital stock of a non-resident-owned investment corporation if, on the first day of the first taxation year of the corporation that ends at or after the particular time, the corporation does not own property referred to in any of clauses 115(1)(b)(v)(A) to (D);

``non-qualifyi ng real property''
« immeuble ... »

``non-qualifying real property''

      (a) of a trust that is a personal trust has the meaning assigned by subsection 110.6(1), and

      (b) of a trust that is not a personal trust has the meaning assigned by subsection 131(6);

``pre-1972 spousal trust''
« fiducie au profit ... »

``pre-1972 spousal trust'' at a particular time means a trust that was

      (a) created by the will of a taxpayer who died before 1972, or

      (b) created before June 18, 1971 by a taxpayer during the taxpayer's lifetime

    that, throughout the period beginning at the time it was created and ending at the earliest of January 1, 1993, the day on which the taxpayer's spouse died and the particular time, was a trust under which the taxpayer's spouse was entitled to receive all of the income of the trust that arose before the spouse's death, unless a person other than the spouse received or otherwise obtained the use of any of the income or capital of the trust before the end of that period;

(4) The portion of the definition ``trust'' in subsection 108(1) of the Act before paragraph (a) is replaced by the following:

``trust''
« fiducie »

``trust'' includes an inter vivos trust and a testamentary trust but in subsections 104(4), (5), (5.2), (12), (13.1), (13.2), (14) and (15) and sections 105 to 107 does not include

(5) Paragraph (a) of the definition ``trust'' in subsection 108(1) of the Act is replaced by the following:

      (a) an amateur athlete trust, an employee trust, a trust described in paragraph 149(1)(o.4) or a trust governed by a deferred profit sharing plan, an employee benefit plan, an employees profit sharing plan, a foreign retirement arrangement, a registered education savings plan, a registered pension plan, a registered retirement income fund, a registered retirement savings plan or a registered supplementary unemployment benefit plan,

(6) The definition ``trust'' in subsection 108(1) of the Act is amended by striking out the word ``or'' at the end of paragraph (c), by adding the word ``or'' at the end of paragraph (d) and by adding the following after paragraph (d):

      (e) a trust each of the beneficiaries under which was at all times after it was created a trust referred to in paragraph (a), (b) or (d) or a person who is a beneficiary of the trust only because of being a beneficiary under a trust referred to in any of those paragraphs,

    and, in subsections 104(4), (5), (5.2), (12), (14) and (15), does not include

      (f) a unit trust, or

      (g) a trust (other than a trust described in paragraph 104(4)(a), a trust that has elected under subsection 104(5.3), or a trust that, in its return of income under this Part for its first taxation year ending after 1992, has elected that this subparagraph not apply) all interests in which have vested indefeasibly and no interest in which may become effective in the future.

(7) The portion of subsection 108(3) of the Act before paragraph (a) is replaced by the following:

Meaning of ``income'' of trust

(3) For the purposes of the definition ``income interest'' in subsection (1), the income of a trust is its income computed without reference to the provisions of this Act and, for the purposes of the definition ``pre-1972 spousal trust'' in subsection (1) and paragraphs 70(6)(b) and (6.1)(b), 73(1)(c) and 104(4)(a), the income of a trust is its income computed without reference to the provisions of this Act, minus any dividends included therein

(8) The portion of subsection 108(4) of the Act before paragraph (a) is replaced by the following:

Trust not disqualified

(4) For the purposes of the definition ``pre-1972 spousal trust'' in subsection (1) and subparagraphs 70(6)(b)(ii) and (6.1)(b)(ii), 73(1)(c)(ii) and 104(4)(a)(iv), where a trust was created by a taxpayer whether by the taxpayer's will or otherwise, a person, other than the taxpayer's spouse, shall be deemed not to have received or otherwise obtained or to be entitled to receive or otherwise obtain the use of any income or capital of the trust solely because of the payment, or provision for payment, as the case may be, by the trust of

(9) Section 108 of the Act is amended by adding the following after subsection (5):

Variation of trusts

(6) For the purposes of subsections 104(4), (5) and (5.2), where at any time the terms of a trust are varied, the trust shall at and after that time be deemed to be the same trust as, and a continuation of, the trust immediately before that time, but, for greater certainty, nothing in this subsection affects the application of paragraph 104(4)(a.1).

(10) Subsections (1), (7) and (8) apply to the 1991 and subsequent taxation years.

(11) The definitions ``eligible real property gain'', ``eligible real property loss'' and ``non-qualifying real property'' in subsection 108(1) of the Act, as enacted by subsection (2), apply to the 1992 and subsequent taxation years.

(12) The definitions ``excluded property'' and ``pre-1972 spousal trust'' in subsection 108(1) of the Act, as enacted by subsection (2), apply after February 11, 1991.

(13) Subsections (4) and (6) apply to the 1993 and subsequent taxation years.

(14) Subsection (5) applies to the 1988 and subsequent taxation years except that, in its application to the 1988 and 1989 taxation years, paragraph (a) of the definition ``trust'' in subsection 108(1) of the Act, as enacted by subsection (5), shall be read without reference to the expression ``a foreign retirement arrangement''.

(15) Subsection (9) applies to variations occurring after February 11, 1991.

45. (1) Paragraph 110(1)(f) of the Act is amended by striking out the word ``or'' at the end of subparagraph (i) and by adding the following after subparagraph (ii):

      (iii) income from employment with a prescribed international organization,

(2) Subsection (1) applies to the 1991 and subsequent taxation years.

46. (1) The portion of subsection 110.1(3) of the Act after paragraph (b) is replaced by the following:

such amount, not greater than the fair market value and not less than the adjusted cost base to the corporation of the property at that time, as the corporation designates in its return of income under section 150 for the year in which the gift is made shall, if the making of the gift is proven by filing with the Minister a receipt containing prescribed information, be deemed to be its proceeds of disposition of the property and, for the purposes of subsection (1), the fair market value of the gift made by the corporation.

(2) Subsection (1) applies to gifts made after December 11, 1988.

47. (1) The definitions ``annual gains limit'' and ``cumulative gains limit'' in subsection 110.6(1) of the Act are replaced by the following:

``annual gains limit''
« plafond annuel ... »

``annual gains limit'' of an individual for a taxation year means the amount determined by the formula

A - B

    where

    A is the lesser of

        (a) the amount determined in respect of the individual for the year under paragraph 3(b) in respect of capital gains and capital losses, and

        (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 capital losses if

          (i) the only properties referred to in paragraph 3(b) were properties disposed of by the individual after 1984, and

          (ii) the individual's capital gains and capital losses for the year from dispositions of non-qualifying real property of the individual were equal to the individual's eligible real property gains and eligible real property losses, respectively, for the year from those dispositions, and

    B is the total of

        (a) the amount, if any, by which

          (i) the individual's net capital losses for other taxation years deducted under paragraph 111(1)(b) in computing the individual's taxable income for the year

        exceeds

          (ii) the amount, if any, by which the amount determined in respect of the individual for the year under paragraph 3(b) in respect of capital gains and capital losses exceeds the amount determined for A in respect of the individual for the year, and

        (b) all of the individual's allowable business investment losses for the year;

``cumulative gains limit''
« plafond des ... »

``cumulative gains limit'' of an individual at the end of a taxation year means the amount, if any, by which

      (a) the total of all amounts each of which is

        (i) the amount determined in respect of the individual for the year or a preceding taxation year ending after 1987 for A in the definition ``annual gains limit'', or

        (ii) the amount determined in respect of the individual for a preceding taxation year ending after 1984 and before 1988 under paragraph (a) of the definition ``annual gains limit'' as it read in its application to those years

    exceeds the total of

      (b) all amounts each of which is

        (i) the amount determined in respect of the individual for the year or a preceding taxation year ending after 1987 under paragraph (a) or (b) of the description of B in the definition ``annual gains limit'',

        (ii) the amount determined in respect of the individual for a preceding taxation year ending after 1984 and before 1988 under paragraph (b) or (c) of the definition ``annual gains limit'' as it read in its application to those years, or

        (iii) an amount deducted under paragraph 3(e) by the individual for the individual's 1985 taxation year,

      (c) all amounts deducted under this section in computing the individual's taxable income for a preceding taxation year, and

      (d) the individual's cumulative net investment loss at the end of the year;

(2) The definition ``interest in a family farm partnership'' in subsection 110.6(1) of the Act is replaced by the following:

``interest in a family farm partnership''
« participatio n ... »

``interest in a family farm partnership'' of an individual (other than a trust that is not a personal trust) at any time means an interest owned by the individual at that time in a partnership where

      (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 by

          (A) the partnership,

          (B) the individual,

          (C) where the individual is a personal trust, a beneficiary of the trust,

          (D) a spouse, child or parent of the individual or of a beneficiary referred to in clause (C), or

          (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, child or parent of the individual or of a beneficiary referred to in clause (C),

        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, child or parent of the individual or of a beneficiary referred to in clause (C) was actively engaged on a regular and continuous basis,

        (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 (iii), or

        (iii) properties described in either subparagraph (i) or (ii), and

      (b) at that time, all or substantially all 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 by the partnership or a person referred to in subparagraph (a)(i),

        (ii) shares of the capital stock or indebtedness of one or more corporations described in subparagraph (a)(ii), or

        (iii) properties described in subparagraph (i) or (ii).

(3) The definition ``investment expense'' in subsection 110.6(1) of the Act is amended by striking out the word ``and'' at the end of paragraph (d), by adding the word ``and'' at the end of paragraph (e) and by adding the following after paragraph (e):

      (f) the amount, if any, by which the total of the individual's net capital losses for other taxation years deducted under paragraph 111(1)(b) in computing the individual's taxable income for the year exceeds the amount determined in respect of the individual for the year under paragraph (a) of the description of B in the definition ``annual gains limit'';

(4) The definition ``investment income'' in subsection 110.6(1) of the Act is amended by striking out the word ``and'' at the end of paragraph (d), by adding the word ``and'' at the end of paragraph (e) and by adding the following after paragraph (e):

      (f) the amount, if any, by which the total of all amounts included under paragraph 3(b) in respect of capital gains and capital losses in computing the individual's income for the year exceeds the amount determined in respect of the individual for the year for A in the definition ``annual gains limit'';

(5) The portion of subparagraph (a)(i) of the definition ``share of the capital stock of a family farm corporation'' in subsection 110.6(1) of the Act before clause (A) is replaced by the following:

        (i) property that was used by

(6) Subsection 110.6(1) of the Act is amended by adding the following in alphabetical order:

``eligible real property gain''
« gain ... »

``eligible real property gain'' of an individual for a taxation year from a disposition of a non-qualifying real property of the individual means the amount determined by the formula

A x B / C

    where

    A is the individual's capital gain for the year from the disposition,

    B is the number of calendar months in the period that begins with the later of the calendar month in which the property was last acquired by the individual and January 1972 and ends with February 1992, and

    C is the number of calendar months in the period that begins with the later of the calendar month in which the property was last acquired by the individual and January 1972 and ends with the calendar month in which the property was disposed of by the individual;

``eligible real property loss''
« perte ... »

``eligible real property loss'' of an individual for a taxation year from a disposition of a non-qualifying real property of the individual means the amount determined by the formula

A x B / C

    where

    A is the individual's capital loss for the year from the disposition,

    B is the number of calendar months in the period that begins with the later of the calendar month in which the property was last acquired by the individual and January 1972 and ends with February 1992, and

    C is the number of calendar months in the period that begins with the later of the calendar month in which the property was last acquired by the individual and January 1972 and ends with the calendar month in which the property was disposed of by the individual;

``non-qualifyi ng real property''
« immeuble ... »

``non-qualifying real property'' of an individual (other than a trust that is not a personal trust) means property disposed of after February 1992 by the individual, or a partnership any of the income of which is required to be included in computing the income of the individual, that at the time of its disposition (in this definition referred to as the ``determination time'') is

      (a) real property, other than

        (i) qualified farm property of the individual,

        (ii) real property owned by the individual or the individual's spouse that was used

          (A) throughout that part of the 24-month period preceding the determination time during which it was owned by the individual or the individual's spouse, or

          (B) throughout all or substantially all of the time in the period preceding the determination time during which it was owned by the individual or the individual's spouse,

        principally in an active business carried on by

          (C) the individual (otherwise than as a member of a partnership),

          (D) where the individual is a personal trust, a preferred beneficiary (within the meaning assigned by subsection 108(1)) under the trust (otherwise than as a member of a partnership),

          (E) a spouse, child or parent of the individual or of a preferred beneficiary described in clause (D) (otherwise than as a member of a partnership),

          (F) a corporation (otherwise than as a member of a partnership) where shares representing all or substantially all of the fair market value of all the issued and outstanding shares of its capital stock were owned by one or more persons described in this subparagraph,

          (G) one or more persons as members of a partnership where interests representing all or substantially all of the fair market value of all partnership interests in the partnership were owned by one or more persons described in this subparagraph, or

          (H) a personal trust (otherwise than as a member of a partnership) where interests representing all or substantially all of the fair market value of all beneficial interests in the trust were owned by one or more persons described in this subparagraph, and

        (iii) real property of the partnership (except where the individual is a specified member of the partnership or, if a taxable capital gain of the individual's spouse from the disposition of property of the partnership would be a taxable capital gain of the individual, the individual's spouse is a specified member of the partnership) that was used

          (A) throughout that part of the 24-month period preceding the determination time during which it was property of the partnership, the individual or the individual's spouse, or

          (B) throughout all or substantially all of the time in the period preceding the determination time during which it was property of the partnership, the individual or the individual's spouse,

        principally in an active business carried on by

          (C) the individual,

          (D) where the individual is a personal trust, a preferred beneficiary (within the meaning assigned by subsection 108(1)) under the trust,

          (E) a spouse, child or parent of the individual or of a preferred beneficiary described in clause (D),

          (F) a corporation where shares representing all or substantially all of the fair market value of all the issued and outstanding shares of its capital stock were owned by one or more persons described in this subparagraph, or

          (G) a personal trust where interests representing all or substantially all of the fair market value of all beneficial interests in the trust were owned by one or more persons described in this subparagraph,

      (b) a share of the capital stock of a corporation (other than a qualified small business corporation share of the individual or a share of the capital stock of a family farm corporation of the individual) the fair market value of which is derived principally from real property, other than real property that was used

        (i) throughout that part of the 24-month period preceding the determination time during which it was owned by the corporation or by persons described in any of clauses (a)(ii)(C) to (H), or

        (ii) throughout all or substantially all of the time in the period preceding the determination time during which it was owned by the corporation or by persons described in any of clauses (a)(ii)(C) to (H),

      principally in an active business carried on by the corporation or by persons described in any of clauses (a)(ii)(C) to (H),

      (c) an interest in a partnership (other than an interest in a family farm partnership of the individual) the fair market value of which is derived principally from real property, other than real property that was used

        (i) throughout that part of the 24-month period preceding the determination time during which it was property of the partnership or persons described in any of clauses (a)(ii)(C) to (H), or

        (ii) throughout all or substantially all of the time in the period preceding the determination time during which it was property of the partnership or persons described in any of clauses (a)(ii)(C) to (H),

      principally in an active business carried on by one or more persons as members of the partnership or by persons described in any of clauses (a)(ii)(C) to (H),

      (d) an interest in a trust the fair market value of which is derived principally from real property, other than real property that was used

        (i) throughout that part of the 24-month period preceding the determination time during which it was owned by the trust or persons described in any of clauses (a)(ii)(C) to (H), or

        (ii) throughout all or substantially all of the time in the period preceding the determination time during which it was owned by the trust or persons described in any of clauses (a)(ii)(C) to (H),

      principally in an active business carried on by the trust or by persons described in any of clauses (a)(ii)(C) to (H), or

      (e) an interest or an option in respect of property described in any of paragraphs (a) to (d),

    and, for the purpose of this definition, an ``active business'' carried on by a person at any time means any business carried on by the person at that time other than a business (other than a business carried on by a credit union or a business of leasing property that is not real property) the principal purpose of which is to derive income from property (including interest, dividends, rents or royalties), unless the person or, where the person carries on the business as a member of a partnership, the partnership

      (f) employs in the business at that time more than 5 individuals on a full-time basis, or

      (g) in the course of carrying on the business has managerial, administrative, financial, maintenance or other similar services provided to it at that time and the person or partnership could reasonably be expected to require more than 5 full-time employees if those services had not been so provided;

(7) Section 110.6 of the Act is amended by adding the following after subsection (1):

Idem

(1.1) For the purposes of the definitions ``qualified small business corporation share'' and ``share of the capital stock of a family farm corporation'' in subsection (1), the fair market value of a net income stabilization account shall be deemed to be nil.

(8) Clause 110.6(2)(a)(iii)(A) of the Act is replaced by the following:

        (A) all amounts deducted under this section in computing the individual's taxable income for a taxation year ending before 1990 (other than amounts deducted under this section for a taxation year in respect of an amount that was included in computing the individual's income for that year because of subparagraph 14(1)(a)(v)), and

(9) Clause 110.6(3)(a)(iii)(A) of the Act is replaced by the following:

        (A) all amounts deducted under this subsection in computing the individual's taxable income for a taxation year ending before 1990 (other than amounts deducted under this subsection for a taxation year in respect of an amount that was included in computing the individual's income for that year because of subparagraph 14(1)(a)(v)), and

(10) The portion of subsection 110.6(12) of the Act before paragraph (a) is replaced by the following:

Spousal trust deduction

(12) Notwithstanding any other provision of this Act, a trust described in paragraph 104(4)(a) or (a.1) (other than a trust that elected under subsection 104(5.3)) may, in computing its taxable income for its taxation year that includes the day determined under paragraph 104(4)(a) or (a.1), as the case may be, in respect of the trust, deduct under this section an amount equal to the least of

(11) The portion of paragraph 110.6(12)(b) of the Act before clause (i)(B) is replaced by the following:

    (b) the total of

      (i) the least of

        (A) the amount, if any, determined under paragraph 3(b) in respect of the trust for that year in respect of capital gains and capital losses,

        (A.1) the amount, if any, that would be determined under paragraph 3(b) in respect of the trust for that year in respect of capital gains and capital losses if

          (I) the only properties referred to in that paragraph were properties disposed of by it after 1984, other than properties referred to in subparagraph (ii), and

          (II) the trust's capital gains and capital losses for that year from dispositions of non-qualifying real property of the trust were equal to its eligible real property gains and eligible real property losses, respectively, for that year from those dispositions, and

(12) Section 110.6 of the Act is amended by adding the following after subsection (16):

Order of deduction

(17) For the purposes of clauses (2)(a)(iii)(A) and (3)(a)(iii)(A), amounts deducted by an individual under this section in computing the individual's taxable income for a taxation year ending before 1990 shall be deemed to have first been deducted in respect of any amounts that were included in computing the individual's income for that year because of paragraph 14(1)(a)(v) before being deducted in respect of any other amounts that were included in computing the individual's income for that year.

Eligible real property gains and losses

(18) For the purposes of the definitions ``eligible real property gain'' and ``eligible real property loss'' in subsection (1),

    (a) an individual shall be deemed to have disposed of identical properties in the order in which they were acquired;

    (b) where paragraph 74.2(2)(b) applies for the purposes of this section to deem a property disposed of by another person to have been disposed of by an individual in a taxation year, the individual shall be deemed to have last acquired that property at the time at which the other person last acquired it and to have disposed of it at the time at which the other person disposed of it;

    (c) where an individual is deemed by subsection 70(6), (9), (9.1), (9.2) or (9.3), 73(1), (3) or (4), 98(3) or (5) or 107(2) to have acquired property for an amount that is not greater than the adjusted cost base to the person or partnership from whom it was acquired, the individual shall be deemed to have acquired the property at the time it was last acquired by the person or partnership;

    (d) the number of calendar months in a period shall be determined without reference to any such month that is in a taxation year of the individual or the individual's spouse for which the property in respect of which the eligible real property gain or eligible real property loss is computed was a principal residence (within the meaning assigned by section 54) of the individual or the individual's spouse; and

    (e) where the eligible real property gain or eligible real property loss of an individual is computed in respect of a gain or loss from a disposition of property by a partnership, the individual shall be deemed to have last acquired the property at the time it was last acquired by the partnership and to have disposed of the property at the time it was disposed of by the partnership except that, where the individual had disposed of that property to the partnership and an election had been filed under subsection 97(2) in respect of that disposition, the individual shall be deemed to have last acquired the property at the time it was last acquired by the individual before that disposition if the amount agreed on in that election in respect of the property was not greater than the adjusted cost base to the individual of the property at the time of that disposition.

(13) Subsection (1) applies to the 1988 and subsequent taxation years except that, in its application to the 1988 to 1991 taxation years, paragraph (b) of the description of A in the definition ``annual gains limit'' in subsection 110.6(1) of the Act, as enacted by subsection (1), shall be read as follows:

      (b) the amount that would be determined under paragraph 3(b) in respect of the individual for the year in respect of capital gains and capital losses if the only properties referred to in paragraph 3(b) were properties disposed of by the individual after 1984

(14) Subsections (2) to (6) and (11) and subsection 110.6(18) of the Act, as enacted by subsection (12), apply to the 1992 and subsequent taxation years.

(15) Subsection (7) applies to the 1991 and subsequent taxation years.

(16) Subsections (8) and (9) and subsection 110.6(17) of the Act, as enacted by subsection (12), apply to the 1990 and subsequent taxation years.

(17) Subsection (10) applies to the 1993 and subsequent taxation years.

48. (1) Paragraph 110.7(1)(a) of the Act is amended by striking out the word ``and'' at the end of subparagraph (i) and by adding the following after subparagraph (ii):

      (iii) neither the taxpayer nor a member of the taxpayer's household is at any time entitled to a reimbursement or any form of assistance (other than a reimbursement or assistance included in computing the income of the taxpayer or the member) in respect of travel expenses to which subparagraph (ii) applies; and

(2) Subsection (1) applies to the 1992 and subsequent taxation years.

49. (1) The description of E in the definition ``non-capital loss'' in subsection 111(8) of the Act is replaced by the following:

    E is the total of all amounts each of which is the taxpayer's loss for the year from an office, employment, business or property, the taxpayer's allowable business investment loss for the year, an amount deducted under paragraph (1)(b) or section 110.6 in computing the taxpayer's taxable income for the year or an amount that may be deducted under paragraph 110(1)(d), (d.1), (d.2), (d.3), (f), (j) or (k), section 112 or subsection 113(1) or 138(6) in computing the taxpayer's taxable income for the year, and

(2) The portion of subsection 111(9) of the Act after paragraph (b) is replaced by the following:

    the taxpayer had no income other than income described in subparagraphs 115(1)(a)(i) to (vi), the taxpayer's only taxable capital gains and allowable capital losses were taxable capital gains and allowable capital losses from the disposition of taxable Canadian property and the taxpayer's only losses were allowable business investment losses and losses from duties of an office or employment performed by the taxpayer in Canada and businesses carried on by the taxpayer in Canada.

(3) Subsection (1) applies to the 1991 and subsequent taxation years.

(4) Subsection (2) applies to the 1991 and subsequent taxation years and with respect to the computation of taxable income and taxable income earned in Canada for those years.

50. (1) Paragraph 115(1)(c) of the Act is replaced by the following:

    (c) the only losses for the year referred to in paragraph 3(d) were losses from duties of an office or employment performed by the person in Canada and businesses carried on by the person in Canada and allowable business investment losses in respect of property any gain from the disposition of which would, because of this subsection, be included in computing the person's taxable income earned in Canada,

(2) Subsection (1) applies to the 1991 and subsequent taxation years.

51. (1) Section 115.1 of the Act is replaced by the following:

Competent authority agreements

115.1 (1) Notwithstanding any other provision of this Act, where the Minister and another person have, under a provision contained in a tax convention or agreement with another country that has the force of law in Canada, entered into an agreement with respect to the taxation of the other person, all determinations made in accordance with the terms and conditions of the agreement shall be deemed to be in accordance with this Act.

Transfer of rights and obligations

(2) Where rights and obligations under an agreement described in subsection (1) have been transferred to another person with the concurrence of the Minister, that other person shall be deemed, for the purpose of subsection (1), to have entered into the agreement with the Minister.

(2) Subsection (1) applies after 1984.

52. (1) Subsection 118(3) of the Act is replaced by the following:

Pension credit

(3) For the purpose of computing the tax payable under this Part by an individual for a taxation year, there may be deducted an amount determined by the formula

A x B

where

A is the appropriate percentage for the year; and

B is the lesser of $1,000 and

      (a) where the individual has attained the age of 65 years before the end of the year, the pension income received by the individual in the year, and

      (b) where the individual has not attained the age of 65 years before the end of the year, the qualified pension income received by the individual in the year.

(2) Paragraph (b) of the definition ``qualified pension income'' in subsection 118(7) of the Act is replaced by the following:

      (b) any of subparagraphs (a)(ii) to (vi) or paragraph (b) of the definition ``pension income'' in this subsection received by the individual as a consequence of the death of a spouse of the individual.

(3) Subsection (1) applies to the 1992 and subsequent taxation years.

(4) Subsection (2) applies after 1992.

53. (1) The portion of subsection 118.1(6) of the Act after paragraph (b) is replaced by the following:

and the fair market value of the property at that time exceeds its adjusted cost base to the individual, such amount, not greater than the fair market value and not less than the adjusted cost base to the individual of the property at that time, as the individual or the individual's legal representative designates in the individual's return of income under section 150 for the year in which the gift is made shall, if the making of the gift is proven by filing with the Minister a receipt containing prescribed information, be deemed to be the individual's proceeds of disposition of the property and, for the purposes of subsection (1), the fair market value of the gift made by the individual.

(2) Subsection (1) applies to gifts made after December 11, 1988.

54. (1) Subsection 118.2(2) of the Act is amended by adding the following after paragraph (l.2):

    (l.3) for reasonable expenses relating to rehabilitative therapy, including training in lip reading and sign language, incurred to adjust for the patient's hearing or speech loss;

(2) Paragraph 118.2(3)(b) of the Act is replaced by the following:

    (b) there shall not be included as a medical expense of an individual any expense for which the individual, the person referred to in subsection (2) as the patient or the legal representative of either of them has been or is entitled to be reimbursed, except to the extent that the amount thereof is required to be included in computing income under this Part and cannot be deducted in computing taxable income.

(3) Subsections (1) and (2) apply to the 1992 and subsequent taxation years.

55. (1) Paragraph 118.3(2)(b) of the Act is replaced by the following:

    (b) no amount in respect of remuneration for an attendant, or care in a nursing home, because of that person's mental or physical impairment, is included in calculating a deduction under section 118.2 (otherwise than under paragraph 118.2(2)(b.1)) for the year by the individual or by any other person,

(2) Subsection (1) applies to the 1991 and subsequent years.

56. (1) The portion of paragraph 118.5(1)(a) of the Act after subparagraph (ii) and before subparagraph (iii) is replaced by the following:

    an amount equal to the product obtained when the appropriate percentage for the year is multiplied by the amount of any fees for the individual's tuition paid in respect of the year to the educational institution if the total of those fees exceeds $100, except to the extent that those fees

      (ii.1) are paid to an educational institution described in subparagraph (i) in respect of courses that are not at the post-secondary school level,

      (ii.2) are paid to an educational institution described in subparagraph (ii) if

        (A) the individual had not attained the age of 16 years before the end of the year, or

        (B) the purpose of the individual's enrolment at the institution cannot reasonably be regarded as being to provide the individual with skills, or to improve the individual's skills, in an occupation,

(2) Subsection (1) applies to the 1992 and subsequent taxation years.

57. (1) The formula in subsection 118.6(2) of the Act is replaced by the following:

A x $80 x B

(2) Section 118.6 of the Act is amended by adding the following after subsection (2):

Application of s. (2) to disabled individuals

(3) In calculating the amount deductible under subsection (2) in computing the tax payable under this Part for a taxation year by an individual

    (a) in respect of whom an amount may be deducted under section 118.3 for the year, or

    (b) who has in the year a mental or physical impairment, if a medical doctor or, where the impairment is an impairment of sight, a medical doctor or an optometrist, has certified in writing that the effects of the impairment on the individual are such that the individual cannot reasonably be expected to be enrolled as a full-time student while so impaired,

the reference in that subsection to ``full-time student'' shall be read as ``student''.

(3) Subsections (1) and (2) apply to the 1992 and subsequent taxation years.

58. (1) The description of A in section 118.8 of the Act is replaced by the following:

A is the lesser of $680 and the total of all amounts that the individual's spouse may deduct under section 118.5 or 118.6 for the year;

(2) Subsection (1) applies to the 1992 and subsequent taxation years.

59. (1) The description of A in subsection 118.9(1) of the Act is replaced by the following:

A is the lesser of $680 and the total of all amounts that the individual may deduct under section 118.5 or 118.6 for the year; and

(2) Subsection (1) applies to the 1992 and subsequent taxation years.

60. (1) The definition ``adjusted income'' in subsection 122.5(1) of the Act is amended by adding the word ``or'' at the end of paragraph (a), by striking out the word ``or'' at the end of paragraph (b) and by repealing paragraph (c).

(2) The definition ``qualified relation'' in subsection 122.5(1) of the Act is replaced by the following:

``qualified relation''
« proche ... »

``qualified relation'' of an individual for a taxation year means the person who, at the end of the year, is the individual's cohabiting spouse (within the meaning assigned by section 122.6).

(3) Paragraph 122.5(5)(b) of the Act is replaced by the following:

    (b) where the total of all amounts, deemed under that subsection to be paid by an individual for a taxation year during months specified for the year, is less than $100, the total shall be deemed to be paid by the individual during the first month specified for the year, and no other amount shall be deemed to be paid under that subsection by the individual for the year; and

(4) Paragraph 122.5(5)(c) of the Act is replaced by the following:

    (c) no amount shall be deemed to be paid under that subsection by an individual for a taxation year during a month specified for that year where the individual died before that month or was not resident in Canada at the beginning of that month.

(5) Subsection 122.5(6) of the Act is replaced by the following:

Qualified relation of a deceased individual

(6) Notwithstanding paragraph (5)(c), on application made in prescribed form containing prescribed information within 60 days after a person's death (or within such longer period as the Minister considers reasonable in the circumstances) by an individual who

    (a) is the deceased person's qualified relation for the taxation year in respect of which a payment under this section would, but for that paragraph, be made, and

    (b) is not an individual to whom that paragraph applies,

each amount that, but for that paragraph, would be deemed to be paid under subsection (3) by the deceased person during a month specified for a taxation year shall be deemed to be paid during the month on account of the individual's tax payable under this Part for that year.

(6) Subsections (1) and (2) apply to the 1992 and subsequent taxation years except that, in its application to the 1992 taxation year, the definition ``qualified relation'' in subsection 122.5(1) of the Act, as enacted by subsection (2), shall be read as follows:

``qualified relation'' of an individual for a taxation year means the person who, at the beginning of the 1993 calendar year, is the individual's cohabiting spouse (within the meaning assigned by section 122.6).

(7) Subsections (4) and (5) apply to the 1989 and subsequent taxation years.

61. (1) Paragraph 123.2(a) of the Act is replaced by the following:

    (a) the tax payable under this Part by the corporation for the year determined without reference to this section, sections 125 to 126 and subsections 127(3) and (5) and 137(3) and as if subsection 124(1) did not contain the words ``in a province'' therein

(2) Subsection (1) applies to the 1992 and subsequent taxation years except that, in its application to a corporation's taxation year beginning before 1992, there shall be deducted from the amount determined under paragraph 123.2(a) of the Act, as enacted by subsection (1), in respect of the corporation for the year an amount equal to that proportion of the amount determined under subsection 137(3) of the Act in respect of the corporation for the year that the number of days in the year that are before 1992 is of the number of days in the year.

62. (1) Subsection 124(3) of the Act is replaced by the following:

Crown agents

(3) Notwithstanding subsection (1), no deduction may be made under this section from the tax otherwise payable under this Part for a taxation year by a corporation in respect of any taxable income of the corporation for the year that is not, because of an Act of Parliament, subject to tax under this Part or by a prescribed federal Crown corporation that is an agent of Her Majesty.

(2) Subsection (1) applies to the 1992 and subsequent taxation years.

63. (1) Paragraph 125(1)(b) of the Act is amended by striking out the word ``and'' at the end of subparagraph (i) and by adding the following after subparagraph (ii):

      (iii) the amount, if any, of the corporation's taxable income for the year that is not, because of an Act of Parliament, subject to tax under this Part, and

(2) Paragraph 125(5)(a) of the Act is replaced by the following:

    (a) where a Canadian-controlled private corporation (in this paragraph referred to as the ``first corporation'') has more than one taxation year ending in the same calendar year and it is associated in 2 or more of those taxation years with another Canadian-controlled private corporation that has a taxation year ending in that calendar year, the business limit of the first corporation for each taxation year ending in the calendar year in which it is associated with the other corporation that ends after the first such taxation year ending in that calendar year is, subject to the application of paragraph (b), an amount equal to the lesser of

      (i) its business limit determined under subsection (3) or (4) for the first such taxation year ending in the calendar year, and

      (ii) its business limit determined under subsection (3) or (4) for the particular taxation year ending in the calendar year ; and

(3) The definition ``income of the corporation for the year from an active business'' in subsection 125(7) of the Act is replaced by the following:

``income of the corporation for the year from an active business''
« revenu de la ... »

``income of the corporation for the year from an active business'' means the total of

      (a) the corporation's income for the year from an active business carried on by it including any income for the year pertaining to or incident to that business, other than income for the year from a source in Canada that is a property (within the meaning assigned by subsection 129(4.1)), and

      (b) the amount, if any, included under subsection 12(10.2) in computing the corporation's income for the year;

(4) Subsection (1) applies to the 1992 and subsequent taxation years.

(5) Subsection (2) applies to taxation years ending after December 20, 1991.

(6) Subsection (3) applies to the 1991 and subsequent taxation years.

64. (1) The portion of subsection 125.1(1) of the Act before paragraph (a) is replaced by the following:

Manufacturin g and processing profits deductions

125.1 (1) There may be deducted from the tax otherwise payable under this Part by a corporation for a taxation year an amount equal to 7% of the lesser of

(2) Subsection (1) applies to the 1993 and subsequent taxation years except that, in its application to taxation years beginning before 1994, the reference in subsection 125.1(1) of the Act, as amended by subsection (1), to ``7%'' shall be read as a reference to the total of

    (a) the proportion of 5% that the number of days in the year that are before 1993 is of the number of days in the year,

    (b) the proportion of 6% that the number of days in the year that are in 1993 is of the number of days in the year, and

    (c) the proportion of 7% that the number of days in the year that are after 1993 is of the number of days in the year.

65. (1) Subsection 125.2(1) of the Act is replaced by the following:

Deduction of Part VI tax

125.2 (1) There may be deducted in computing the tax payable under this Part for a taxation year by a corporation that was throughout the year a financial institution (within the meaning assigned by section 190) an amount equal to such part as the corporation claims of its unused Part VI tax credits for any of its 7 immediately preceding taxation years ending before 1992, to the extent that that amount does not exceed the amount, if any, by which

    (a) its tax payable under this Part (determined without reference to this section) for the year

exceeds the total of

    (b) the amount that would, but for subsection 190.1(3), be its tax payable under Part VI for the year, and

    (c) the lesser of its Canadian surtax payable (within the meaning assigned by subsection 125.3(4)) for the year and the amount that would, but for subsection 181.1(4), be its tax payable under Part I.3 for the year.

(2) Subsection 125.2(3) of the Act is replaced by the following:

Definition of ``unused Part VI tax credit''

(3) For the purposes of this section, ``unused Part VI tax credit'' of a corporation for a taxation year ending after 1991 means the amount determined by the formula

A - B

where

A is the corporation's tax payable under Part VI for the year (determined without reference to subsection 190.1(3)), and

B is the amount, if any, by which

      (a) the amount that would, but for this section, be its tax payable under this Part for the year

    exceeds

      (b) the lesser of its Canadian surtax payable (within the meaning assigned by subsection 125.3(4)) and the amount that would, but for subsection 181.1(4), be its tax payable under Part I.3 for the year.

(3) Subsection (1) applies to the 1992 and subsequent taxation years and, where a corporation elected under subsection 111(2) of this Act to have subsection 111(1) of this Act apply to its taxation years ending in 1991, to all such years except that, in its application to such years, subsection 125.2(1) of the Income Tax Act, as enacted by subsection (1), shall be read without reference to

    (a) the expression ``the total of'',

    (b) the word ``and'' at the end of paragraph 125.2(1)(b), and

    (c) paragraph 125.2(1)(c),

and the reference therein to ``1992'' shall be read as ``1991''.

(4) Subsection (2) applies for the purpose of computing the amount that may be deducted by a corporation under subsection 125.2(1) of the Act

    (a) subject to paragraph (b), for taxation years ending before 1992 in respect of unused Part VI tax credits for taxation years ending after 1991; or

    (b) where the corporation elected under subsection 111(2) of this Act to have subsection 111(1) of this Act apply to its taxation years ending in 1991, for its taxation years ending before 1991 in respect of unused Part VI tax credits for taxation years ending after 1990, except that, for the purpose of computing its unused Part VI tax credits under subsection 125.2(3) of the Income Tax Act, as enacted by subsection (2), for taxation years ending in 1991, the amount determined under paragraph (b) in the description of B in the said subsection 125.2(3) shall be deemed to be nil.

66. (1) Subsection 125.3(1) of the Act is replaced by the following:

Deduction of Part I.3 tax

125.3 (1) There may be deducted in computing the tax payable under this Part for a taxation year by a corporation (other than a corporation that was throughout the year a financial institution, within the meaning assigned by section 190) an amount equal to such part as the corporation claims of its unused Part I.3 tax credits for any of its 7 immediately preceding taxation years ending before 1992, to the extent that that amount does not exceed the amount, if any, by which

    (a) its Canadian surtax payable for the year

exceeds

    (b) the amount that would, but for subsection 181.1(4), be its tax payable under Part I.3 for the year.

Idem

(1.1) There may be deducted in computing the tax payable under this Part for a taxation year by a corporation that was a financial institution (within the meaning assigned by section 190) throughout the year an amount equal to such part as the corporation claims of its unused Part I.3 tax credits for any of its 7 immediately preceding taxation years ending before 1992, to the extent that that amount does not exceed the lesser of

    (a) the amount, if any, by which its Canadian surtax payable for the year exceeds the amount that would, but for subsection 181.1(4), be its tax payable under Part I.3 for the year, and

    (b) the amount, if any, by which its tax payable under this Part (determined without reference to this section and section 125.2) for the year exceeds the amount that would, but for subsections 181.1(4) and 190.1(3), be the total of its taxes payable under Parts I.3 and VI for the year.

(2) The definition ``unused Part I.3 tax credit'' in subsection 125.3(4) of the Act is replaced by the following:

``unused Part I.3 tax credit''
« crédit ... »

``unused Part I.3 tax credit'' of a corporation for a taxation year means

      (a) where the year ended before 1992, the amount, if any, by which its tax payable under Part I.3 for the year exceeds the amount deductible under subsection (1) in computing its tax payable under this Part for the year, and

      (b) where the year ends after 1991, the amount, if any, by which the corporation's tax payable under Part I.3 for the year (determined without reference to subsection 181.1(4)) exceeds its Canadian surtax payable under this Part for the year.

(3) Subsection (1) applies to the 1992 and subsequent taxation years.

(4) Subsection (2) applies for the purpose of computing the amount that may be deducted under subsection 125.3(1) of the Act for taxation years ending after June 1989.

67. (1) The portion of paragraph 126(3)(a) of the Act after subparagraph (ii) is replaced by the following:

    from employment with an international organization (other than a prescribed international organization), as defined for the purposes of section 2 of the Foreign Missions and International Organizations Act

(2) The portion of subsection 126(3) of the Act after subparagraph (b)(ii) and before paragraph (c) is replaced by the following:

    exceeds

      (iii) the total of all amounts each of which is an amount deducted under section 110.6 or paragraph 111(1)(b), or deductible under paragraph 110(1)(d), (d.1), (d.2), (d.3), (f) or (j), in computing the individual's taxable income for the year or in respect of the period or periods referred to in subparagraph (ii), as the case may be,

except that the amount deductible under this subsection in computing the individual's tax payable under this Part for the year may not exceed that proportion of the total of all amounts each of which is an amount paid by the individual to the organization as a levy (the proceeds of which are used to defray expenses of the organization), computed by reference to the remuneration received by the individual in the year from the organization in a manner similar to the manner in which income tax is computed, that

(3) Subsections (1) and (2) apply to the 1991 and subsequent taxation years.

68. (1) The portion of subsection 127(1) of the Act after paragraph (b) is replaced by the following:

except that in no case shall the total of amounts in respect of all provinces that would otherwise be deductible under this subsection from the tax otherwise payable under this Part for the year by the taxpayer exceed 6 2/3% of the amount that would be the taxpayer's taxable income for the year or taxable income earned in Canada for the year, as the case may be, if this Part were read without reference to paragraphs 60(b), (c) to (c.2), (i) and (v) and sections 62, 63 and 64.

(2) The definition ``contract payment'' in subsection 127(9) of the Act is replaced by the following:

``contract payment''
« paiement ... »

``contract payment'' means

      (a) an amount payable for scientific research and experimental development to the extent that it can reasonably be considered to have been performed for, or on behalf of, a person entitled to a deduction in respect of the amount because of subparagraph 37(1)(a)(i) or clause 37(1)(a)(ii)(D), or

      (b) an amount, other than a prescribed amount, payable by a Canadian government or municipality or other Canadian public authority or by a person exempt, because of section 149, from tax under this Part on all or part of the person's taxable income for scientific research and experimental development to be performed for it or on its behalf;

(3) Section 127 of the Act is amended by adding the following after subsection (10.7):

Idem

(10.8) For the purposes of paragraph (e.1) of the definition ``investment tax credit'' in subsection (9), subsection (10.7) and paragraph 37(1)(c), where an amount of assistance that

    (a) was applied in reduction of

      (i) the capital cost to a taxpayer of a property, because of paragraph (11.1)(b), or

      (ii) the amount of a qualified expenditure made by a taxpayer, because of paragraph (11.1)(c),

    (b) was not received by the taxpayer, and

    (c) ceased in a taxation year to be an amount that the taxpayer can reasonably be expected to receive,

that amount shall be deemed to be an amount of assistance repaid by the taxpayer in the year.

(4) Subsections (1) and (3) apply to the 1991 and subsequent taxation years.

(5) Subsection (2) applies to amounts that become payable after December 20, 1991.

69. (1) Subsection 127.4(2) of the Act is replaced by the following:

Deduction of labour-sponso red funds tax credit

(2) There may be deducted from the tax otherwise payable by an individual (other than a trust) for a taxation year the lesser of $1,000 and the individual's labour-sponsored funds tax credit for the year.

(2) Subsection (1) applies to the 1992 and subsequent taxation years.

70. (1) Paragraph 127.52(1)(d) of the Act is replaced by the following:

    (d) except in respect of dispositions of property occurring before 1986 or to which section 79 applies,

      (i) sections 38 and 41 were read without the references therein to ``3/4 of'', and

      (ii) each amount deemed by subsection 104(21) to be a taxable capital gain for the year of the individual were equal to 4/3 of that amount;

(2) Subsection (1) applies to the 1991 and subsequent taxation years.

71. (1) Paragraph 127.55(e) of the Act is replaced by the following:

    (e) a trust described in paragraph 104(4)(a) or (a.1) for its taxation year that includes the day determined in respect of the trust under that paragraph.

(2) Subsection (1) applies to the 1993 and subsequent taxation years.

72. (1) Paragraph 128(2)(d) of the Act is replaced by the following:

    (d) except for the purposes of subsections 146(1) and 146.01(4) and (9) and Part X.1, a taxation year of the individual shall be deemed to have begun on the day in the calendar year on which the individual became a bankrupt and the individual's taxation year that would otherwise have ended on the last day of that calendar year shall be deemed to have ended on the day immediately before the day the individual became a bankrupt;

(2) Subsection (1) applies to the 1992 and subsequent taxation years.

73. (1) The portion of subsection 129(1) of the Act before subparagraph (a)(ii) is replaced by the following:

Dividend refund to private corporation

129. (1) Where a return of a corporation's income under this Part for a taxation year is made within 3 years after the end of the year, the Minister

    (a) may, on mailing the notice of assessment for the year, refund without application therefor an amount (in this Act referred to as its ``dividend refund'' for the year) equal to the lesser of

      (i) 1/4 of all taxable dividends paid by the corporation in the year and at a time when it was a private corporation on shares of its capital stock, and

(2) Section 129 of the Act is amended by adding the following after subsection (2):

Interest on dividend refund

(2.1) Where a dividend refund for a taxation year is paid to, or applied to a liability of, a corporation, the Minister shall pay or apply interest on the refund at the prescribed rate for the period beginning on the day that is the later of

    (a) the day that is 120 days after the end of the year, and

    (b) the day on which the corporation's return of income under this Part for the year was filed under section 150, unless the return was filed on or before the day on or before which it was required to be filed,

and ending on the day on which the refund is paid or applied.

Excess interest on dividend refund

(2.2) Where, at any particular time, interest has been paid to, or applied to a liability of, a corporation under subsection (2.1) in respect of a dividend refund and it is determined at a subsequent time that the dividend refund was less than that in respect of which interest was so paid or applied,

    (a) the amount by which the interest that was so paid or applied exceeds the interest, if any, computed in respect of the amount that is determined at the subsequent time to be the dividend refund shall be deemed to be an amount (in this subsection referred to as the ``amount payable'') that became payable under this Part by the corporation at the particular time;

    (b) the corporation shall pay to the Receiver General interest at the prescribed rate on the amount payable, computed from the particular time to the day of payment; and

    (c) the Minister may at any time assess the corporation in respect of the amount payable and, where the Minister makes such an assessment, the provisions of Divisions I and J apply, with such modifications as the circumstances require, in respect of the assessment as though it had been made under section 152.

(3) The portion of subsection 129(3) of the Act before paragraph (a) is replaced by the following:

Definition of ``refundable dividend tax on hand''

(3) In this section, ``refundable dividend tax on hand'' of a corporation at the end of any particular taxation year means the amount, if any, by which the total of

(4) The description of B in the definition ``Canadian investment income'' in subsection 129(4) of the Act is replaced by the following:

    B is the total of all amounts each of which is the corporation's income for the year from a source in Canada that is property (other than exempt income, an amount included under subsection 12(10.2) in the corporation's income for the year, any dividend the amount of which was deductible in computing its taxable income for the year or income that, but for paragraph 108(5)(a), would not be income from a property), determined after deducting all outlays and expenses deductible in computing the corporation's income for the year to the extent that they can reasonably be regarded as having been made or incurred for the purpose of earning income from that property, and

(5) Subsection (1) applies to the 1993 and subsequent taxation years except that, in its application to taxation years beginning before 1993 and ending after 1992, subparagraph 129(1)(a)(i) of the Act, as enacted by subsection (1), shall be read as follows:

      (i) the total of

        (A) 1/4 of all taxable dividends paid by the corporation on shares of its capital stock in the year and before 1993, where the corporation was a private corporation at the end of the year, and

        (B) 1/4 of all taxable dividends paid by the corporation on shares of its capital stock in the year and at a time after 1992 when it was a private corporation, and

(6) Subsection (2) applies to dividend refunds paid or applied with respect to taxation years beginning after 1991.

(7) Subsection (3) applies to the 1993 and subsequent taxation years.

(8) Subsection (4) applies to the 1991 and subsequent taxation years.

74. (1) The portion of subsection 130(2) of the Act before paragraph (a) is replaced by the following:

Application of ss. 131(1) to (3.2)

(2) Where a corporation was throughout a taxation year an investment corporation (other than a mutual fund corporation), subsections 131(1) to (3.2) apply in respect of the corporation for the year

(2) Subsection (1) applies to capital gains refunds paid or applied with respect to taxation years beginning after 1991.

75. (1) Subsection 130.1(4) of the Act is replaced by the following:

Electing capital gains dividend

(4) Where at any particular time during the period beginning 91 days after the beginning of a taxation year of a corporation that was, throughout the year, a mortgage investment corporation and ending 90 days after the end of the year, a dividend is paid by the corporation to shareholders of the corporation,

    (a) if the corporation so elects in respect of the full amount of the dividend, in prescribed form and manner and at or before the earlier of the particular time and the first day on which any part of the dividend was paid,

      (i) the dividend shall be deemed to be a capital gains dividend to the extent that it does not exceed the amount, if any, by which

        (A) 4/3 of the corporation's qualifying taxed capital gains for the year

      exceeds

        (B) the total of all dividends, and parts of dividends, paid by the corporation during the period and before the particular time that are deemed by this subparagraph to be capital gains dividends,

      (ii) notwithstanding any other provision of this Act, any amount received by a taxpayer in a taxation year as or on account of the dividend shall not be included in computing the taxpayer's income for the year as income from a share of the capital stock of the corporation, but shall be deemed to be a capital gain of the taxpayer for the year from a disposition of capital property and, for the purposes of section 110.6, that property shall be deemed to have been disposed of by the taxpayer in the year, and

      (iii) any election under paragraph (b) made by the corporation in respect of the dividend shall be deemed not to have been made; and

    (b) if the corporation so elects in respect of the full amount of the dividend, in prescribed form and manner and at or before the earlier of the particular time and the first day on which any part of the dividend was paid,

      (i) the dividend shall be deemed to be a capital gains dividend to the extent that it does not exceed the amount, if any, by which

        (A) 4/3 of the corporation's non-qualifying taxed capital gains for the year

      exceeds

        (B) the total of all dividends, and parts of dividends, paid by the corporation during the period and before the particular time that are deemed by this subparagraph to be capital gains dividends, and

      (ii) notwithstanding any other provision of this Act, any amount received by a taxpayer in a taxation year as or on account of the dividend shall not be included in computing the taxpayer's income for the year as income from a share of the capital stock of the corporation, but shall be deemed to be a capital gain of the taxpayer for the year from a disposition of capital property and, for the purposes of section 110.6,

        (A) that property shall be deemed to have been non-qualifying real property of the taxpayer, within the meaning of that section, disposed of by the taxpayer in the year, and

        (B) the taxpayer's eligible real property gain for the year, within the meaning of that section, from the disposition of that property shall be deemed to be nil.

(2) The definition ``taxed capital gains'' in subsection 130.1(9) of the Act is repealed.

(2.1) Subsection 130.1(9) of the Act is amended by adding the following in alphabetical order:

``non-qualifyi ng real property''
« immeuble ... »

``non-qualifying real property'' of a corporation has the meaning assigned by subsection 131(6);

``non-qualifyi ng taxed capital gains''
« gains en capital imposés non-admissibl es »

``non-qualifying taxed capital gains'' of a mortgage investment corporation for a taxation year means the amount, if any, by which

      (a) the amount by which its taxable capital gains for the year from dispositions of its non-qualifying real property exceeds the amounts determined under paragraph (b) of the definition ``qualifying taxed capital gains'' in respect of those dispositions

    exceeds the total of

      (b) the amount by which its allowable capital losses for the year from dispositions of its non-qualifying real property exceeds the amounts determined under paragraph (d) of the definition ``qualifying taxed capital gains'' in respect of those dispositions,

      (c) the amount, if any, deducted under paragraph 111(1)(b) in computing its taxable income for the year, and

      (d) the amount, if any, by which the total of the amounts, if any, determined under paragraphs (c) and (d) of the definition ``qualifying taxed capital gains'' in respect of the corporation for the year exceeds the total of the amounts, if any, determined under paragraphs (a) and (b) of that definition in respect of the corporation for the year;

``qualifying taxed capital gains''
« gains en capital imposés admissibles »

``qualifying taxed capital gains'' of a mortgage investment corporation for a taxation year means the amount, if any, by which the total of

      (a) its taxable capital gains for the year from dispositions of property, other than its non-qualifying real property, and

      (b) all amounts each of which is an amount determined by the formula

A x B / C

      where

      A is its taxable capital gain for the year from the disposition of a non-qualifying real property of the corporation,

      B is the number of calendar months in the period that begins with the later of the calendar month in which the property was last acquired by it and January 1972 and ends with February 1992, and

      C is the number of calendar months in the period that begins with the later of the calendar month in which the property was last acquired by it and January 1972 and ends with the calendar month in which the property was disposed of

    exceeds the total of

      (c) its allowable capital losses for the year from dispositions of property, other than its non-qualifying real property,

      (d) all amounts each of which is an amount determined by the formula

D x E / F

      where

      D is its allowable capital loss for the year from the disposition of a non-qualifying real property of the corporation,

      E is the number of calendar months in the period that begins with the later of the calendar month in which the property was last acquired by it and January 1972 and ends with February 1992, and

      F is the number of calendar months in the period that begins with the later of the calendar month in which the property was last acquired by it and January 1972 and ends with the calendar month in which the property was disposed of, and

      (e) the amount, if any, by which the total of the amounts determined under paragraphs (b) and (c) of the definition ``non-qualifying taxed capital gains'' in respect of the corporation for the year exceeds the amount, if any, determined under paragraph (a) of that definition in respect of the corporation for the year;

(3) Subsections (1) to (2.1) apply to the 1992 and subsequent taxation years.

76. (1) Subsection 131(1) of the Act is replaced by the following:

Election re capital gains dividend

131. (1) Where at any particular time a dividend became payable, by a corporation that was throughout the taxation year in which the dividend became payable a mutual fund corporation, to shareholders of any class of shares of its capital stock,

    (a) if the corporation so elects in respect of the full amount of the dividend, in prescribed form and manner and at or before the earlier of the particular time and the first day on which any part of the dividend was paid,

      (i) the dividend shall be deemed to be a capital gains dividend payable out of the corporation's capital gains dividend account to the extent that it does not exceed the corporation's capital gains dividend account at the particular time,

      (ii) notwithstanding any other provision of this Act, any amount received by a taxpayer in a taxation year as, on account of, in lieu of payment of or in satisfaction of, the dividend shall not be included in computing the taxpayer's income for the year as income from a share of the capital stock of the corporation, but shall be deemed to be a capital gain of the taxpayer for the year from a disposition of capital property and, for the purposes of section 110.6, that property shall be deemed to have been disposed of by the taxpayer in the year, and

      (iii) any election under paragraph (b) made by the corporation in respect of the dividend shall be deemed not to have been made; and

    (b) if the corporation so elects in respect of the full amount of the dividend, in prescribed form and manner and at or before the earlier of the particular time and the first day on which any part of the dividend was paid,

      (i) the dividend shall be deemed to be a capital gains dividend payable out of the corporation's non-qualifying real property capital gains dividend account to the extent that it does not exceed the corporation's non-qualifying real property capital gains dividend account at the particular time, and

      (ii) notwithstanding any other provision of this Act, any amount received by a taxpayer in a taxation year as, on account of, in lieu of payment of or in satisfaction of, the dividend shall not be included in computing the taxpayer's income for the year as income from a share of the capital stock of the corporation, but shall be deemed to be a capital gain of the taxpayer for the year from a disposition of capital property and, for the purposes of section 110.6,

        (A) that property shall be deemed to have been a non-qualifying real property of the taxpayer, within the meaning of that section, disposed of by the taxpayer in the year, and

        (B) the taxpayer's eligible real property gain for the year from the disposition of that property shall be deemed to be nil.

(2) Section 131 of the Act is amended by adding the following after subsection (3):

Interest on capital gains refund

(3.1) Where a capital gains refund for a taxation year is paid to, or applied to a liability of, a corporation, the Minister shall pay or apply interest on the refund at the prescribed rate for the period beginning on the day that is the later of

    (a) the day that is 120 days after the end of the year, and

    (b) the day on which the corporation's return of income under this Part for the year was filed under section 150, unless the return was filed on or before the day on or before which it was required to be filed,

and ending on the day the refund is paid or applied.

Excess interest on capital gains refund

(3.2) Where at any particular time interest has been paid to, or applied to a liability of, a corporation under subsection (3.1) in respect of a capital gains refund and it is determined at a subsequent time that the capital gains refund was less than that in respect of which interest was so paid or applied,

    (a) the amount by which the interest that was so paid or applied exceeds the interest, if any, computed in respect of the amount that is determined at the subsequent time to be the capital gains refund shall be deemed to be an amount (in this subsection referred to as the ``amount payable'') that became payable under this Part by the corporation at the particular time;

    (b) the corporation shall pay to the Receiver General interest at the prescribed rate on the amount payable, computed from the particular time to the day of payment; and

    (c) the Minister may at any time assess the corporation in respect of the amount payable and, where the Minister makes such an assessment, the provisions of Divisions I and J apply, with such modifications as the circumstances require, in respect of the assessment as though it had been made under section 152.

(3) The definition ``capital gains dividend account'' in subsection 131(6) of the Act is replaced by the following:

``capital gains dividend account''
« compte de dividendes sur les gains en capital »

``capital gains dividend account'' of a mutual fund corporation at any time means the amount, if any, by which the total of

      (a) its capital gains, for all taxation years beginning more than 60 days before that time, from dispositions of property (other than its non-qualifying real property) after 1971 and before that time while it was a mutual fund corporation, and

      (b) all amounts each of which is an amount determined by the formula

A x B / C

      where

      A is its capital gain, for a taxation year beginning more than 60 days before that time, from the disposition of a non-qualifying real property of the corporation before that time while it was a mutual fund corporation,

      B is the number of calendar months in the period that begins with the later of the calendar month in which the property was last acquired by it and January 1972 and ends with February 1992, and

      C is the number of calendar months in the period that begins with the later of the calendar month in which the property was last acquired by it and January 1972 and ends with the calendar month in which the property was disposed of by it

    exceeds the total of

      (c) its capital losses, for all taxation years beginning more than 60 days before that time, from dispositions of property (other than its non-qualifying real property) after 1971 and before that time while it was a mutual fund corporation,

      (d) all amounts each of which is an amount determined by the formula

D x E / F

      where

      D is its capital loss, for a taxation year beginning more than 60 days before that time, from the disposition of a non-qualifying real property of the corporation before that time while it was a mutual fund corporation,

      E is the number of calendar months in the period that begins with the later of the calendar month in which the property was last acquired by it and January 1972 and ends with February 1992, and

      F is the number of calendar months in the period that begins with the later of the calendar month in which the property was last acquired by it and January 1972 and ends with the calendar month in which the property was disposed of by it,

      (e) all capital gains dividends that became payable by the corporation before that time and more than 60 days after the end of the last taxation year ending more than 60 days before that time, other than any such dividends that became payable out of the corporation's non-qualifying real property capital gains dividend account,

      (f) all amounts each of which is an amount in respect of any taxation year ending more than 60 days before that time throughout which it was a mutual fund corporation, equal to 100/21 of its capital gains refund for that year, and

      (g) the amount, if any, by which the total of the amounts determined under paragraphs (b) and (c) of the definition ``non-qualifying real property capital gains dividend account'' in respect of the corporation at that time exceeds the amount determined under paragraph (a) of that definition in respect of the corporation at that time;

(3.1) Subsection 131(6) of the Act is amended by adding the following in alphabetical order:

``non-qualifyi ng real property''
« immeuble non admissible »

``non-qualifying real property'' of a corporation or trust (other than a personal trust) means property disposed of by the corporation or trust after February 1992 that at the time of its disposition is

      (a) real property,

      (b) a share of the capital stock of a corporation, the fair market value of which is derived principally from real property, other than real property that was used

        (i) throughout that part of the 24-month period immediately preceding that time while it was owned by the corporation or a corporation related to the corporation, or

        (ii) throughout all or substantially all of the time in the period preceding that time during which it was owned by the corporation or a corporation related to the corporation,

      principally in an active business carried on by the corporation or a corporation related to it,

      (c) an interest in a partnership or trust, the fair market value of which is derived principally from real property, other than real property that was used

        (i) throughout that part of the 24-month period immediately preceding that time while it was property of the partnership or trust, or

        (ii) throughout all or substantially all of the time in the period preceding that time during which it was property of the partnership or trust,

      principally in an active business carried on by one or more persons as members of the partnership or by the trust, or

      (d) an interest or an option in respect of property described in any of paragraphs (a) to (c),

    and, for the purpose of this definition, an ``active business'' carried on by a person at any time means a business carried on by the person at that time other than a business (other than a business carried on by a credit union or a business of leasing property that is not real property) the principal purpose of which is to derive income from property (including interest, dividends, rents or royalties), unless the person or, where the person carries on the business as a member of a partnership, the partnership

      (e) employs in the business at that time more than 5 individuals on a full-time basis, or

      (f) in the course of carrying on the business has managerial, administrative, financial, maintenance or other similar services provided to it at that time and the person or partnership could reasonably be expected to require more than 5 full-time employees if those services had not been so provided;

``non-qualifyi ng real property capital gains dividend account''
« compte de dividendes sur les gains en capital sur ... »

``non-qualifying real property capital gains dividend account'' of a mutual fund corporation at any time means the amount, if any, by which

      (a) the total of all amounts each of which is the amount by which its capital gain, for a taxation year beginning more than 60 days before that time, from the disposition of a non-qualifying real property of the corporation before that time while it was a mutual fund corporation exceeds the amount determined under paragraph (b) of the definition ``capital gains dividend account'' in respect of that disposition

    exceeds the total of

      (b) all amounts each of which is the amount by which its capital loss, for a taxation year beginning more than 60 days before that time, from the disposition of a non-qualifying real property of the corporation before that time while it was a mutual fund corporation exceeds the amount determined under paragraph (d) of the definition ``capital gains dividend account'' in respect of that disposition,

      (c) all capital gains dividends that became payable by the corporation before that time and more than 60 days after the end of the last taxation year ending more than 60 days before that time, other than any such dividends that became payable out of the corporation's capital gains dividend account, and

      (d) the amount, if any, by which the total of all amounts determined under paragraphs (c) to (f) of the definition ``capital gains dividend account'' in respect of the corporation at that time exceeds the total of all amounts determined under paragraphs (a) and (b) of that definition in respect of the corporation at that time;

(4) Subsections (1), (3) and (3.1) apply to the 1992 and subsequent taxation years.

(5) Subsection (2) applies to capital gains refunds paid or applied with respect to taxation years beginning after 1991.

77. (1) Section 132 of the Act is amended by adding the following after subsection (2):

Interest on capital gains refund

(2.1) Where a capital gains refund for a taxation year is paid to, or applied to a liability of, a mutual fund trust, the Minister shall pay or apply interest on the refund at the prescribed rate for the period beginning on the day that is 45 days after the later of

    (a) the day that is 90 days after the end of the year, and

    (b) the day on which the trust's return of income under this Part for the year was filed under section 150

and ending on the day on which the refund is paid or applied.

Excess interest on capital gains refund

(2.2) Where at any particular time interest has been paid to, or applied to a liability of, a trust under subsection (2.1) in respect of a capital gains refund and it is determined at a subsequent time that the capital gains refund was less than that in respect of which interest was so paid or applied,

    (a) the amount by which the interest that was so paid or applied exceeds the interest, if any, computed in respect of the amount that is determined at the subsequent time to be the capital gains refund shall be deemed to be an amount (in this subsection referred to as the ``amount payable'') that became payable under this Part by the trust at the particular time;

    (b) the trust shall pay to the Receiver General interest at the prescribed rate on the amount payable, computed from the particular time to the day of payment; and

    (c) the Minister may at any time assess the trust in respect of the amount payable and, where the Minister makes such an assessment, the provisions of Divisions I and J apply, with such modifications as the circumstances require, in respect of the assessment as though it had been made under section 152.

(2) Subsection (1) applies to capital gains refunds paid or applied with respect to taxation years beginning after 1991.

78. (1) Section 133 of the Act is amended by adding the following after subsection (7):

Interest on allowable refund

(7.01) Where an allowable refund for a taxation year is paid to, or applied to a liability of, a non-resident-owned investment corporation, the Minister shall pay or apply interest on the refund at the prescribed rate for the period beginning on the day that is the later of

    (a) the day that is 120 days after the end of the year, and

    (b) the day on which the corporation's return of income under this Part for the year was filed under section 150, unless the return was filed on or before the day on or before which it was required to be filed,

and ending on the day the refund is paid or applied.

Excess interest on allowable refund

(7.02) Where at any particular time interest has been paid to, or applied to a liability of, a corporation under subsection (7.01) in respect of an allowable refund and it is determined at a subsequent time that the allowable refund was less than that in respect of which interest was so paid or applied,

    (a) the amount by which the interest that was so paid or applied exceeds the interest, if any, computed in respect of the amount that is determined at the subsequent time to be the allowable refund shall be deemed to be an amount (in this subsection referred to as the ``amount payable'') that became payable under this Part by the corporation at the particular time;

    (b) the corporation shall pay to the Receiver General interest at the prescribed rate on the amount payable, computed from the particular time to the day of payment; and

    (c) the Minister may at any time assess the corporation in respect of the amount payable and, where the Minister makes such an assessment, the provisions of Divisions I and J apply, with such modifications as the circumstances require, in respect of the assessment as though it had been made under section 152.

(2) Subsection (1) applies to allowable refunds paid or applied with respect to taxation years beginning after 1991.

79. (1) Paragraph 137(5.2)(c) of the Act is replaced by the following:

    (c) each amount allocated under subsection (5.1) to a member may be deducted by that member in computing the member's taxable income for its taxation year that includes the last day of the payer's taxation year in respect of which the amount was so allocated.

(2) Subsection (1) applies to the 1991 and subsequent taxation years.

80. (1) Subsection 138.1(7) of the Act is replaced by the following:

Where ss. (1) to (6) do not apply

(7) Subsections (1) to (6) do not apply to the holder of a segregated fund policy with respect to such a policy that is issued or effected as a registered retirement savings plan or a registered retirement income fund or that is issued under a registered pension plan.

(2) Subsection (1) applies to the 1991 and subsequent taxation years.

81. (1) The Act is amended by adding the following after section 143:

Amateur athletes' reserve funds

143.1 (1) Where a national sport organization that is a registered Canadian amateur athletic association receives an amount for the benefit of an individual under an arrangement made under rules of an international sport federation that require amounts to be held, controlled and administered by the organization in order to preserve the eligibility of the individual to compete in a sporting event sanctioned by the federation,

    (a) an inter vivos trust (in this section referred to as an ``amateur athlete trust'') shall be deemed to be created on the day that is the later of

      (i) the day on which the first such amount is received by the organization, and

      (ii) January 1, 1992,

    and to exist continuously thereafter until subsection (3) or (4) applies in respect of the trust;

    (b) all property required to be held after 1991 under the arrangement shall be deemed to be property of the trust and not property of any other person;

    (c) any amount received at any time under the arrangement by the organization shall, to the extent that it would, but for this subsection, be included in computing the individual's income for the taxation year that includes that time, be deemed to be income of the trust for the taxation year and not to be income of the individual;

    (d) all amounts paid at any time by the organization under the arrangement to or for the benefit of the individual shall be deemed to be amounts distributed at that time to the individual by the trust;

    (e) the individual shall be deemed to be the beneficiary under the trust;

    (f) the organization shall be deemed to be the trustee of the trust; and

    (g) no tax is payable under this Part by the trust on its taxable income for any taxation year.

Amounts included in beneficiary's income

(2) In computing the income for a taxation year of the beneficiary under an amateur athlete trust, there shall be included the total of all amounts distributed in the year to the beneficiary by the trust.

Termination of amateur athlete trust

(3) Where an amateur athlete trust holds property on behalf of a beneficiary who has not competed in an international sporting event as a Canadian national team member for a period of 8 years that ends in a particular taxation year and that begins in the year that is the later of

    (a) where the beneficiary has competed in such an event, the year in which the beneficiary last so competed, and

    (b) the year in which the trust was created,

the trust shall be deemed to have distributed, at the end of the particular taxation year to the beneficiary, an amount equal to

    (c) where the trust is liable to pay tax under Part XII.2 in respect of the particular year, 64% of the fair market value of all property held by it at that time, and

    (d) in any other case, the fair market value of all property held by it at that time.

Death of beneficiary

(4) Where an amateur athlete trust holds property on behalf of a beneficiary who dies in a year, the trust shall be deemed to have distributed, immediately before the death, to the beneficiary, an amount equal to

    (a) where the trust is liable to pay tax under Part XII.2 in respect of the year, 64% of the fair market value of all property held by it at that time; and

    (b) in any other case, the fair market value of all property held by it at that time.

(2) Subsection (1) applies to the 1992 and subsequent taxation years and, where an individual and a national sport organization that received an amount for the benefit of that individual jointly so elect by notifying the Minister of National Revenue in writing, to any taxation year ending after 1987 and before 1992 throughout which the individual was resident in Canada, in which case, with respect to that individual and the trust under which the individual is deemed by section 143.1 of the Act, as enacted by subsection (1), to be a beneficiary,

    (a) the reference to ``1992'' in paragraph 143.1(1)(a) of the Act, as enacted by subsection (1), shall be read as a reference to the taxation year for which the election is made; and

    (b) the reference to ``1991'' in paragraph 143.1(1)(b) of the Act, as enacted by subsection (1), shall be read as a reference to the taxation year before the year for which the election is made.

82. (1) Paragraph (b) of the definition ``earned income'' in subsection 146(1) of the Act is replaced by the following:

      (b) an amount included under paragraph 56(1)(b), (c), (c.1), (c.2), (g) or (o) in computing the taxpayer's income for a period in the year throughout which the taxpayer was resident in Canada,

      (b.1) an amount described in paragraph 56(8)(a) received by the taxpayer in the year, where the taxpayer was resident in Canada at the time of receipt,

(2) Paragraph (f) of the definition ``earned income'' in subsection 146(1) of the Act is replaced by the following:

      (f) an amount deductible under paragraph 60(b), (c) or (c.1), or deducted under paragraph 60(c.2), in computing the taxpayer's income for the year, or

(3) The portion of the definition ``net past service pension adjustment'' in subsection 146(1) of the Act before the description of G is replaced by the following:

``net past service pension adjustment''
« facteur ... »

``net past service pension adjustment'' of a taxpayer for a taxation year means the positive or negative amount determined by the formula

P - G

    where

    P is the total of all amounts each of which is the taxpayer's past service pension adjustment for the year in respect of an employer, and

(4) The definition ``premium'' in subsection 146(1) of the Act is replaced by the following:

``premium''
« prime »

``premium'' means any periodic or other amount paid or payable under a retirement savings plan

      (a) as consideration for any contract referred to in paragraph (a) of the definition ``retirement savings plan'' to pay a retirement income, or

      (b) as a contribution or deposit referred to in paragraph (b) of that definition for the purpose stated in that paragraph

    but, except for the purposes of paragraph (b) of the definition ``benefit'' and paragraph (2)(b.3), does not include a repayment described in subparagraph (b)(ii) of the definition ``excluded withdrawal'' in subsection 146.01(1) or designated under subsection 146.01(3);

(5) Subsection 146(1.1) of the Act is repealed.

(6) Paragraph 146(5)(a) of the Act is replaced by the following:

    (a) the amount, if any, by which the total of all amounts each of which is a premium paid by the taxpayer after 1990 and on or before the day that is 60 days after the end of the year under a registered retirement savings plan under which the taxpayer was the annuitant at the time the premium was paid, other than the portion, if any, of the premium

      (i) that was deducted in computing the taxpayer's income for a preceding taxation year,

      (ii) that was designated for any taxation year for the purposes of paragraph 60(j), (j.1) or (l),

      (iii) in respect of which the taxpayer received a payment that was deducted under subsection (8.2) in computing the taxpayer's income for a preceding taxation year, or

      (iv) that was deductible under subsection (6.1) in computing the taxpayer's income for any taxation year

    exceeds the total of all amounts each is which is

      (v) an amount deducted under subsection 147.3(13.1) in computing the taxpayer's income for the year or a preceding taxation year that ends after 1992, or

      (vi) an amount deducted under subsection 147.3(13.1) in computing the taxpayer's income for the 1992 taxation year, other than any portion of the amount that could not have been so deducted if paragraphs 147.3(10)(b) and (c) did not apply in respect of transfers made before 1991, and

(7) Subsection 146(8) of the Act is replaced by the following:

Benefits taxable

(8) There shall be included in computing the income of a taxpayer for a taxation year the total of all amounts received by the taxpayer in the year as benefits out of or under registered retirement savings plans, other than excluded withdrawals (within the meaning assigned by subsection 146.01(1)) in respect of the taxpayer and amounts that are included under paragraph (12)(b) in computing the taxpayer's income.

Idem - subsequent re-calculation

(8.01) Where an amount referred to in paragraph (a) of the definition ``eligible amount'' in subsection 146.01(1) is received by a taxpayer in a taxation year and, at any time after that year, it is determined that the amount is not an excluded withdrawal (within the meaning assigned by that subsection), notwithstanding subsections 152(4) to (5), such assessments of tax, interest and penalties shall be made as are necessary to give effect to the determination.

(8) Paragraph 146(8.2)(b) of the Act is replaced by the following:

    (b) the taxpayer or the taxpayer's spouse can reasonably be regarded as having received a payment from a registered retirement savings plan or a registered retirement income fund in respect of such portion of the undeducted premiums as

      (i) was not paid by way of a transfer of an amount from a registered pension plan to a registered retirement savings plan, and

      (ii) was not paid by way of a transfer of an amount from a deferred profit sharing plan to a registered retirement savings plan in accordance with subsection 147(19),

(9) Paragraph 146(16)(b) of the Act is replaced by the following:

    (b) to a registered retirement savings plan or registered retirement income fund under which the spouse or former spouse of the transferor is the annuitant, where the transferor and the transferor's spouse or former spouse are living separate and apart and the payment or transfer is made under a decree, order or judgment of a competent tribunal, or under a written separation agreement, relating to a division of property between the transferor and the transferor's spouse or former spouse in settlement of rights arising out of, or on the breakdown of, their marriage,

(10) The portion of subsection 146(16) of the Act after paragraph (b) is replaced by the following:

and, where there has been such a payment or transfer of such property on behalf of the transferor before the maturity of the plan,

    (c) the amount of the payment or transfer shall not, solely because of the payment or transfer, be included in computing the income of the transferor or the transferor's spouse or former spouse,

    (d) no deduction may be made under subsection (5), (5.1) or (8.2) or section 8 or 60 in respect of the payment or transfer in computing the income of any taxpayer, and

    (e) where the payment or transfer was made to a registered retirement savings plan, for the purposes of subsection (8.2), the amount of the payment or transfer shall be deemed not to be a premium paid to that plan by the taxpayer.

(11) Subsections (1), (2), (8) and (10) apply to the 1991 and subsequent taxation years except that, for the 1991 taxation year, subparagraph 146(8.2)(b)(i) of the Act, as enacted by subsection (8), shall be read as follows:

      (i) was not paid by way of a transfer of an amount from a registered pension plan to a registered retirement savings plan in accordance with any of subsections 147.3(1) and (4) to (7), and

(12) Subsection (3) applies after 1988.

(13) Subsections (4), (6) and (7) apply to the 1992 and subsequent taxation years except that, for the 1992 taxation year, paragraph 146(5)(a) of the Act, as enacted by subsection (6), shall be read without reference to subparagraph (v).

(14) Subsections (5) and (9) apply after 1992.

83. (1) The Act is amended by adding the following after section 146:

Home Buyers' Plan

Definitions

146.01 (1) In this section,

``annuitant''
« rentier »

``annuitant'' has the meaning assigned by subsection 146(1);

``benefit''
« prestation »

``benefit'' has the meaning assigned by subsection 146(1);

``eligible amount''
« montant admissible »

``eligible amount'' in respect of an individual means an amount received at a particular time by the individual as a benefit out of or under a registered retirement savings plan where

      (a) the amount is received after February 25, 1992 and before March 2, 1993 pursuant to the written request of the individual in prescribed form in which the individual sets out the location of a qualifying home that the individual has begun, or intends not later than one year after its acquisition by the individual to begin, using as a principal place of residence,

      (b) the individual is resident in Canada at the particular time and entered into an agreement in writing before the particular time for the acquisition of the qualifying home or with respect to its construction,

      (c) the individual acquires the qualifying home (or replacement property for the qualifying home) after February 25, 1992 and before October 1, 1993,

      (d) neither the individual nor the individual's spouse acquired the qualifying home more than 30 days before the particular time,

      (e) unless the individual acquired the qualifying home before the particular time, the individual is resident in Canada throughout the period beginning immediately after the particular time and ending at the earliest of any time at which the individual acquired the qualifying home or any replacement property for the qualifying home, and

      (f) the total of the amount and all eligible amounts received by the individual at or before the particular time does not exceed $20,000;

``excluded premium''
« prime exclue »

``excluded premium'' in respect of an individual means a premium under a registered retirement savings plan where the premium

      (a) was designated by the individual for the purposes of paragraph 60(j), (j.1), (j.2) or (l),

      (b) was an amount transferred directly from a registered retirement savings plan, registered pension plan, registered retirement income fund or deferred profit sharing plan,

      (c) was deductible under subsection 146(6.1) in computing the individual's income for any taxation year, or

      (d) was deducted in computing the individual's income for the 1991 taxation year;

``excluded withdrawal''
« retrait exclu »

``excluded withdrawal'' in respect of an individual means

      (a) an eligible amount received by the individual, or

      (b) an amount (other than an eligible amount) that would, if the definition ``eligible amount'' were read without reference to paragraphs (c) and (e) of that definition, be an eligible amount received by the individual out of or under a registered retirement savings plan in respect of which a person is the issuer, where either

        (i) the individual died before 1994 and was resident in Canada throughout the period beginning immediately after the amount was received and ending at the time of the death, or

        (ii) the amount is repaid before 1994 to a registered retirement savings plan in respect of which the person is the issuer (or, where the individual was not resident in Canada at the time the individual filed a return of income under this Part for the taxation year in which the amount was received by the individual, before the earlier of January 1, 1994 and the time the individual filed that return) and the issuer is notified of the repayment in prescribed form submitted to the issuer at the time the repayment is made,

    except that, where an amount would, but for subclause (2)(c)(ii)(A)(II), be an eligible amount, subparagraph (b)(ii) applies in respect of the amount as if the first reference therein to ``1994'' were ``1995'';

``issuer''
« émetteur »

``issuer'' has the meaning assigned by subsection 146(1);

``premium''
« prime »

``premium'' has the meaning assigned by subsection 146(1);

``qualifying home''
« habitation admissible »

``qualifying home'' means

      (a) a housing unit located in Canada, or

      (b) a share of the capital stock of a cooperative housing corporation, the holder of which is entitled to possession of a housing unit located in Canada,

    except that, where the context so requires, a reference to a qualifying home that is a share described in paragraph (b) means the housing unit to which the share described in that paragraph relates;

``quarter''
« trimestre »

``quarter'' means any of the following periods in a calendar year:

      (a) the period beginning on January 1 and ending on March 31,

      (b) the period beginning on April 1 and ending on June 30,

      (c) the period beginning on July 1 and ending on September 30, and

      (d) the period beginning on October 1 and ending on December 31;

``replacement property''
« bien de replacement »

``replacement property'' for a particular qualifying home in respect of an individual means another qualifying home where

      (a) the individual

        (i) agreed to acquire, or

        (ii) began the construction of

      the other qualifying home at a particular time that is after the latest time that the individual requested a withdrawal in respect of the particular qualifying home under paragraph (a) of the definition ``eligible amount'',

      (b) the individual intended, at the particular time, that the other qualifying home be used by the individual as a principal place of residence not later than one year after its acquisition, and

      (c) neither the individual nor the individual's spouse had acquired the other qualifying home before the particular time.

Special Rules

(2) For the purposes of this section,

    (a) an individual shall be considered to have acquired a qualifying home if the individual acquired it jointly with one or more other persons;

    (b) where an individual agrees to acquire a condominium unit, the individual shall be deemed to have acquired it on the day the individual is entitled to immediate vacant possession of it; and

    (c) where

      (i) neither a qualifying home in respect of which an individual withdrew an amount described in paragraph (a) of the definition ``eligible amount'' in subsection (1) nor a replacement property for the qualifying home has been acquired by the individual before October 1, 1993, and

      (ii) either

        (A) the individual

          (I) is obliged under the terms of a written agreement in effect on October 1, 1993 to acquire the qualifying home (or a replacement property for the qualifying home) on or after that day,

          (II) acquires the qualifying home or a replacement property for the qualifying home before October 1, 1994, and

          (III) is resident in Canada throughout the period beginning on October 1, 1993 and ending on the earlier of October 1, 1994 and the earliest of any day on which the individual acquires the qualifying home or a replacement property for the qualifying home, or

        (B) the individual made payments

          (I) to persons with whom the individual was dealing at arm's length,

          (II) in respect of the construction of the qualifying home or a replacement property for the qualifying home, and

          (III) in the period beginning at the time the individual first withdrew an amount described in paragraph (a) of that definition in respect of the qualifying home and ending before October 1, 1993,

        and the total of all payments so made was not less than the total of all amounts described in that paragraph in respect of the qualifying home that were withdrawn by the individual,

    except for the purposes of this paragraph, the individual shall be deemed to have acquired the qualifying home on September 30, 1993.

Repayment of eligible amount

(3) An amount (other than an excluded premium) paid by an individual at a particular time in a taxation year under a retirement savings plan that was at the end of the year a registered retirement savings plan under which the individual is the annuitant may be designated by the individual under this subsection (in prescribed form submitted to the issuer of the plan at the time of the payment or at such later time as is acceptable to the Minister) to the extent that the amount so paid does not exceed the amount, if any, by which

    (a) the total of all eligible amounts received by the individual before the particular time

exceeds the total of

    (b) all amounts designated under this subsection in respect of amounts paid before the particular time to registered retirement savings plans under which the individual is the annuitant, and

    (c) all amounts each of which is an amount included in computing the income of the individual under subsection (4) or (5) for a taxation year ending before the particular time.

Where portion of eligible amount not repaid

(4) There shall be included in computing the income of an individual for a particular taxation year ending after 1993 the amount determined by the formula

(15 - D)

where

A is

      (a) where the individual died or ceased to be resident in Canada in the particular year, nil, and

      (b) in any other case, the total of all eligible amounts received by the individual in preceding taxation years;

B is

      (a) where the particular year is the 1994 taxation year, nil, and

      (b) in any other case, the total of all amounts designated by the individual under subsection (3) for preceding taxation years;

C is the total of all amounts each of which is an amount included under this subsection or subsection (5) in computing the income of the individual for a preceding taxation year;

D is the lesser of 14 and the number of taxation years of the individual ending in the period beginning on January 1, 1994 and ending at the beginning of the particular year; and

E is

      (a) where the particular year is the 1994 taxation year, the total of all amounts each of which is an amount designated by the individual under subsection (3) for the particular year or either of the 2 preceding taxation years, and

      (b) in any other case, the total of all amounts designated under subsection (3) by the individual for the particular year.

Where individual becomes a non-resident

(5) Where at any time in a taxation year an individual ceases to be resident in Canada, there shall be included in computing the income of the individual for the period in the year during which the individual was resident in Canada the amount, if any, by which

    (a) the total of all amounts each of which is an eligible amount received by the individual in the year or a preceding taxation year

exceeds the total of

    (b) all amounts designated by the individual under subsection (3) that are paid not later than 90 days after that time and before the individual files a return of income under this Part for the year, and

    (c) all amounts included under subsection (4) in computing the income of the individual for preceding taxation years.

Where individual dies

(6) Where an individual dies at any time in a taxation year, there shall be included in computing the income of the individual for the year the amount, if any, by which

    (a) the total of all excluded withdrawals in respect of the individual received by the individual before that time (other than excluded withdrawals in respect of the individual repaid as described in subparagraph (b)(ii) of the definition ``excluded withdrawal'' in subsection (1) before that time)

exceeds the total of

    (b) all amounts designated by the individual under subsection (3) that were paid before that time, and

    (c) all amounts each of which is an amount included under subsection (4) or (5) in computing the income of the individual for a preceding taxation year.

Idem

(7) Where an individual's spouse was resident in Canada immediately before the death of the individual in a taxation year and the spouse and the individual's legal representative jointly so elect in writing in the individual's return of income under this Part for the year,

    (a) subsection (6) does not apply in respect of the individual; and

    (b) except for the purpose of subsection (9), the spouse shall be deemed to have received an eligible amount at the time of the individual's death equal to the amount that would, but for this subsection, be determined under subsection (6) in respect of the individual.

Filing of prescribed form

(8) A prescribed form referred to in this section that is submitted to an issuer shall be filed with the Minister by the issuer not later than 15 days after the quarter in which it was submitted to the issuer.

Income inclusion

(9) There shall be included in computing the income for the 1992 taxation year of an individual who was resident in Canada at the end of that year an amount equal to the lesser of

    (a) the net premium balance of the individual, and

    (b) the total of

      (i) all amounts each of which is an eligible amount received in 1992 or 1993 by the individual, and

      (ii) the lesser of

        (A) the total of all premiums (other than excluded premiums in respect of the individual) paid by the individual after February 25, 1992 and before March 2, 1993 under registered retirement savings plans under which the individual's spouse is the annuitant, and

        (B) the amount, if any, by which

          (I) the total of all amounts each of which is an eligible amount received in 1992 or 1993 by the individual's spouse

        exceeds

          (II) the net premium balance of the individual's spouse.

Net premium balance

(10) For the purposes of subsection (9), the net premium balance of an individual is the amount, if any, by which

    (a) the total of all premiums (other than excluded premiums in respect of the individual) paid by the individual after February 25, 1992 and before March 2, 1993 under registered retirement savings plans under which the individual or the individual's spouse is the annuitant

exceeds

    (b) the total of all amounts each of which is an amount received by the individual or the individual's spouse after February 25, 1992 and before 1994 and included under subsection 146(8) or (8.3) in computing the individual's income for the 1992 or 1993 taxation year (other than an amount in respect of which an amount is deductible under paragraph 146(8.6)(b) in computing the income of the individual or in respect of premiums paid by the individual after March 1, 1993).

Assessments

(11) Notwithstanding subsections 152(4) to (5), such assessments of tax, interest and penalties shall be made as are necessary to give effect to amounts included in income under subsection (9).

(2) Subsection (1) applies to the 1992 and subsequent taxation years and, in applying section 146.01 of the Act, as enacted by subsection (1), before 1993, subsection 146.01(1) of the Act, as enacted by subsection (1), shall be read as though it included the following definition:

``spouse'' has the meaning assigned by subsection 146(1.1).

84. (1) The definition ``annuitant'' in subsection 146.3(1) of the Act is replaced by the following:

``annuitant''
« rentier »

``annuitant'' under a retirement income fund at any time means

      (a) the first individual to whom the carrier has undertaken to make payments described in the definition ``retirement income fund'' out of or under the fund, where the first individual is alive at that time,

      (b) after the death of the first individual, a spouse (in this paragraph referred to as the ``surviving spouse'') of the first individual to whom the carrier has undertaken to make payments described in the definition ``retirement income fund'' out of or under the fund after the death of the first individual, where the surviving spouse is alive at that time and the undertaking was made pursuant to an election described in that definition of the first individual or with the consent of the legal representative of the first individual, and

      (c) after the death of the surviving spouse, another spouse of the surviving spouse to whom the carrier has undertaken, with the consent of the legal representative of the surviving spouse, to make payments described in the definition ``retirement income fund'' out of or under the fund after the death of the surviving spouse, where that other spouse is alive at that time;

(2) The definition ``minimum amount'' in subsection 146.3(1) of the Act is replaced by the following:

``minimum amount''
« minimum »

``minimum amount'' under a retirement income fund for the year in which the fund is entered into is nil and for each subsequent year is the product obtained when the fair market value of the property held in connection with the fund at the beginning of that subsequent year is multiplied by

      (a) where the first annuitant under the fund elected in respect of the fund under paragraph (b), as it read before 1992, or under subparagraph 146.3(1)(f)(i) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, as it read before 1986, to use the age of another individual, the prescribed amount for that subsequent year in respect of the other individual,

      (b) where paragraph (a) does not apply and the first annuitant under the fund so elects before any payment has been made under the fund by the carrier, the prescribed amount for that subsequent year in respect of an individual who was the spouse of the first annuitant at the time of the election, or

      (c) in any other case, the prescribed amount for that subsequent year in respect of the first annuitant under the fund;

(3) Subsection 146.3(1.1) of the Act is repealed.

(4) Paragraph 146.3(2)(d) of the Act is replaced by the following:

    (d) the fund provides that, except where the annuitant's spouse becomes the annuitant under the fund, the carrier shall, as a consequence of the death of the annuitant, distribute the property held in connection with the fund at the time of the annuitant's death or an amount equal to the value of such property at that time;

(5) Subparagraph 146.3(2)(f)(iv) of the Act is replaced by the following:

      (iv) a registered retirement income fund or registered retirement savings plan of the individual's spouse or former spouse under a decree, order or judgment of a competent tribunal, or under a written separation agreement, relating to a division of property between the individual and the individual's spouse or former spouse in settlement of rights arising out of, or on the breakdown of, their marriage,

(6) Paragraph 146.3(2)(f) of the Act is amended by striking out the word ``or'' at the end of subparagraph (iii) and by adding the following after subparagraph (iv):

      (v) a registered pension plan of which the individual is a member (within the meaning assigned by subsection 147.1(1)), or

      (vi) a registered pension plan in accordance with subsection 147.3(5) or (7);

(7) Paragraph 146.3(14)(b) of the Act is replaced by the following:

    (b) transferred from a registered retirement income fund of an annuitant to a registered retirement income fund or registered retirement savings plan of the annuitant's spouse or former spouse under a decree, order or judgment of a competent tribunal, or under a written separation agreement, relating to a division of property between the annuitant and the annuitant's spouse or former spouse in settlement of rights arising out of, or on the breakdown of, their marriage,

(8) Subsection (1) applies to deaths occurring after 1990.

(9) Subsection (2) applies

    (a) to the 1992 and subsequent taxation years with respect to

      (i) retirement income funds entered into after February 1986, and

      (ii) retirement income funds entered into before March 1986 and revised or amended after February 1986 and before 1992; and

    (b) to the taxation year in which a retirement income fund is first revised or amended after February 1986 and to subsequent taxation years, where the fund was entered into before March 1986 and was not revised or amended after February 1986 and before 1992.

(10) Notwithstanding subsection (9), subsection (2) does not apply, for the purposes of subsection 146.3(5.1) of the Act, prescribed rules made for the purpose of subsection 153(1) of the Act and section 5 of the Income Tax Conventions Interpretation Act, to payments made before 1993.

(11) Subsections (3), (5) and (7) apply after 1992 and, in applying subsection 146.3(1.1) of the Act after 1990 and before 1993, the reference therein to ``the definitions ``minimum amount'' and ``retirement income fund'''' shall be read as ``the definitions ``annuitant'', ``minimum amount'' and ``retirement income fund'' ''.

(12) Subsection (4) applies after 1990.

(13) Subsection (6) applies after August 29, 1990.

85. (1) The definition ``money purchase limit'' in subsection 147.1(1) of the Act is replaced by the following:

``money purchase limit''
« plafond ... »

``money purchase limit'' for a calendar year means

      (a) for years before 1990, nil,

      (b) for 1990, $11,500,

      (c) for 1991 and 1992, $12,500,

      (d) for 1993, $13,500,

      (e) for 1994, $14,500,

      (f) for 1995, $15,500, and

      (g) for each year thereafter, the greater of

        (i) the product of

          (A) $15,500, and

          (B) the quotient obtained when the average wage for the year is divided by the average wage for 1995,

        rounded to the nearest multiple of $10, or, if that product is equidistant from 2 such consecutive multiples, to the higher thereof, and

        (ii) the money purchase limit for the preceding calendar year;

(2) The definition ``spouse'' in subsection 147.1(1) of the Act is repealed.

(3) Paragraphs 147.1(2)(b) and (c) of the Act are replaced by the following:

    (b) where a pension plan that was submitted for registration before 1992 is registered by the Minister, the registration is effective from the day specified in writing by the Minister; and

    (c) where a pension plan that is submitted for registration after 1991 is registered by the Minister, the registration is effective from the later of

      (i) January 1 of the calendar year in which application for registration is made in prescribed manner by the plan administrator, and

      (ii) the day the plan began.

(4) Subsection (1) applies after 1991.

(5) Subsection (2) applies after 1992.

(6) Subsection (3) applies after 1990.

86. (1) Subsection 147.3(1) of the Act is replaced by the following:

Transfer - money purchase to money purchase, RRSP or RRIF

147.3 (1) An amount is transferred from a registered pension plan in accordance with this subsection if the amount

    (a) is a single amount;

    (b) is transferred on behalf of a member in full or partial satisfaction of the member's entitlement to benefits under a money purchase provision of the plan as registered; and

    (c) is transferred directly to

      (i) another registered pension plan to provide benefits in respect of the member under a money purchase provision of that plan,

      (ii) a registered retirement savings plan under which the member is the annuitant (within the meaning assigned by subsection 146(1)), or

      (iii) a registered retirement income fund under which the member is the annuitant (within the meaning assigned by subsection 146.3(1)).

(2) Subsections 147.3(4) and (5) of the Act are replaced by the following:

Transfer - defined benefit to money purchase, RRSP or RRIF

(4) An amount is transferred from a registered pension plan in accordance with this subsection if the amount

    (a) is a single amount no portion of which relates to an actuarial surplus;

    (b) is transferred on behalf of a member in full or partial satisfaction of benefits to which the member is entitled, either absolutely or contingently, under a defined benefit provision of the plan as registered;

    (c) does not exceed a prescribed amount; and

    (d) is transferred directly to

      (i) another registered pension plan and allocated to the member under a money purchase provision of that plan,

      (ii) a registered retirement savings plan under which the member is the annuitant (within the meaning assigned by subsection 146(1)), or

      (iii) a registered retirement income fund under which the member is the annuitant (within the meaning assigned by subsection 146.3(1)).

Transfer of surplus - defined benefit to money purchase

(4.1) An amount is transferred from a registered pension plan in accordance with this subsection if the amount

    (a) is transferred in respect of the actuarial surplus under a defined benefit provision of the plan; and

    (b) is transferred directly to another registered pension plan and allocated under a money purchase provision of that plan to one or more members of that plan.

Transfer to RPP, RRSP or RRIF for spouse on marriage breakdown

(5) An amount is transferred from a registered pension plan in accordance with this subsection if the amount

    (a) is a single amount;

    (b) is transferred on behalf of an individual who is a spouse or former spouse of a member of the plan and who is entitled to the amount under a decree, order or judgment of a competent tribunal, or under a written agreement, relating to a division of property between the member and the individual in settlement of rights arising out of, or on a breakdown of, their marriage; and

    (c) is transferred directly to

      (i) another registered pension plan for the benefit of the individual,

      (ii) a registered retirement savings plan under which the individual is the annuitant (within the meaning assigned by subsection 146(1)), or

      (iii) a registered retirement income fund under which the individual is the annuitant (within the meaning assigned by subsection 146.3(1)).

(3) Paragraph 147.3(6)(c) of the Act is replaced by the following:

    (c) is transferred directly to

      (i) another registered pension plan for the benefit of the member,

      (ii) a registered retirement savings plan under which the member is the annuitant (within the meaning assigned by subsection 146(1)), or

      (iii) a registered retirement income fund under which the member is the annuitant (within the meaning assigned by subsection 146.3(1)).

(4) Paragraph 147.3(7)(c) of the Act is replaced by the following:

    (c) is transferred directly to

      (i) another registered pension plan for the benefit of the individual,

      (ii) a registered retirement savings plan under which the individual is the annuitant (within the meaning assigned by subsection 146(1)), or

      (iii) a registered retirement income fund under which the individual is the annuitant (within the meaning assigned by subsection 146.3(1)).

(5) Subsection 147.3(10) of the Act is replaced by the following:

Idem

(10) Where, on behalf of an individual, an amount is transferred from a registered pension plan (in this subsection referred to as the ``transferor plan'') to another plan or fund (in this subsection referred to as the ``transferee plan'') that is a registered pension plan, a registered retirement savings plan or a registered retirement income fund and the transfer is not in accordance with any of subsections (1) to (7),

    (a) notwithstanding section 254, the amount shall be deemed to have been paid from the transferor plan to the individual;

    (b) subject to paragraph (c), the individual shall be deemed to have paid the amount as a contribution or premium to the transferee plan; and

    (c) where the transferee plan is a registered retirement income fund, for the purposes of subsection 146(5) and Part X.1, the individual shall be deemed to have paid the amount at the time of the transfer as a premium under a registered retirement savings plan under which the individual was the annuitant (within the meaning assigned by subsection 146(1)).

(6) The portion of subsection 147.3(11) of the Act before paragraph (a) is replaced by the following:

Division of transferred amount

(11) Where an amount is transferred from a registered pension plan to another registered pension plan, to a registered retirement savings plan or to a registered retirement income fund and a portion, but not all, of the amount is transferred in accordance with any of subsections (1) to (8),

(7) The portion of subsection 147.3(12) of the Act before paragraph (a) is replaced by the following:

Restriction re transfers

(12) A registered pension plan becomes a revocable plan at any time that an amount is transferred from the plan to another registered pension plan, to a registered retirement savings plan or to a registered retirement income fund unless

(8) Section 147.3 of the Act is amended by adding the following after subsection (13):

Withdrawal of excessive transfers to RRSPs and RRIFs

(13.1) There may be deducted in computing the income of an individual for a taxation year the lesser of

    (a) the amount, if any, by which

      (i) the total of all amounts each of which is an amount included under subsection 146(8), (8.3) or (12) or 146.3(5), (5.1) or (11) in computing the individual's income for the year, to the extent that the amount is not a prescribed withdrawal,

    exceeds

      (ii) the total of all amounts each of which is an amount deductible under paragraph 60(l) or subsection 146(8.2) in computing the income of the individual for the year, and

    (b) the amount, if any, by which

      (i) the total of all amounts each of which is an amount that was

        (A) transferred to a registered retirement savings plan or registered retirement income fund under which the individual was the annuitant (within the meaning assigned by subsection 146(1) or 146.3(1), as the case may be),

        (B) included in computing the income of the individual for the year or a preceding taxation year, and

        (C) deemed by paragraph (10)(b) or (c) to have been paid by the individual as a premium to a registered retirement savings plan,

    exceeds

      (ii) the total of all amounts each of which is an amount

        (A) deductible under this subsection in computing the individual's income for a preceding taxation year, or

        (B) deducted under subsection 146(5) in computing the individual's income for a preceding taxation year, to the extent that the amount can reasonably be considered to be in respect of an amount referred to in subparagraph (i).

(9) Subsection (1), subsection 147.3(5) of the Act, as enacted by subsection (2), and subsections (3) to (7) apply to transfers occurring after August 29, 1990 except that, in applying subsection 147.3(5) of the Act, as enacted by subsection (2), before 1993, the reference in paragraph (b) to ``marriage'' shall be read as ``marriage or other conjugal relationship''.

(10) Subsection 147.3(4) of the Act, as enacted by subsection (2), applies to transfers occurring after 1988 except that, in its application to transfers occurring after 1988 and before August 30, 1990, paragraph 147.3(4)(d) of the Act, as enacted by subsection (2), shall be read as follows:

    (d) is transferred directly to

      (i) another registered pension plan and allocated to the member under a money purchase provision of that plan, or

      (ii) a registered retirement savings plan under which the member is the annuitant (within the meaning assigned by subsection 146(1)).

(11) Subsection 147.3(4.1) of the Act, as enacted by subsection (2), applies to transfers occurring after 1990.

(12) Subsection (8) applies to the 1992 and subsequent taxation years except that, in its application to the 1992 taxation year, subsection 147.3(13.1) of the Act, as enacted by subsection (8), shall be read as follows:

(13.1) There may be deducted in computing the income of an individual for the 1992 taxation year the lesser of

    (a) the amount, if any, by which

      (i) the total of all amounts each of which is an amount included under subsection 146(8), (8.3) or (12) or 146.3(5), (5.1) or (11) in computing the individual's income for a taxation year ending after 1988 and before 1993, to the extent that the amount is not a prescribed withdrawal,

    exceeds

      (ii) the total of all amounts each of which is an amount deductible under paragraph 60(l) or subsection 146(8.2) in computing the income of the individual for a taxation year ending after 1988 and before 1993, and

    (b) the amount, if any, by which

      (i) the total of all amounts each of which is an amount

        (A) transferred to a registered retirement savings plan or registered retirement income fund under which the individual was the annuitant (within the meaning assigned by subsection 146(1) or 146.3(1), as the case may be),

        (B) included in computing the income of the individual for the year or a preceding taxation year, and

        (C) deemed by paragraph (10)(b) or (c) to have been paid by the individual as a premium to a registered retirement savings plan,

    exceeds

      (ii) the total of all amounts each of which is an amount deducted under subsection 146(5) in computing the individual's income for a preceding taxation year, to the extent that the amount can reasonably be considered to be in respect of an amount referred to in subparagraph (i).

87. (1) Subsection 148(1) of the Act is amended by adding the following after paragraph (b):

    (b.1) a registered retirement income fund,

(2) Paragraph 148(2)(a) of the Act is replaced by the following:

    (a) where at any time a policyholder becomes entitled to receive under a life insurance policy a particular amount as, on account of, in lieu of payment of or in satisfaction of, a policy dividend, the policyholder shall be deemed

      (i) to have disposed of an interest in the policy at that time, and

      (ii) to have become entitled to receive proceeds of the disposition equal to the amount, if any, by which

        (A) the particular amount

      exceeds

        (B) the part of the particular amount applied immediately after that time to pay a premium under the policy or to repay a policy loan under the policy, as provided for under the terms and conditions of the policy;

(3) Paragraph 148(8.1)(a) of the Act is amended by adding the word ``or'' at the end of subparagraph (i), by replacing the word ``or'' at the end of subparagraph (ii) with the word ``and'', and by repealing subparagraph (iii).

(3.1) The formula in the definition ``adjusted cost basis'' in subsection 148(9) of the Act is replaced by the following:

(A + B + C + D + E + F + G + G.1) - (H + I + J + K + L)

(4) The description of B in the definition ``adjusted cost basis'' in subsection 148(9) of the Act is replaced by the following:

    B is the total of all amounts each of which is an amount paid before that time by or on behalf of the policyholder in respect of a premium under the policy, other than amounts referred to in clause (2)(a)(ii)(B), in subparagraph (iii) of the description of C in paragraph (a) of the definition ``proceeds of the disposition'' or in subparagraph (b)(i) of that definition,

(5) The description of E in the definition ``adjusted cost basis'' in subsection 148(9) of the Act is replaced by the following:

    E is the total of all amounts each of which is an amount in respect of the repayment before that time and after March 31, 1978 of a policy loan not exceeding the total of the proceeds of the disposition, if any, in respect of that loan and the amount, if any, described in the description of J but not including any payment of interest thereon, any loan repayment that was deductible under paragraph 60(s) of this Act or paragraph 20(1)(hh) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952 (as it applied in taxation years before 1985) or any loan repayment referred to in clause (2)(a)(ii)(B),

(6) The definition ``adjusted cost basis'' in subsection 148(9) of the Act is amended by adding the following after the description of G:

    G.1 is, in the case of an interest in a life insurance policy (other than an annuity contract) to which subsection (8.2) applied before that time, the total of all amounts each of which is a mortality gain, as defined by regulation and determined by the issuer of the policy in accordance with the regulations, in respect of the interest immediately before the end of the calendar year ending in a taxation year beginning before that time,

(7) The description of C in paragraph (a) of the definition ``proceeds of the disposition'' in subsection 148(9) of the Act is replaced by the following:

      C is the total of amounts each of which is

          (i) an amount payable at that time by the policyholder in respect of a policy loan in respect of the policy,

          (ii) a premium under the policy that is due but unpaid at that time, or

          (iii) an amount applied, immediately after the time of the surrender, to pay a premium under the policy, as provided for under the terms and conditions of the policy,

(8) Subparagraph (b)(i) of the definition ``proceeds of the disposition'' in subsection 148(9) of the Act is replaced by the following:

        (i) the amount of the loan, other than the part thereof applied, immediately after the loan, to pay a premium under the policy, as provided for under the terms and conditions of the policy, and

(9) Subsection (1) applies to the 1991 and subsequent taxation years.

(10) Subsection (2) applies to policy dividends received or receivable in taxation years beginning after December 20, 1991.

(11) Subsection (3) applies after 1992.

(12) Subsection (4) applies to amounts paid in taxation years beginning after December 20, 1991.

(13) Subsection (5) applies to loan repayments occurring in taxation years beginning after December 20, 1991.

(14) Subsections (3.1) and (6) apply to transfers and distributions occurring after 1989.

(15) Subsection (7) applies to surrenders occurring in taxation years beginning after December 20, 1991.

(16) Subsection (8) applies to policy loans made in taxation years beginning after December 20, 1991.

88. (1) Subsection 149(1) of the Act is amended by adding the following after paragraph (u):

Amateur athlete trust

    (v) an amateur athlete trust;

(2) Subsection 149(2) of the Act is replaced by the following:

Determination of income

(2) For the purposes of paragraphs (1)(e), (i), (j) and (l), in computing the part, if any, of any income that was payable to or otherwise available for the personal benefit of any person or the total of any amounts that is not less than a percentage specified in any of those paragraphs of any income for a period, the amount of such income shall be deemed to be the amount thereof determined on the assumption that the amount of any taxable capital gain or allowable capital loss is nil.

(3) Subsection 149(10) of the Act is amended by adding the following after paragraph (a):

    (a.1) for the purpose of computing the corporation's income for its first taxation year ending after that time, the corporation shall be deemed to have deducted under sections 20, 138 and 140 in computing its income for its taxation year ending immediately before that time, the greatest amount that could have been claimed or deducted for that year as a reserve under those sections;

(4) Section 149 of the Act is amended by adding the following after subsection (11):

Information returns

(12) Every person who, because of paragraph (1)(e) or (l), is exempt from tax under this Part on all or part of the person's taxable income shall, within 6 months after the end of each fiscal period of the person and without notice or demand therefor, file with the Minister an information return for the period in prescribed form and containing prescribed information, if

    (a) the total of all amounts each of which is a taxable dividend or an amount received or receivable by the person as, on account of, in lieu of or in satisfaction of, interest, rentals or royalties in the period exceeds $10,000;

    (b) at the end of the person's preceding fiscal period the total assets of the person (determined in accordance with generally accepted accounting principles) exceeded $200,000; or

    (c) an information return was required to be filed under this subsection by the person for a preceding fiscal period.

(5) Subsection (1) applies to the 1988 and subsequent taxation years.

(6) Subsections (2) and (3) apply to the 1992 and subsequent taxation years.

(7) Subsection (4) applies to fiscal periods ending after 1992.

89. (1) The Act is amended by adding the following after section 150:

Definition of ``electronic filing''

150.1 (1) For the purposes of this section, ``electronic filing'' means using electronic media in a manner specified in writing by the Minister.

Filing of return by electronic transmission

(2) A person who meets the criteria specified in writing by the Minister may file a return of income for a taxation year by way of electronic filing.

Deemed date of filing

(3) For the purposes of section 150, where a return of income of a taxpayer for a taxation year is filed by way of electronic filing, it shall be deemed to be a return of income filed with the Minister in prescribed form on the day the Minister acknowledges acceptance of it.

Declaration

(4) Where a return of income of a taxpayer for a taxation year is filed by way of electronic filing by a particular person (in this subsection referred to as the ``filer'') other than the person who is required to file the return, the filer shall, if required by regulation, obtain from the other person a signed statement in prescribed form, retain one copy of the statement and provide the other person with a copy, and the statement shall be deemed to be a record referred to in section 230 in respect of the filer and the other person.

Application to other Parts

(5) This section also applies to Parts I.1 to XIII, with such modifications as the circumstances require.

(2) Subsection (1) applies to the 1992 and subsequent taxation years, and subsection 150.1(5) of the Act, as enacted by subsection (1), in its application to Parts X, X.1, X.2, X.4, XI, XI.1 and XI.2 of the Act, applies after 1991 as if subsections 150.1(1) to (4) of the Act, as enacted by subsection (1), applied after 1991.

90. (1) The portion of subsection 152(3.1) of the Act before paragraph (a) is replaced by the following:

Definition of ``normal reassessment period''

(3.1) For the purposes of subsections (4), (4.2), (4.3) and (5), the normal reassessment period for a taxpayer in respect of a taxation year is

(2) Section 152 of the Act is amended by adding the following after subsection (4.2):

Consequential assessment

(4.3) Notwithstanding subsections (4), (4.1) and (5), where the result of an assessment or a decision on an appeal is to change a particular balance of a taxpayer for a particular taxation year, the Minister may or, where the taxpayer so requests in writing, shall, before the later of the expiration of the normal reassessment period in respect of another taxation year and the end of the day that is one year after the day on which all rights of objection and appeal have expired or been determined in respect of the particular year, reassess the tax, interest or penalties payable, or redetermine an amount deemed to have been paid, under this Part by the taxpayer in respect of the other taxation year, but only for the purpose of giving effect to any provision of this Act requiring the inclusion, or allowing the deduction, of an amount in computing a balance of the taxpayer for the other year, to the extent that the inclusion or deduction can reasonably be considered to relate to the change in the particular balance of the taxpayer for the particular year.

Definition of ``balance''

(4.4) For the purposes of subsection (4.3), a ``balance'' of a taxpayer for a taxation year is the income, taxable income, taxable income earned in Canada or any loss of the taxpayer for the year, or the tax or other amount payable by, any amount refundable to, or any amount deemed to have been paid by, the taxpayer for the year.

(3) Subsections (1) and (2) apply to reassessments and redeterminations in respect of taxation years made after June 10, 1993 that relate to changes in balances for other taxation years made as a result of assessments made, or decisions on appeals rendered, after December 20, 1991 except that, where the day referred to in subsection 152(4.3) of the Income Tax Act, as enacted by subsection (2), as ``the day on which all rights of objection and appeal have expired or been determined in respect of the particular year'' occurs before June 10, 1993, that subsection of the Income Tax Act shall be read as if that reference were to June 10, 1993.

91. (1) The portion of subsection 153(1) of the Act after paragraph (r) is replaced by the following:

shall deduct or withhold therefrom such amount as is determined in accordance with prescribed rules and shall, at such time as is prescribed, remit that amount to the Receiver General on account of the payee's tax for the year under this Part or Part XI.3, as the case may be, and, where at that prescribed time the person is a prescribed person, the remittance shall be made to the account of the Receiver General at a financial institution (within the meaning that would be assigned by the definition ``financial institution'' in subsection 190(1) if that definition were read without reference to paragraphs (d) and (e) thereof).

(2) Subsection (1) applies after 1992.

92. (1) Subsection 156(1) of the Act is replaced by the following:

Other individuals

156. (1) Subject to section 156.1, every individual, other than one to whom subsection 153(2) or section 155 applies, shall pay to the Receiver General in respect of each taxation year

    (a) on or before March 15, June 15, September 15 and December 15 in the year, an amount equal to 1/4 of

      (i) the amount estimated by the individual to be the tax payable under this Part by the individual for the year, or

      (ii) the individual's instalment base for the preceding taxation year, or

    (b) on or before

      (i) March 15 and June 15 in the year, an amount equal to 1/4 of the individual's instalment base for the second preceding taxation year, and

      (ii) September 15 and December 15 in the year, an amount equal to 1/2 of the amount, if any, by which

        (A) the individual's instalment base for the preceding taxation year

      exceeds

        (B) 1/2 of the individual's instalment base for the second preceding taxation year,

and, on or before the individual's balance-due day for the year, the remainder of the individual's tax estimated under section 151.

(2) Subsection (1) applies to the 1992 and subsequent taxation years.

93. (1) Subsection 156.1(2) of the Act is replaced by the following:

Idem

(2) Paragraphs 155(1)(a) and 156(1)(a) and (b) do not require the payment of any amount in respect of an individual that would otherwise become due under any of those paragraphs on or after the day on which the individual died.

(2) Subsection (1) applies to the 1992 and subsequent taxation years.

94. (1) Subparagraph 157(1)(a)(i) of the Act is replaced by the following:

      (i) on or before the last day of each month in the year, an amount equal to 1/12 of the total of the amounts estimated by it to be the taxes payable by it under this Part and Parts I.3, VI and VI.1 for the year,

(2) The portion of paragraph 157(1)(b) of the Act before subparagraph (i) is replaced by the following:

    (b) the remainder of the taxes payable by it under this Part and Parts I.3, VI and VI.1 for the year

(3) The portion of subsection 157(2) of the Act after paragraph (c) is replaced by the following:

    (d) no tax was payable by it under any of Parts I.3, VI and VI.1,

it may, instead of paying the instalments required by subsection (1), pay to the Receiver General at the end of the third month following the end of the year the total of the taxes payable by it under this Part and Parts I.3, VI and VI.1 for the year.

(4) Subsection 157(2.1) of the Act is replaced by the following:

Idem

(2.1) Where

    (a) the total of the taxes payable (before taking into consideration any amount referred to in any of subparagraphs 161(7)(a)(ii) to (x) that was excluded or deducted, as the case may be) under this Part and Parts I.3, VI and VI.1 by a corporation for a taxation year, or

    (b) the corporation's first instalment base for the year

is not more than $1,000, the corporation may, instead of paying the instalments required for the year by paragraph (1)(a), pay to the Receiver General, under paragraph (1)(b), the total of the taxes payable by it under this Part and Parts I.3, VI and VI.1 for the year.

(5) Paragraph 157(3)(b) of the Act is replaced by the following:

    (b) where the corporation is neither a mutual fund corporation nor a non-resident-owned investment corporation, 1/12 of the corporation's dividend refund (within the meaning assigned by subsection 129(1)) for the year,

(6) Subsections (1) to (4) apply to the 1992 and subsequent taxation years.

(7) Subsection (5) applies to the 1993 and subsequent taxation years.

95. (1) Subsection 159(7) of the Act is replaced by the following:

Election where subsection 104(4) applicable

(6.1) Where a day determined under paragraph 104(4)(a), (a.1), (b) or (c) in respect of a trust occurs in a taxation year of the trust and the trust so elects and furnishes to the Minister security acceptable to the Minister for payment of any tax the payment of which is deferred by the election, notwithstanding any other provision of this Part respecting the time within which payment shall be made of the tax payable under this Part by the trust for the year, all or any portion of such part of that tax as is equal to the amount, if any, by which that tax exceeds the amount that that tax would be if this Act were read without reference to paragraph 104(4)(a), (a.1), (b) or (c), as the case may be, may be paid in such number (not exceeding 10) of equal consecutive annual instalments as is specified by the trust in the election, the first instalment of which shall be paid on or before the day on or before which payment of that tax would, but for the election, have been required to be made and each subsequent instalment of which shall be paid on or before the next following anniversary of that day.

Form and manner of election and interest

(7) Every election made by a taxpayer under subsection (4) or (6.1) or by the legal representative of a taxpayer under subsection (5) shall be made in prescribed form and on condition that, at the time of payment of any amount payment of which is deferred by the election, the taxpayer shall pay to the Receiver General interest on the amount at the prescribed rate in effect at the time the election was made, computed from the day on or before which the amount would, but for the election, have been required to be paid to the day of payment.

(2) Subsection (1) applies to the 1993 and subsequent taxation years.

96. (1) Subsection 161(1) of the Act is replaced by the following:

General

161. (1) Where at any time after the day on or before which a taxpayer is required to pay the remainder of the taxpayer's tax payable under this Part for a taxation year (or would be so required if a remainder of such tax were payable),

    (a) the total of the taxpayer's taxes payable under this Part and Parts I.3, VI and VI.1 for the year

exceeds

    (b) the total of all amounts each of which is an amount paid at or before that time on account of the taxpayer's tax payable and applied as at that time by the Minister against the taxpayer's liability for an amount payable under this Part or Part I.3, VI or VI.1 for the year,

the taxpayer shall pay to the Receiver General interest at the prescribed rate on the excess, computed for the period during which that excess is outstanding.

(2) Subsections 161(4) and (4.1) of the Act are replaced by the following:

Limitation - farmers and fishermen

(4) For the purposes of subsection (2) and section 163.1, where an individual is required to pay a part or instalment of tax for a taxation year computed by reference to a method described in subsection 155(1), the individual shall be deemed to have been liable to pay on or before the day referred to in subsection 155(1) a part or instalment computed by reference to

    (a) the amount, if any, by which the tax payable under this Part by the individual for the year exceeds the amount deemed by subsection 120(2) to have been paid on account of the individual's tax under this Part for the year,

    (b) the individual's instalment base for the preceding taxation year, or

    (c) the amount stated to be the amount of the instalment payable by the individual for the year in the notice, if any, sent to the individual by the Minister,

whichever method gives rise to the least amount required to be paid by the individual on or before that day.

Limitation - other individuals

(4.01) For the purposes of subsection (2) and section 163.1, where an individual is required to pay a part or instalment of tax for a taxation year computed by reference to a method described in subsection 156(1), the individual shall be deemed to have been liable to pay on or before each day referred to in subsection 156(1) a part or instalment computed by reference to

    (a) the amount, if any, by which the tax payable under this Part by the individual for the year exceeds the amount deemed by subsection 120(2) to have been paid on account of the individual's tax under this Part for the year,

    (b) the individual's instalment base for the preceding taxation year,

    (c) the amounts determined under paragraph 156(1)(b) in respect of the individual for the year, or

    (d) the amounts stated to be the amounts of instalments payable by the individual for the year in the notices, if any, sent to the individual by the Minister,

reduced by the amount, if any, determined under paragraph 156(2)(b) in respect of the individual for the year, whichever method gives rise to the least amount required to be paid by the individual on or before that day.

Limitation - corporations

(4.1) For the purposes of subsection (2) and section 163.1, where a corporation is required to pay a part or instalment of tax for a taxation year computed by reference to a method described in subsection 157(1), the corporation shall be deemed to have been liable to pay on or before each day referred to in subparagraphs 157(1)(a)(i) to (iii) a part or instalment computed by reference to

    (a) the total of the taxes payable under this Part and Parts I.3, VI and VI.1 by the corporation for the year,

    (b) its first instalment base for the year, or

    (c) its second instalment base and its first instalment base for the year,

reduced by the amount, if any, determined under any of paragraphs 157(3)(b) to (d) in respect of the corporation for the year, whichever method gives rise to the least amount required to be paid by the corporation on or before that day.

(3) The portion of subsection 161(7) of the Act before paragraph (a) is replaced by the following:

Effect of carryback of loss, etc.

(7) For the purpose of computing interest under subsection (1) or (2) on tax or a part of an instalment of tax for a taxation year, and for the purpose of section 163.1,

(4) The portion of paragraph 161(7)(a) of the Act before subparagraph (i) is replaced by the following:

    (a) the tax payable by the taxpayer under this Part and Parts I.3, VI and VI.1 for the year shall be deemed to be the amount that it would have been if none of the following amounts, namely,

(5) Paragraph 161(7)(a) of the Act is amended by striking out the word ``or'' at the end of subparagraph (vii) and by adding the following after subparagraph (viii):

      (ix) any amount deducted for a subsequent taxation year under subsection 181.1(4) in respect of any unused surtax credit (within the meaning assigned by subsection 181.1(6)) of the taxpayer, or

      (x) any amount deducted for a subsequent taxation year under subsection 190.1(3) in respect of any unused Part I tax credit (within the meaning assigned by subsection 190.1(5)) of the taxpayer,

(6) The portion of paragraph 161(7)(b) of the Act before subparagraph (i) is replaced by the following:

    (b) the amount by which the tax payable by the taxpayer under this Part and Parts I.3, VI and VI.1 for the year is reduced because of the exclusion or deduction, as the case may be, of an amount described in any of subparagraphs (a)(ii) to (x) of this subsection and subparagraph 161(7)(a)(i) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952 shall be deemed to have been paid by the taxpayer on account of the taxpayer's tax payable for the year under this Part on the day that is the latest of

(7) Subsections (1) and (2) apply to the 1992 and subsequent taxation years except that, in applying subsections 161(4), (4.01) and (4.1) of the Act, as enacted by subsection (2), with respect to instalments of tax that became payable before June 11, 1993, they shall be read without reference to the words ``and section 163.1''.

(8) Subsection (3) applies to instalments of tax that become payable after June 10, 1993.

(9) Subsection (4) and subparagraph 161(7)(a)(ix) of the Act, as enacted by subsection (5), apply to the 1992 and subsequent taxation years.

(10) Subparagraph 161(7)(a)(x) of the Act, as enacted by subsection (5), and subsection (6) apply to the 1991 and subsequent taxation years except that, in applying paragraph 161(7)(b) of the Act, as enacted by subsection (6), to the 1991 taxation year, it shall be read without reference to the words ``and Parts I.3, VI and VI.1''.

97. (1) Paragraph 164(1.1)(d) of the Act is replaced by the following:

    (d) the total of

      (i) the amount, if any, so assessed that is not in controversy, and

      (ii) where the taxpayer is a large corporation (within the meaning assigned by subsection 225.1(8)), 1/2 of the amount so assessed that is in controversy.

(2) Paragraph 164(1.5)(b) of the Act is replaced by the following:

    (b) where an assessment or a redetermination was made under subsection 152(4.2) or 220(3.1) or (3.4) in respect of the taxpayer.

(3) Paragraph 164(3)(a) of the Act is replaced by the following:

    (a) where the taxpayer is an individual, the day that is 45 days after the day on or before which the taxpayer's return of income under this Part for the year was required to be filed under section 150 or would have been required to be so filed if tax under this Part were payable by the taxpayer for the year,

(4) Paragraph 164(3)(c) of the Act is replaced by the following:

    (c) the day or, where the taxpayer is an individual, the day that is 45 days after the day, on which the taxpayer's return of income under this Part for the year was filed under section 150, unless the return was filed on or before the day on or before which it was required to be filed,

(5) Subsection 164(3.2) of the Act is replaced by the following:

Idem

(3.2) Notwithstanding subsection (3), where the amount of an overpayment of a taxpayer for a taxation year is determined because of an assessment made under subsection 152(4.2) or 220(3.1) or (3.4) and an amount in respect thereof is refunded to, or applied to another liability of, the taxpayer under subsection (1.5) or (2), the Minister shall pay or apply interest thereon at the prescribed rate for the period beginning on the day the Minister received the application therefor, in a form satisfactory to the Minister, and ending on the day the amount is refunded or applied, unless the amount of the interest so calculated is less than $1, in which case no interest shall be paid or applied under this subsection.

(6) Subsection 164(5) of the Act is amended by striking out the word ``or'' at the end of paragraph (h) and by adding the following after paragraph (h.1):

    (h.2) the deduction of an amount under subsection 181.1(4) in respect of an unused surtax credit (within the meaning assigned by subsection 181.1(6)) of the taxpayer for a subsequent taxation year, or

    (h.3) the deduction of an amount under subsection 190.1(3) in respect of an unused Part I tax credit (within the meaning assigned by subsection 190.1(5)) of the taxpayer for a subsequent taxation year,

(7) Subsection 164(5.1) of the Act is amended by striking out the word ``or'' at the end of paragraph (h) and by adding the following after paragraph (h.1):

    (h.2) the deduction of an amount under subsection 181.1(4) in respect of an unused surtax credit (within the meaning assigned by subsection 181.1(6)) of the taxpayer for a subsequent taxation year, or

    (h.3) the deduction of an amount under subsection 190.1(3) in respect of an unused Part I tax credit (within the meaning assigned by subsection 190.1(5)) of the taxpayer for a subsequent taxation year,

(8) Section 164 of the Act is amended by adding the following after subsection (6):

Exercise or disposition of employee stock option by legal representative of deceased employee

(6.1) Where, within the first taxation year of the estate of a deceased taxpayer, a right to acquire shares under an agreement in respect of which a benefit was deemed by paragraph 7(1)(e) to have been received by the taxpayer (in this subsection referred to as ``the right'') is exercised or disposed of by the taxpayer's legal representative, notwithstanding any other provision of this Act, where the taxpayer's legal representative elects in prescribed manner and on or before a prescribed day,

    (a) the amount, if any, by which

      (i) the amount of the benefit deemed by paragraph 7(1)(e) to have been received by the taxpayer in respect of the right

    exceeds the total of

      (ii) the amount, if any, by which the value of the right immediately before the time it was exercised or disposed of exceeds the amount, if any, paid by the taxpayer to acquire the right, and

      (iii) where in computing the taxpayer's taxable income for the taxation year in which the taxpayer died an amount was deducted under paragraph 110(1)(d) in respect of the benefit deemed by paragraph 7(1)(e) to have been received by the taxpayer in that year by reason of paragraph 7(1)(e) in respect of that right, « of the amount, if any, by which the amount determined under subparagraph (i) exceeds the amount determined under subparagraph (ii),

    shall be deemed to be a loss of the taxpayer from employment for the year in which the taxpayer died;

    (b) there shall be deducted in computing the adjusted cost base to the estate of the right at any time the amount of the loss that would be determined under paragraph (a) if that paragraph were read without reference to subparagraph (a)(iii); and

    (c) the legal representative shall, at or before the time prescribed for filing the election under this subsection, file an amended return of income for the taxpayer for the taxation year in which the taxpayer died to give effect to paragraph (a).

(9) Subsection 164(7) of the Act is replaced by the following:

Definition of ``overpaymen t''

(7) In this section, ``overpayment'' of a taxpayer for a taxation year means

    (a) where the taxpayer is not a corporation, the total of all amounts paid on account of the taxpayer's liability under this Part for the year minus all amounts payable in respect thereof; and

    (b) where the taxpayer is a corporation, the total of all amounts paid on account of the corporation's liability under this Part or Parts I.3, VI or VI.1 for the year minus all amounts payable in respect thereof.

(10) Subsection (1) applies after June 10, 1993 except that, where a taxpayer has served a notice of objection under the Act with respect to a notice of assessment of tax, interest or penalties under the Act mailed before 1992, the reference in subparagraph 164(1.1)(d)(ii) of the Act, as enacted by subsection (1), to ``1/2'' shall, in its application before 1994 with respect to that notice of objection, be read as ``1/4''.

(11) Subsections (2) and (5) apply to the 1985 and subsequent taxation years.

(12) Subsections (3) and (4) apply to returns of income filed after 1992.

(13) Paragraph 164(5)(h.2) of the Act, as enacted by subsection (6), paragraph 164(5.1)(h.2) of the Act, as enacted by subsection (7), and subsection (9) apply to the 1992 and subsequent taxation years.

(14) Paragraph 164(5)(h.3) of the Act, as enacted by subsection (6), and paragraph 164(5.1)(h.3) of the Act, as enacted by subsection (7), apply to the 1991 and subsequent taxation years.

(15) Subsection (8) applies to deaths occurring after July 13, 1990.

98. (1) Paragraph 165(1.1)(a) of the Act is replaced by the following:

    (a) under subsection 67.5(2), subparagraph 152(4)(b)(i) or subsection 152(4.3) or (6) or 164(4.1), 220(3.4) or 245(8) or in accordance with an order of a court vacating, varying or restoring the assessment or referring the assessment back to the Minister for reconsideration and reassessment,

(2) Subsection 165(1.2) of the Act is replaced by the following:

Idem

(1.2) Notwithstanding subsection (1), no objection may be made to an assessment made under subsection 152(4.2), 169(3) or 220(3.1).

(3) Subsections 165(3) and (4) of the Act are replaced by the following:

Duties of Minister

(3) On receipt of a notice of objection under this section, the Minister shall, with all due dispatch, reconsider the assessment and vacate, confirm or vary the assessment or reassess, and shall thereupon notify the taxpayer in writing of the Minister's action.

99. Subsection 166.1(5) of the Act is replaced by the following:

Duties of Minister

(5) On receipt of an application made under subsection (1), the Minister shall, with all due dispatch, consider the application and grant or refuse it, and shall thereupon notify the taxpayer in writing of the Minister's decision.

100. (1) Paragraph 169(2)(a) of the Act is replaced by the following:

    (a) under subsection 67.5(2), subparagraph 152(4)(b)(i) or subsection 152(4.3) or (6), 164(4.1), 220(3.4) or 245(8) or in accordance with an order of a court vacating, varying or restoring the assessment or referring the assessment back to the Minister for reconsideration and reassessment,

(2) Section 169 of the Act is amended by adding the following after subsection (2):

Disposition of appeal on consent

(3) Notwithstanding section 152, for the purpose of disposing of an appeal made under a provision of this Act, the Minister may at any time, with the consent in writing of the taxpayer, reassess tax, interest, penalties or other amounts payable under this Act by the taxpayer.

Provisions applicable

(4) Division I applies, with such modifications as the circumstances require, in respect of a reassessment made under subsection (3) as though it had been made under section 152.

101. Section 175 of the Act is replaced by the following:

Institution of appeals

175. An appeal to the Tax Court of Canada under this Act, other than one referred to in section 18 of the Tax Court of Canada Act, shall be instituted in the manner set out in that Act or in any rules made under that Act.

102. (1) Section 179.1 of the Act is replaced by the following:

No reasonable grounds for appeal

179.1 Where the Tax Court of Canada disposes of an appeal by a taxpayer in respect of an amount payable under this Part or where such an appeal has been discontinued or dismissed without trial, the Court may, on the application of the Minister and whether or not it awards costs, order the taxpayer to pay to the Receiver General an amount not exceeding 10% of any part of the amount that was in controversy in respect of which the Court determines that there were no reasonable grounds for the appeal, if in the opinion of the Court one of the main purposes for instituting or maintaining any part of the appeal was to defer the payment of any amount payable under this Part.

(2) Subsection (1) applies after June 10, 1993 to appeals instituted after June 1992.

103. (1) Paragraph 180.1(1)(a) of the Act is replaced by the following:

    (a) 3% of the tax payable under Part I by the individual for the year, and

(2) Subsection 180.1(1.1) of the Act is replaced by the following:

Foreign tax deduction

(1.1) There may be deducted from the tax otherwise payable under this Part for a taxation year (computed without reference to subsection (1.2)) by an individual the amount, if any, by which

    (a) the total of all amounts that would be

      (i) deductible by the individual under section 126 for the year, or

      (ii) the individual's special foreign tax credit for the year determined under section 127.54,

    if the references in section 126 to ``the tax for the year otherwise payable under this Part by the taxpayer'' were read as ``the total of the tax for the year otherwise payable under this Part by the individual and the tax for the year that would be payable by the individual under Part I.1 but for subsections 180.1(1.1) and (1.2)''

exceeds

    (b) the total of all amounts deductible by the individual under section 126 for the year and the individual's special foreign tax credit for the year determined under section 127.54.

(3) Subsection (1) applies to the 1992 and subsequent taxation years except that, for the 1992 taxation year, the reference to ``3%'' in paragraph 180.1(1)(a) of the Act, as enacted by subsection (1), shall be read as ``4%''.

(4) Subsection (2) applies to the 1988 and subsequent taxation years.

104. (1) Paragraph (b) of the definition ``long-term debt'' in subsection 181(1) of the Act is replaced by the following:

      (b) in the case of a financial institution that is not a bank, its subordinate indebtedness evidenced by obligations issued for a term of not less than 5 years (other than, where the financial institution is a prescribed federal Crown corporation for the purposes of section 27, such indebtedness evidenced by obligations issued to and held by Her Majesty in right of Canada);

(2) Subsection (1) applies to the 1991 and subsequent taxation years.

105. (1) Subsection 181.1(2) of the Act is replaced by the following:

Short taxation years

(2) Where a taxation year of a corporation is less than 51 weeks, the amount determined under subsection (1) for the year in respect of the corporation shall be reduced to that proportion of that amount that the number of days in the year is of 365.

(2) Subsection 181.1(3) of the Act is amended by striking out the word ``or'' at the end of paragraph (d), by adding the word ``or'' at the end of paragraph (e) and by adding the following after paragraph (e):

    (f) that was throughout the year a corporation described in subsection 136(2) the principal business of which was marketing (including processing incidental to or connected therewith) natural products belonging to or acquired from its members or customers.

(3) Section 181.1 of the Act is amended by adding the following after subsection (3):

Deduction

(4) There may be deducted from a corporation's tax otherwise payable under this Part for a taxation year an amount equal to the total of

    (a) its Canadian surtax payable for the year, and

    (b) such part as the corporation claims of its unused surtax credits for its 7 immediately preceding and 3 immediately following taxation years,

to the extent that that total does not exceed the amount by which

    (c) the amount that would, but for this section, be its tax payable under this Part for the year

exceeds

    (d) the total of all amounts each of which is the amount deducted under subsection 125.3(1) in computing the corporation's tax payable under Part I for a taxation year ending before 1992 in respect of its unused Part I.3 tax credit (within the meaning assigned by section 125.3) for the year.

Idem

(5) For the purposes of this subsection and subsections (4), (6) and (7),

    (a) an amount may not be claimed under subsection (4) in computing a corporation's tax payable under this Part for a particular taxation year in respect of its unused surtax credit for another taxation year until its unused surtax credits, if any, for taxation years preceding the other year that may be claimed under this Part for the particular year have been claimed; and

    (b) an amount in respect of a corporation's unused surtax credit for a taxation year may be claimed under subsection (4) in computing its tax payable under this Part for another taxation year only to the extent that it exceeds the total of all amounts each of which is an amount claimed in respect of that unused surtax credit in computing its tax payable under this Part or Part VI for a taxation year preceding that other year.

Definitions

(6) For the purposes of this subsection and subsections (4), (5) and (7),

``Canadian surtax payable''
« surtaxe ... »

``Canadian surtax payable'' of a corporation for a taxation year has the meaning assigned by subsection 125.3(4);

``unused surtax credit''
« crédit ... »

``unused surtax credit'' for a taxation year ending after 1991

      (a) of a corporation (other than a corporation that was throughout the year a financial institution, within the meaning assigned by section 190) means the amount, if any, by which

        (i) its Canadian surtax payable for the year

      exceeds the total of

        (ii) the amount that would, but for subsection (4), be its tax payable under this Part for the year, and

        (iii) the amount, if any, deducted under section 125.3 in computing the corporation's tax payable under Part I for the year, and

      (b) of a corporation that was throughout the year a financial institution (within the meaning assigned by section 190) means the lesser of

        (i) the amount, if any, by which

          (A) its Canadian surtax payable for the year

        exceeds the total of

          (B) the amount that would, but for subsection (4), be its tax payable under this Part for the year, and

          (C) the amount, if any, deducted under section 125.3 in computing the corporation's tax payable under Part I for the year, and

        (ii) the amount, if any, by which its tax payable under Part I for the year exceeds the amount that would, but for subsection (4) and subsection 190.1(3), be the total of its taxes payable under Parts I.3 and VI for the year.

Acquisition of control

(7) Where at any time control of a corporation has been acquired by a person or group of persons, no amount in respect of its unused surtax credit for a taxation year ending before that time is deductible by the corporation for a taxation year ending after that time and no amount in respect of its unused surtax credit for a taxation year ending after that time is deductible by the corporation for a taxation year ending before that time, except that

    (a) where a business was carried on by the corporation in a taxation year ending before that time, its unused surtax credit for that year is deductible by the corporation for a particular taxation year ending after that time only if that business was carried on by the corporation for profit or with a reasonable expectation of profit throughout the particular year and only to the extent of that proportion of the corporation's tax payable under this Part for the particular year that

      (i) the amount, if any, by which

        (A) the total of its income under Part I for the particular year from that business and, where properties were sold, leased, rented or developed or services were rendered in the course of carrying on that business before that time, its income under Part I for the particular year from any other business substantially all of the income of which was derived from the sale, leasing, rental or development, as the case may be, of similar properties or the rendering of similar services

      exceeds

        (B) the total of all amounts each of which is an amount deducted under paragraph 111(1)(a) or (d) in computing its taxable income under Part I for the particular year in respect of a non-capital loss or a farm loss, as the case may be, for a taxation year in respect of that business or the other business

    is of the greater of

      (ii) the amount determined under subparagraph (i), and

      (iii) the corporation's taxable income under Part I for the particular year; and

    (b) where a business was carried on by the corporation throughout a taxation year ending after that time, its unused surtax credit for that year is deductible by the corporation for a particular taxation year ending before that time only if that business was carried on by the corporation for profit or with a reasonable expectation of profit in the particular year and only to the extent of that proportion of the corporation's tax payable under this Part for the particular year that

      (i) the amount, if any, by which

        (A) the total of its income under Part I for the particular year from that business and, where properties were sold, leased, rented or developed or services were rendered in the course of carrying on that business before that time, its income under Part I for the particular year from any other business substantially all the income of which was derived from the sale, leasing, rental or development, as the case may be, of similar properties of the rendering of similar services

      exceeds

        (B) the total of all amounts each of which is an amount deducted under paragraph 111(1)(a) or (d) in computing its taxable income under Part I for the particular year in respect of a non-capital loss or a farm loss, as the case may be, for a taxation year in respect of that business or the other business

    is of the greater of

      (ii) the amount determined under subparagraph (i), and

      (iii) the corporation's taxable income under Part I for the particular year.

(4) Subsections (1) and (3) apply to the 1992 and subsequent taxation years.

(5) Subsection (2) applies to taxation years ending after June 1989.

106. (1) Paragraph 181.2(3)(d) of the Act is replaced by the following:

    (d) the amount of all indebtedness of the corporation at the end of the year represented by bonds, debentures, notes, mortgages, bankers' acceptances or similar obligations,

(2) Subsection 181.2(4) of the Act is amended by adding the following after paragraph (d):

    (d.1) a loan or advance to, or a bond, debenture, note, mortgage or similar obligation of, a partnership all of the members of which, throughout the year, were other corporations (other than financial institutions) that were not exempt from tax under this Part (otherwise than because of paragraph 181.1(3)(d)),

(3) Section 181.2 of the Act is amended by adding the following after subsection (5):

Loan

(6) For the purpose of subsection (4), where a corporation made a particular loan to a trust that neither

    (a) made any loans or advances to nor received any loans or advances from, nor

    (b) acquired any bond, debenture, note, mortgage or similar obligation of nor issued any bond, debenture, note, mortgage or similar obligation to

a person not related to the corporation, as part of a series of transactions in which the trust made a loan to another corporation (other than a financial institution) to which the corporation is related, the least of

    (c) the amount of the particular loan,

    (d) the amount of the loan from the trust to the other corporation, and

    (e) the amount, if any, by which

      (i) the total of all amounts each of which is the amount of a loan from the trust to any corporation

    exceeds

      (ii) the total of all amounts each of which is the amount of a loan (other than the particular loan) from any corporation to the trust

at any time shall be deemed to be the amount of a loan from the corporation to the other corporation at that time.

(4) Subsection (1) applies to taxation years ending after December 20, 1991.

(5) Subsection (2) applies to the 1991 and subsequent taxation years.

(6) Subsection (3) applies after June 1989.

107. (1) Paragraph 181.3(1)(a) of the Act is replaced by the following:

    (a) the total of all amounts each of which is the carrying value at the end of the year of an asset of the financial institution (other than property held by the institution primarily for the purpose of resale that was acquired by the financial institution, in the year or the preceding taxation year, as a consequence of another person's default, or anticipated default, in respect of a debt owed to the institution) that is tangible property used in Canada and, in the case of a financial institution that is an insurance corporation, that is non-segregated property, within the meaning assigned by subsection 138(12),

(2) Subsection (1) applies to taxation years ending after June 1989.

108. (1) Section 181.6 of the Act is replaced by the following:

Return

181.6 Every corporation that is or would, but for subsection 181.1(4), be liable to pay tax under this Part for a taxation year shall file with the Minister, not later than the day on or before which the corporation is required by section 150 to file its return of income for the year under Part I, a return of capital for the year in prescribed form containing an estimate of the tax payable under this Part by it for the year.

(2) Subsection (1) applies to the 1992 and subsequent taxation years.

109. (1) Sections 181.7 to 181.9 of the Act are replaced by the following:

Provisions applicable to Part

181.7 Sections 152, 158 and 159, subsection 161(11), sections 162 to 167 and Division J of Part I apply to this Part with such modifications as the circumstances require and, for the purpose of this section, paragraph 152(6)(a) shall be read as follows:

    ``(a) a deduction under section 181.1(4) in respect of any unused surtax credit (within the meaning assigned by subsection 181.1(6)) for a subsequent taxation year,''

(2) Subsection (1) applies to the 1992 and subsequent taxation years.

110. (1) The portion of paragraph 186(1)(a) of the Act before subparagraph (i) is replaced by the following:

    (a) all amounts received by the particular corporation in the year and at a time when it was a subject corporation or a private corporation as, on account of, in lieu of payment of or in satisfaction of, taxable dividends from corporations (other than payer corporations connected with it),

(2) The portion of paragraph 186(1)(b) of the Act before subparagraph (i) is replaced by the following:

    (b) all amounts, each of which is an amount in respect of a taxable dividend, in respect of which an amount is deductible under subsection 112(1) in computing its taxable income for the year, received by the particular corporation in the year and at a time when it was a subject corporation or a private corporation from a subject corporation or a private corporation that was a payer corporation connected with the particular corporation equal to that proportion of

(3) Subparagraph 186(1)(b)(iii) of the Act is replaced by the following:

      (iii) the total of all taxable dividends paid by the payer corporation in its taxation year in which it paid the dividend and at a time when it was a subject corporation or a private corporation

(4) The portion of subsection 186(5) of the Act before paragraph (a) is replaced by the following:

Deemed private corporation

(5) A corporation that is at any time a subject corporation shall, for the purposes of paragraphs 87(2)(aa) and 88(1)(e.5) and section 129, be deemed to be a private corporation at that time, except that its refundable dividend tax on hand at the end of any taxation year shall be deemed to be the amount, if any, by which the total of

(5) Subsections (1) and (2) apply to dividends received after 1992.

(6) Subsection (3) applies to dividends paid in the 1992 or a subsequent taxation year except that, with respect to dividends paid in a taxation year beginning before 1993 and ending after 1992, subparagraph 186(1)(b)(iii) of the Act, as enacted by subsection (3), shall be read as follows:

      (iii) the total of all taxable dividends paid by the payer corporation in its taxation year in which it paid the dividend that were paid before 1993 or at a time when the payer corporation was a subject corporation or a private corporation

(7) Subsection (4) applies to the 1993 and subsequent taxation years.

111. (1) Subsection 190.1(2) of the Act is replaced by the following:

Short taxation years

(2) Where a taxation year of a corporation is less than 51 weeks, the amount determined under subsection (1) for the year in respect of the corporation shall be reduced to that proportion of that amount that the number of days in the year is of 365.

Deduction

(3) There may be deducted in computing a corporation's tax payable under this Part for a taxation year an amount equal to the total of

    (a) the amount, if any, by which

      (i) the corporation's tax payable under Part I for the year

    exceeds the lesser of

      (ii) the corporation's Canadian surtax payable (within the meaning assigned by section 125.3) for the year, and

      (iii) the amount that would, but for subsection 181.1(4), be its tax payable under Part I.3 for the year, and

    (b) such part as the corporation claims of its unused Part I tax credits and unused surtax credits for its 7 taxation years immediately before and its 3 taxation years immediately after the year,

to the extent that that amount does not exceed the amount by which

    (c) the amount that would, but for this subsection, be its tax payable under this Part for the year

exceeds

    (d) the total of all amounts each of which is the amount deducted under subsection 125.2(1) in computing the corporation's tax payable under Part I for a taxation year ending before 1992 in respect of its unused Part VI tax credit (within the meaning assigned by section 125.2) for the year.

Idem

(4) For the purposes of this subsection and subsections (3), (5) and (6),

    (a) an amount may not be claimed under subsection (3) in computing a corporation's tax payable under this Part for a particular taxation year

      (i) in respect of its unused Part I tax credit for another taxation year, until its unused Part I tax credits for taxation years preceding the other year that may be claimed under this Part for the particular year have been claimed, and

      (ii) in respect of its unused surtax credit for another taxation year, until its unused surtax credits for taxation years preceding the other year that may be claimed under Part I.3 or this Part for the particular year have been claimed; and

    (b) an amount may be claimed under subsection (3) in computing a corporation's tax payable under this Part for a particular taxation year

      (i) in respect of its unused Part I tax credit for another taxation year, only to the extent that it exceeds the total of all amounts each of which is the amount claimed in respect of that unused Part I tax credit in computing its tax payable under this Part for a taxation year preceding the particular year, and

      (ii) in respect of its unused surtax credit for another taxation year, only to the extent that it exceeds the total of all amounts each of which is the amount claimed in respect of the unused surtax credit

        (A) in computing its tax payable under this Part for a taxation year preceding the particular year, or

        (B) in computing its tax payable under Part I.3 for the particular year or a taxation year preceding the particular year.

Definitions

(5) For the purposes of subsections (3), (4) and (6),

``unused Part I tax credit''
« crédit d'impôt ... »

``unused Part I tax credit'' of a corporation for a taxation year ending after 1991 means the amount, if any, by which

      (a) the corporation's tax payable under Part I for the year

    exceeds the total of

      (b) the amount that would, but for subsection (3), be its tax payable under this Part for the year, and

      (c) the corporation's Canadian surtax payable (within the meaning assigned by section 125.3) for the year;

``unused surtax credit''
« crédit de surtaxe ... »

``unused surtax credit'' of a corporation for a taxation year has the meaning assigned by subsection 181.1(6).

Acquisition of control

(6) Where at any time control of a corporation was acquired by a person or group of persons, no amount in respect of its unused Part I tax credit or unused surtax credit for a taxation year ending before that time is deductible by the corporation for a taxation year ending after the time and no amount in respect of its unused Part I tax credit or unused surtax credit for a taxation year ending after that time is deductible by the corporation for a taxation year ending before that time, except that

    (a) where a business was carried on by the corporation in a taxation year ending before that time, its unused Part I tax credit and unused surtax credit for that year are deductible by the corporation for a particular taxation year ending after that time only if that business was carried on by the corporation for profit or with a reasonable expectation of profit throughout the particular year and only to the extent of that proportion of the corporation's tax payable under this Part for the particular year that

      (i) the amount, if any, by which

        (A) the total of its income under Part I for the particular year from that business and, where properties were sold, leased, rented or developed or services were rendered in the course of carrying on that business before that time, its income under Part I for the particular year from any other business substantially all the income of which was derived from the sale, leasing, rental or development, as the case may be, of similar properties or the rendering of similar services

      exceeds

        (B) the total of all amounts each of which is an amount deducted under paragraph 111(1)(a) or (d) in computing its taxable income under Part I for the particular year in respect of a non-capital loss or a farm loss, as the case may be, for a taxation year in respect of that business or the other business

    is of the greater of

      (ii) the amount determined under subparagraph (i), and

      (iii) the corporation's taxable income under Part I for the particular year; and

    (b) where a business was carried on by the corporation throughout a taxation year ending after that time, its unused Part I tax credit and unused surtax credit for that year are deductible by the corporation for a particular taxation year ending before that time only if that business was carried on by the corporation for profit or with a reasonable expectation of profit in the particular year and only to the extent of that proportion of the corporation's tax payable under this Part for the particular year that

      (i) the amount, if any, by which

        (A) the total of its income under Part I for the particular year from that business and, where properties were sold, leased, rented or developed or services were rendered in the course of carrying on that business before that time, its income under Part I for the particular year from any other business substantially all the income of which was derived from the sale, leasing, rental or development, as the case may be, of similar properties or the rendering of similar services

      exceeds

        (B) the total of all amounts each of which is an amount deducted under paragraph 111(1)(a) or (d) in computing its taxable income under Part I for the particular year in respect of a non-capital loss or a farm loss, as the case may be, for a taxation year in respect of that business or the other business

    is of the greater of

      (ii) the amount determined under subparagraph (i), and

      (iii) the corporation's taxable income under Part I for the particular year.

(2) Subsection (1) applies to the 1992 and subsequent taxation years and, where a corporation that was a financial institution (within the meaning assigned by section 190 of the Act) throughout each of its taxation years ending in 1991 so elected by notifying the Minister of National Revenue in writing before December 11, 1993, to its taxation years ending in 1991 except that, in its application to such years,

    (a) paragraphs 190.1(3)(a) and (b) of the Act, as enacted by subsection (1), shall be read as follows:

    (a) the corporation's tax payable under Part I for the year, and

    (b) such part as the corporation claims of its unused Part I tax credits for its 7 taxation years immediately before and 3 taxation years immediately after the year,

    (b) the reference in paragraph 190.1(3)(d) of the Act, as enacted by subsection (1), to ``1992'' shall be read as ``1991'';

    (c) subsection 190.1(4) of the Act, as enacted by subsection (1), shall be read without reference to subparagraphs 190.1(4)(a)(ii) and (b)(ii);

    (d) subsection 190.1(5) of the Act, as enacted by subsection (1), shall be read as follows:

(5) For the purposes of this subsection and subsections (3), (4) and (6), ``unused Part I tax credit'' of a corporation for a taxation year ending after 1990 means the amount, if any, by which its tax payable under Part I for the year exceeds the amount that would, but for subsection (3), be its tax payable under this Part for the year.

    and

    (e) subsection 190.1(6) of the Act, as enacted by subsection (1), shall be read without reference to the expressions ``or unused surtax credit'' and ``and unused surtax credit''.

112. (1) Section 190.15 of the Act is amended by adding the following after subsection (5):

Idem

(6) Two corporations that would, but for this subsection, be related to each other solely because of

    (a) the control of any corporation by Her Majesty in right of Canada or a province, or

    (b) a right referred to in paragraph 251(5)(b),

shall, for the purposes of this section and section 190.14, be deemed not to be related to each other except that, where at any time a taxpayer has a right referred to in paragraph 251(5)(b) with respect to shares and it can reasonably be considered that one of the main purposes of the acquisition of the right was to avoid any limitation on the amount of a corporation's capital deduction for a taxation year, for the purpose of determining whether a corporation is related to any other corporation, the corporations shall, for the purposes of this section, be deemed to be in the same position in relation to each other as if the taxpayer owned the shares.

(2) Subsection (1) applies to the 1989 and subsequent taxation years.

113. (1) Section 190.2 of the Act is replaced by the following:

Return

190.2 A corporation that is or would, but for subsection 190.1(3), be liable to pay tax under this Part for a taxation year shall file with the Minister, not later than the day on or before which the corporation is required by section 150 to file its return of income for the year under Part I, a return of capital for the year in prescribed form containing an estimate of the tax payable under this Part by it for the year.

(2) Subsection (1) applies to the 1991 and subsequent taxation years.

114. (1) Sections 190.21 to 190.24 of the Act are replaced by the following:

Provisions applicable to Part

190.21 Sections 152, 158 and 159, subsection 161(11), sections 162 to 167 and Division J of Part I apply to this Part with such modifications as the circumstances require and, for the purpose of this section, paragraph 152(6)(a) shall be read as follows:

    ``(a) a deduction under subsection 190.1(3) in respect of any unused surtax credit or unused Part I tax credit (within the meanings assigned by subsection 190.1(5)) for a subsequent taxation year,''.

(2) Subsection (1) applies to the 1992 and subsequent taxation years and, in applying section 190.24 of the Act to the 1991 taxation year, it shall be read as follows:

190.24 Section 152, subsection 157(2.1), sections 158 and 159, subsections 161(2.1), (2.2), (7) and (11), sections 162 to 167 and Division J of Part I apply to this Part with such modifications as the circumstances require and, for the purpose of this section, paragraph 152(6)(a) shall be read as follows:

    ``(a) a deduction under subsection 190.1(3) in respect of any unused Part I tax credit (within the meaning assigned by subsection 190.1(5)) for a subsequent taxation year,''.

115. (1) Paragraphs 191(3)(a) and (b) of the Act are replaced by the following:

    (a) where it can reasonably be considered that the principal purpose for a person acquiring an interest that would, but for this subsection, be a substantial interest in a corporation is to avoid or limit the application of Part I or IV.1 or this Part, the person shall be deemed not to have a substantial interest in the corporation;

    (b) where it can reasonably be considered that the principal purpose for an acquisition of a share of the capital stock of a corporation (in this paragraph referred to as the ``issuer'') by any person (in this paragraph referred to as the ``acquirer'') who had, immediately after the time of the acquisition, a substantial interest in the issuer from another person who did not, immediately before that time, have a substantial interest in the issuer, was to avoid or limit the application of Part I or IV.1 or this Part with respect to a dividend on the share, the acquirer and specified persons (within the meaning assigned by paragraph (h) of the definition ``taxable preferred share'' in subsection 248(1)) in relation to the acquirer shall be deemed not to have a substantial interest in the issuer with respect to any dividend paid on the share;

(2) Subparagraphs 191(3)(d)(ii) and (iii) of the Act are replaced by the following:

      (ii) a trust in which each person who is beneficially interested is

        (A) related (otherwise than because of a right referred to in paragraph 251(5)(b)) to each other person who is beneficially interested in the trust and who is not a registered charity, or

        (B) a registered charity

      and, for the purpose of this subparagraph, where a particular person who is beneficially interested in the trust is an aunt, uncle, niece or nephew of another person, the particular person and any person who is a child or descendant of the particular person shall be deemed to be related to the other person and to any person who is the child or descendant of the other person, or

      (iii) a trust in which only one person (other than a registered charity) is beneficially interested,

(3) Subsection (1) applies to dividends paid or received after December 20, 1991.

(4) Subsection (2) applies after 1990.

116. (1) Subsection 191.4(2) of the Act is replaced by the following:

Provisions applicable to Part

(2) Sections 152, 158 and 159, subsection 161(11), sections 162 to 167 and Division J of Part I apply to this Part with such modifications as the circumstances require.

(2) Subsection (1) applies to the 1992 and subsequent taxation years.

117. (1) The portion of subsection 204.2(1.3) of the Act before the description of G is replaced by the following:

Net past service pension adjustment

(1.3) For the purposes of subsection (1.1), the net past service pension adjustment of an individual, at any time, for a taxation year is the positive or negative amount determined by the formula

P - G

where

P is the total of all amounts each of which is the accumulated PSPA of the individual for the year in respect of an employer, determined as of that time in accordance with prescribed rules; and

(2) Subsection (1) applies after 1988.

118. (1) Paragraph (f) of the definition ``eligible investment'' in section 204.8 of the Act is replaced by the following:

      (f) the carrying value of the total assets of the eligible business entity and all corporations related to it (determined in accordance with generally accepted accounting principles on a consolidated or combined basis, where applicable) does not exceed $50,000,000, and

(2) The definition ``national central labour body'' in section 204.8 of the Act is repealed.

(3) Section 204.8 of the Act is amended by adding the following in alphabetical order:

``eligible labour body''
« organisme syndical admissible »

``eligible labour body'' means a trade union, as defined in the Canada Labour Code, that represents employees in more than one province, or an organization that is composed of 2 or more such unions;

(4) Subsections (1) to (3) apply to the 1992 and subsequent taxation years.

119. (1) Section 204.81 of the Act is amended by replacing the expression ``national central labour body'' with the expression ``eligible labour body'', with such grammatical modifications as the circumstances require, in the following provisions:

    (a) paragraph (1)(b);

    (b) clause (1)(c)(ii)(B);

    (c) subparagraph (1)(c)(iii); and

    (d) subsection (3).

(2) Subsection (1) applies to the 1992 and subsequent taxation years.

120. (1) Paragraph 206(2)(a) of the Act is replaced by the following:

    (a) the amount, if any, by which

      (i) the total of all amounts each of which is the cost amount of a foreign property to a taxpayer described in any of paragraphs 205(a) to (f)

    exceeds the total of

      (ii) where the taxpayer is described in any of paragraphs 205(b), (c) and (e), all amounts each of which is the cost amount to the taxpayer of a foreign property that was not at the end of the month a qualified investment (within the meaning assigned by subsection 146(1) or 146.3(1) or section 204, as the case may be) of the taxpayer, and

      (iii) all amounts (other than an amount included in respect of the taxpayer for the month under subparagraph (ii)) each of which is the cost amount to the taxpayer of foreign property that became foreign property of the taxpayer after its last acquisition by the taxpayer and at a time that is not more than 24 months before the end of the month,

(2) Section 206 of the Act is amended by adding the following after subsection (3):

Reorganizatio ns, etc.

(3.1) Where

    (a) a security (in this subsection referred to as the ``new security'') is issued at a particular time by a corporation to a taxpayer

      (i) in exchange for another security acquired before the particular time by the taxpayer, and

      (ii) in the course of

        (A) a corporate merger or reorganization of capital, or

        (B) a transaction in which control of the corporation that issued the other security is acquired by a person or a group of persons, and

    (b) the new security is foreign property at the particular time,

for the purpose of applying subparagraph (2)(a)(iii) to the taxpayer at or after the particular time,

    (c) the new security shall be deemed to have been last acquired by the taxpayer at the time the other security was last acquired by the taxpayer,

    (d) where the other security was not foreign property immediately before the particular time, the new security shall be deemed to have become foreign property at the particular time, and

    (e) where the other security was foreign property immediately before the particular time, the new security shall be deemed to have become foreign property at the time the other security became foreign property.

(3) Subsections (1) and (2) apply to months ending after December 20, 1991.

121. (1) Section 207.6 of the Act is amended by adding the following after subsection (5):

Prescribed plan or arrangement

(6) For the purposes of the provisions of this Act relating to retirement compensation arrangements, the following rules apply in respect of a prescribed plan or arrangement:

    (a) the plan or arrangement shall be deemed to be a retirement compensation arrangement;

    (b) an amount credited at any time to the account established in the accounts of Canada or a province in connection with the plan or arrangement shall be, except to the extent that it is in respect of a refund determined under subsection 207.7(2), deemed to be a contribution under the plan or arrangement at that time;

    (c) the custodian of the plan or arrangement shall be deemed to be

      (i) where the account is established in the accounts of Canada, Her Majesty in right of Canada, and

      (ii) where the account is established in the accounts of a province, Her Majesty in right of that province; and

    (d) the subject property of the plan or arrangement, at any time, shall be deemed to include an amount of cash equal to the balance at that time in the account.

(2) Subsection (1) applies after 1991.

122. (1) Section 210.2 of the Act is amended by adding the following after subsection (1):

Amateur athlete trusts

(1.1) Notwithstanding section 210.1, where an amount described in subsection 143.1(2) in respect of an amateur athlete trust would, if Part I were applicable, be required to be included in computing the income for a taxation year of a designated beneficiary under the trust, the trust shall pay a tax under this Part in respect of the year equal to 36% of 100/64 of that amount.

(2) Subsection (1) applies to the 1992 and subsequent taxation years.

123. (1) Subparagraph 212(1)(b)(iv) of the Act is replaced by the following:

    (iv) interest payable on any bond, debenture or similar obligation to a person with whom the payer is dealing at arm's length and to whom a certificate of exemption that is in force on the day the amount is paid or credited was issued under subsection (14),

(2) Subparagraph 212(1)(b)(vii) of the Act is amended by striking out the word ``or'' at the end of clause (D), by adding the word ``or'' at the end of clause (E) and by adding the following after clause (E):

        (F) in the event of the person's death;

(3) The portion of subparagraph 212(1)(h)(iii.1) of the Act before clause (A) is replaced by the following:

      (iii.1) the portion of the payment that is transferred by the payer on behalf of the non-resident person, pursuant to an authorization in prescribed form, to a registered pension plan, registered retirement savings plan or registered retirement income fund and that

(4) Subsection 212(1) of the Act is amended by striking out the word ``or'' at the end of paragraph (r) and by adding the following after paragraph (s):

NISA Fund No. 2 payments

    (t) a payment out of a NISA Fund No. 2 to the extent that that amount would, if Part I applied, be required by subsection 12(10.2) to be included in computing the person's income for a taxation year; or

Amateur athlete trust payments

    (u) a payment in respect of an amateur athlete trust that would, if Part I applied, be required by section 143.1 to be included in computing the person's income for a taxation year.

(5) Subsections (1) and (2) apply to amounts paid or credited after 1991 except that, in its application to amounts paid or credited in respect of obligations issued before 1992, subparagraph 212(1)(b)(iv) of the Act, as enacted by subsection (1), applies to amounts paid or credited after 1992.

(6) Subsection (3) applies to payments made after August 29, 1990.

(7) Paragraph 212(1)(t) of the Act, as enacted by subsection (4), applies to payments made after 1990.

(8) Paragraph 212(1)(u) of the Act, as enacted by subsection (4), applies to payments made after 1991.

124. (1) Subsection 212.1(3) of the Act is amended by striking out the word ``and'' at the end of paragraph (b), by adding the word ``and'' at the end of paragraph (c) and by adding the following after paragraph (c):

    (d) for the purpose of paragraph (a),

      (i) a group of persons in respect of a corporation means any 2 or more persons each of whom owns shares of the capital stock of the corporation,

      (ii) a corporation that is controlled by one or more members of a particular group of persons in respect of that corporation shall be considered to be controlled by that group of persons, and

      (iii) a corporation may be controlled by a person or a particular group of persons notwithstanding that the corporation is also controlled or deemed to be controlled by another person or group of persons.

(2) Subsection (1) applies to dispositions occurring after December 20, 1991.

125. (1) Subsection 214(3) of the Act is amended by striking out the word ``and'' at the end of paragraph (i) and by adding the following after paragraph (j):

    (k) where, because of subsection 143.1(2), an amount distributed at any time by an amateur athlete trust would, if Part I were applicable, be required to be included in computing an individual's income, that amount shall be deemed to have been paid at that time to the individual as a payment in respect of an amateur athlete trust; and

    (l) where, because of subsection 12(10.2), an amount would at any particular time, if Part I were applicable, be required to be included in computing a taxpayer's income, that amount shall be deemed to have been paid by Her Majesty in right of Canada at that time to the taxpayer out of the taxpayer's NISA Fund No. 2.

(2) The portion of paragraph 214(8)(c) of the Act before subparagraph (i) is replaced by the following:

    (c) that is not an indexed debt obligation and that was issued for an amount not less than 97% of the principal amount thereof, and the yield from which, expressed in terms of an annual rate on the amount for which the obligation was issued (which annual rate shall, if the terms of the obligation or any agreement relating thereto conferred on the holder thereof a right to demand payment of the principal amount of the obligation or the amount outstanding as or on account of the principal amount thereof, as the case may be, before the maturity of the obligation, be calculated on the basis of the yield that produces the highest annual rate obtainable either on the maturity of the obligation or conditional on the exercise of any such right) does not exceed 4/3 of the interest stipulated to be payable on the obligation, expressed in terms of an annual rate on

(3) Paragraph 214(3)(k) of the Act, as enacted by subsection (1), applies to amounts distributed after 1991.

(4) Paragraph 214(3)(l) of the Act, as enacted by subsection (1), applies after 1990.

(5) Subsection (2) applies to indexed debt obligations issued after October 16, 1991.

126. (1) Paragraph 219(1)(a.3) of the Act is replaced by the following:

    (a.3) the amount deducted under paragraph 20(1)(v.1) by the corporation in computing the amount referred to in paragraph (a), other than any portion of the amount so deducted that was deductible because of the membership of the corporation in a partnership,

(2) Paragraph 219(1)(e) of the Act is replaced by the following:

    (e) the total of the taxes payable by it under Parts I, I.3 and VI for the year less, where the corporation was at no time in the year resident in Canada, that proportion of the tax payable by it under Part I for the year that the amount determined under paragraph (d) in respect of the corporation for the year is of the corporation's amount taxable for the year,

(3) Subsection (1) applies after December 20, 1991.

(4) Subsection (2) applies to taxation years ending after June 1989.

127. (1) Section 220 of the Act is amended by adding the following after subsection (2):

Waiver of filing of documents

(2.1) Where any provision of this Act or a regulation requires a person to file a prescribed form, receipt or other document, or to provide prescribed information, the Minister may waive the requirement, but the person shall provide the document or information at the Minister's request.

(2) Subsection 220(3.1) of the Act is replaced by the following:

Waiver of penalty or interest

(3.1) The Minister may at any time waive or cancel all or any portion of any penalty or interest otherwise payable under this Act by a taxpayer or partnership and, notwithstanding subsections 152(4) to (5), such assessment of the interest and penalties payable by the taxpayer or partnership shall be made as is necessary to take into account the cancellation of the penalty or interest.

(3) Subsection 220(4.1) of the Act is replaced by the following:

Idem

(4.1) Where a taxpayer has objected to or appealed from an assessment under this Act, the Minister shall, while the objection or appeal is outstanding, accept adequate security furnished by or on behalf of the taxpayer for payment of the amount in controversy except to the extent that the Minister may collect the amount because of subsection 225.1(7).

(4) Subsection (1) applies to the 1992 and subsequent taxation years.

(5) Subsection (2) applies to the 1985 and subsequent taxation years.

128. The Act is amended by adding the following after section 221.1:

Re-appropriati on of amounts

221.2 Where a particular amount was appropriated to an amount (in this section referred to as the ``debt'') that is or may become payable by a person under any enactment referred to in paragraphs 223(1)(a) to (d), the Minister may, on application by the person, appropriate the particular amount, or a part thereof, to another amount that is or may become payable under any such enactment and, for the purposes of any such enactment,

    (a) the later appropriation shall be deemed to have been made at the time of the earlier appropriation;

    (b) the earlier appropriation shall be deemed not to have been made to the extent of the later appropriation; and

    (c) the particular amount shall be deemed not to have been paid on account of the debt to the extent of the later appropriation.

129. Subsection 223(3) of the Act is replaced by the following:

Registration in court

(3) On production to the Federal Court, a certificate made under subsection (2) in respect of a debtor shall be registered in the Court and when so registered has the same effect, and all proceedings may be taken thereon, as if the certificate were a judgment obtained in the Court against the debtor for a debt in the amount certified plus interest thereon to the day of payment as provided by the statute or statutes referred to in subsection (1) under which the amount is payable and, for the purpose of any such proceedings, the certificate shall be deemed to be a judgment of the Court against the debtor for a debt due to Her Majesty, enforceable in the amount certified plus interest thereon to the day of payment as provided by that statute or statutes.

130. The portion of subsection 224(1.2) of the Act after paragraph (b) is replaced by the following:

the Minister may, by registered letter or by a letter served personally, require the particular person to pay forthwith, where the moneys are immediately payable, and in any other case, as and when the moneys become payable, the moneys otherwise payable to the tax debtor or the secured creditor in whole or in part to the Receiver General on account of the tax debtor's liability under subsection 227(10.1) or a similar provision, and on receipt of that letter by the particular person, the amount of those moneys that is required by that letter to be paid to the Receiver General shall, notwithstanding any security interest in those moneys, become the property of Her Majesty to the extent of that liability as assessed by the Minister and shall be paid to the Receiver General in priority to any such security interest.

131. (1) The portion of subsection 225.1(1) of the Act after paragraph (g) is replaced by the following:

until after the day that is 90 days after the day of the mailing of the notice of assessment.

(2) Subsection 225.1(2) of the Act is replaced by the following:

Idem

(2) Where a taxpayer has served a notice of objection under this Act to an assessment of an amount payable under this Act, the Minister shall not, for the purpose of collecting the amount in controversy, take any of the actions described in paragraphs (1)(a) to (g) until after the day that is 90 days after the day on which notice is mailed to the taxpayer that the Minister has confirmed or varied the assessment.

(3) Section 225.1 of the Act is amended by adding the following after subsection (6):

Idem - large corporations

(7) Where an amount has been assessed under this Act in respect of a corporation for a taxation year in which it was a large corporation, subsections (1) to (4) do not apply to limit any action of the Minister to collect

    (a) at any time on or before the particular day that is 90 days after the day of the mailing of the notice of assessment, 1/2 of the amount so assessed; and

    (b) at any time after the particular day, the amount, if any, by which the amount so assessed exceeds the total of

      (i) all amounts collected before that time with respect to the assessment, and

      (ii) 1/2 of the amount in controversy at that time.

Definition of ``large corporation''

(8) For the purposes of this section, a ``large corporation'' in a particular taxation year means

    (a) a corporation by which tax under Part I.3 is payable,

      (i) where the particular year ended before July 1989, for its first taxation year ending after June 1989, or

      (ii) where the particular year ended after June 1989, for the particular year,

    or would, but for section 181.1, have been so payable, or

    (b) a corporation that, at the end of the particular year, is related (for the purposes of section 181.5) to a corporation that is a large corporation in its taxation year that includes the end of the particular year,

and, for the purpose of subparagraph (a)(i), a corporation formed as a result of the amalgamation or merger of 2 or more predecessor corporations shall be deemed to be the same corporation as, and a continuation of, each of the predecessor corporations.

(4) Subsection (3) applies after June 10, 1993 except that, where a taxpayer served a notice of objection or instituted an appeal under the Income Tax Act with respect to a notice of assessment of tax, interest or penalties under the Act mailed before 1992,

    (a) the reference in paragraph 225.1(7)(a) of the Act, as enacted by subsection (3), to ``1/2'' shall, in its application before 1994 to all proceedings concerning the subject-matter of the notice of objection or the appeal, be read as ``1/4''; and

    (b) the reference in subparagraph 225.1(7)(b)(ii) of the Act, as enacted by subsection (3), to ``1/2'' shall, in its application before 1994 to all proceedings concerning the subject-matter of the notice of objection or the appeal, be read as ``3/4''.

132. (1) Paragraph 227(8)(b) of the Act is replaced by the following:

    (b) where at the time of the failure a penalty under this subsection was payable by the person in respect of an amount that should have been deducted or withheld during the year and the failure was made knowingly or under circumstances amounting to gross negligence, 20% of that amount.

(2) Subsection 227(8.5) of the Act is repealed.

(3) Paragraph 227(9)(b) of the Act is replaced by the following:

    (b) where at the time of the failure a penalty under this subsection was payable by the person in respect of an amount that should have been remitted or paid during the year and the failure was made knowingly or under circumstances amounting to gross negligence, 20% of that amount.

(4) Subsection 227(9.1) of the Act is replaced by the following:

Idem

(9.1) Notwithstanding any other provision of this Act, any other enactment of Canada, any enactment of a province or any other law, the penalty for failure to remit an amount required to be remitted by a person on or before a prescribed date under subsection 153(1), subsection 21(1) of the Canada Pension Plan and subsection 53(1) of the Unemployment Insurance Act shall, unless the person who is required to remit the amount has, knowingly or under circumstances amounting to gross negligence, delayed in remitting the amount or has, knowingly or under circumstances amounting to gross negligence, remitted an amount less than the amount required, apply only to the amount by which the total of all amounts so required to be remitted on or before that date exceeds $500.

(5) Subsection 227(9.5) of the Act is replaced by the following:

Payment from same establishment

(9.5) In applying paragraphs (8)(b) and (9)(b) in respect of an amount required by paragraph 153(1)(a) to be deducted or withheld, each establishment of a person shall be deemed to be a separate person.

(6) Subsections (1) to (5) apply after 1992, other than with respect to amounts required to be remitted before 1993.

133. (1) The portion of subsection 230.1(1) of the Act before paragraph (a) is replaced by the following:

Books and records re political contributions

230.1 (1) Every registered agent of a registered party and the official agent of each candidate at an election of a member or members to serve in the House of Commons of Canada shall keep records and books of account sufficient to enable the amounts contributed that are received by the agent and expenditures that are made by the agent to be verified (including duplicates of all receipts for amounts contributed, containing prescribed information and signed by the agent) at

(2) The portion of subsection 230.1(2) of the Act after paragraph (a) is replaced by the following:

    (b) in the case of an official agent, within the time within which a return is required to be submitted by the agent to a returning officer under section 228 of the Canada Elections Act,

file with the Minister a return of information in prescribed form and containing prescribed information.

(3) Subsection 230.1(4) of the Act is replaced by the following:

Reports to chief electoral officer

(4) Notwithstanding section 241, the Minister shall, as soon as is reasonably possible after each election and at such other time as is appropriate having regard to the time of receipt by the Minister of returns of information under subsection (2), forward to the Chief Electoral Officer a report that is based on all such returns of information as have been received by the Minister since the most recent such report and that sets out the total of amounts contributed to each registered party and the total of amounts contributed to each candidate at an election of a member or members to serve in the House of Commons of Canada since the most recent such report, and, on receipt thereof by the Chief Electoral Officer, the report is a public record and may be inspected by any person on request during normal business hours.

(4) Subsections (1) to (3) apply to the 1992 and subsequent taxation years.

134. Section 233 of the Act is replaced by the following:

Information return

233. Every person shall, on written demand from the Minister served personally or otherwise, whether or not the person has filed an information return as required by this Act or a regulation, file with the Minister, within such reasonable time as is stipulated in the demand, such information as is designated therein.

135. (1) The description of A in section 235 of the Act is replaced by the following:

A is the total of the taxes that would be payable under Parts I.3 and VI by the corporation for the year if this Act were read without reference to subsections 181.1(4) and 190.1(3); and

(2) Subsection (1) applies to the 1991 and subsequent taxation years.

136. Subsection 239(2.2) of the Act is replaced by the following:

Offence with respect to confidential information

(2.2) Every person who

    (a) contravenes subsection 241(1), or

    (b) knowingly contravenes an order made under subsection 241(4.1)

is guilty of an offence and liable on summary conviction to a fine not exceeding $5,000 or to imprisonment for a term not exceeding 12 months, or to both.

Idem

(2.21) Every person

    (a) to whom taxpayer information has been provided for a particular purpose under paragraph 241(4)(b), (c), (e), (h) or (k), or

    (b) who is an official to whom taxpayer information has been provided for a particular purpose under paragraph 241(4)(a), (d), (f) or (i)

and who for any other purpose knowingly uses, provides to any person, allows the provision to any person of, or allows any person access to, that information is guilty of an offence and liable on summary conviction to a fine not exceeding $5,000 or to imprisonment for a term not exceeding 12 months, or to both.

Definitions

(2.22) In subsection (2.21), ``official'' and ``taxpayer information'' have the meanings assigned by subsection 241(10).

137. (1) Subsections 241(1) to (5) of the Act are replaced by the following:

Provision of information

241. (1) Except as authorized by this section, no official shall

    (a) knowingly provide, or knowingly allow to be provided, to any person any taxpayer information;

    (b) knowingly allow any person to have access to any taxpayer information; or

    (c) knowingly use any taxpayer information otherwise than in the course of the administration or enforcement of this Act, the Canada Pension Plan or the Unemployment Insurance Act or for the purpose for which it was provided under this section.

Idem

(2) Notwithstanding any other Act of Parliament or other law, no official shall be required, in connection with any legal proceedings, to give or produce evidence relating to any taxpayer information.

Communicati on where proceedings have been commenced

(3) Subsections (1) and (2) do not apply in respect of

    (a) criminal proceedings, either by indictment or on summary conviction, that have been commenced by the laying of an information or the preferring of an indictment, under an Act of Parliament; or

    (b) any legal proceedings relating to the administration or enforcement of this Act, the Canada Pension Plan or the Unemployment Insurance Act or any other Act of Parliament or law of a province that provides for the imposition or collection of a tax or duty.

Circumstances involving danger

(3.1) The Minister may provide to appropriate persons any taxpayer information relating to imminent danger of death or physical injury to any individual.

Where taxpayer information may be disclosed

(4) An official may

    (a) provide to any person taxpayer information that can reasonably be regarded as necessary for the purposes of the administration or enforcement of this Act, the Canada Pension Plan or the Unemployment Insurance Act, solely for that purpose;

    (b) provide to any person taxpayer information that can reasonably be regarded as necessary for the purposes of determining any tax, interest, penalty or other amount that is or may become payable by the person, or any refund or tax credit to which the person is or may become entitled, under this Act or any other amount that is relevant for the purposes of that determination;

    (c) provide to the person who seeks a certification referred to in paragraph 147.1(10)(a) the certification or a refusal to make the certification, solely for the purposes of administering a registered pension plan;

    (d) provide taxpayer information

      (i) to an official of the Department of Finance solely for the purposes of the formulation or evaluation of fiscal policy,

      (ii) to an official solely for the purposes of the initial implementation of a fiscal policy or for the purposes of the administration or enforcement of an Act of Parliament that provides for the imposition and collection of a tax or duty,

      (iii) to an official solely for the purposes of the administration or enforcement of a law of a province that provides for the imposition or collection of a tax or duty,

      (iv) to an official of the government of a province solely for the purposes of the formulation or evaluation of fiscal policy,

      (v) to an official of the Department of Energy, Mines and Resources or of the government of a province solely for the purposes of the administration or enforcement of a program of the Government of Canada or of the province relating to the exploration for or exploitation of Canadian petroleum and gas resources,

      (vi) to an official of the government of a province that has received or is entitled to receive a payment referred to in this subparagraph, or to an official of the Department of Energy, Mines and Resources, solely for the purposes of the provisions relating to payments to a province in respect of the taxable income of corporations earned in the offshore area with respect to the province under the Canada-Nova Scotia Offshore Petroleum Resources Accord Implementation Act, chapter 28 of the Statutes of Canada, 1988, the Canada-Newfoundland Atlantic Accord Implementation Act, chapter 3 of the Statutes of Canada, 1987, or similar Acts relating to the exploration for or exploitation of offshore Canadian petroleum and gas resources,

      (vii) to an official solely for the purposes of the administration or enforcement of the Pension Benefits Standards Act, 1985 or a similar law of a province,

      (viii) to an official of the Department of Veterans Affairs solely for the purposes of the administration of the War Veterans Allowance Act or Part XI of the Merchant Navy Veteran and Civilian War-related Benefits Act,

      (ix) to an official of a department or agency of the Government of Canada or of a province as to the name, address, occupation, size or type of business of a taxpayer, solely for the purposes of enabling that department or agency to obtain statistical data for research and analysis,

      (x) to an official of the Canada Employment and Immigration Commission or the Department of Employment and Immigration solely for the purposes of the administration or enforcement of, or the evaluation or formulation of policy for the purposes of, the Unemployment Insurance Act or an employment program of the Government of Canada,

      (xi) to an official of the Department of Agriculture or of the government of a province solely for the purposes of the administration or enforcement of a program of the Government of Canada or of the province established under an agreement entered into under the Farm Income Protection Act,

      (xii) to an official of the Department of Communications or a member of the Canadian Cultural Property Export Review Board solely for the purposes of administering sections 32 and 33 of the Cultural Property Export and Import Act,

      (xiii) to an official solely for the purposes of setting off against any sum of money that may be due or payable by Her Majesty in right of Canada a debt due to

        (A) Her Majesty in right of Canada, or

        (B) Her Majesty in right of a province on account of taxes payable to the province where an agreement exists between Canada and the province under which Canada is authorized to collect the taxes on behalf of the province, or

      (xiv) to an official solely for the purposes of section 7.1 of the Federal-Provincial Fiscal Arrangements and Federal Post-Secondary Education and Health Contributions Act;

    (e) provide taxpayer information, or allow the inspection of or access to taxpayer information, as the case may be, under, and solely for the purposes of,

      (i) subsection 36(2) or section 46 of the Access to Information Act,

      (ii) section 13 of the Auditor General Act,

      (iii) section 92 of the Canada Pension Plan,

      (iv) a warrant issued under subsection 21(3) of the Canadian Security Intelligence Service Act,

      (v) an order made under subsection 462.48(3) of the Criminal Code,

      (vi) section 26 of the Cultural Property Export and Import Act,

      (vii) section 62 of the Family Orders and Agreements Enforcement Assistance Act,

      (viii) paragraph 33(3)(a) of the Old Age Security Act,

      (ix) subsection 34(2) or section 45 of the Privacy Act,

      (x) section 24 of the Statistics Act,

      (xi) section 9 of the Tax Rebate Discounting Act, or

      (xii) a provision contained in a tax convention or agreement between Canada and another country that has the force of law in Canada;

    (f) provide taxpayer information solely for the purposes of sections 23 to 25 of the Financial Administration Act;

    (g) use taxpayer information to compile information in a form that does not directly or indirectly reveal the identity of the taxpayer to whom the information relates;

    (h) use, or provide to any person, taxpayer information solely for a purpose relating to the supervision, evaluation or discipline of an authorized person by Her Majesty in right of Canada in respect of a period during which the authorized person was employed by or engaged by or on behalf of Her Majesty in right of Canada to assist in the administration or enforcement of this Act, the Canada Pension Plan or the Unemployment Insurance Act, to the extent that the information is relevant for that purpose;

    (i) provide access to records of taxpayer information to the National Archivist of Canada or a person acting on behalf of or under the direction of the National Archivist of Canada, solely for the purposes of section 5 of the National Archives of Canada Act, and transfer such records to the care and control of such persons solely for the purposes of section 6 of that Act;

    (j) use taxpayer information relating to a taxpayer to provide information to the taxpayer; or

    (k) provide, or allow inspection of or access to, taxpayer information to or by any person otherwise legally entitled to it under an Act of Parliament solely for the purposes for which that person is entitled to the information.

Measures to prevent unauthorized use or disclosure

(4.1) The person who presides at a legal proceeding relating to the supervision, evaluation or discipline of an authorized person may order such measures as are necessary to ensure that taxpayer information is not used or provided to any person for any purpose not relating to that proceeding, including

    (a) holding a hearing in camera;

    (b) banning the publication of the information;

    (c) concealing the identity of the taxpayer to whom the information relates; and

    (d) sealing the records of the proceeding.

Disclosure to taxpayer or on consent

(5) An official may provide taxpayer information relating to a taxpayer

    (a) to the taxpayer; and

    (b) with the consent of the taxpayer, to any other person.

(2) The portion of subsection 241(6) of the Act before paragraph (a) is replaced by the following:

Appeal from order or direction

(6) An order or direction that is made in the course of or in connection with any legal proceedings and that requires an official or authorized person to give or produce evidence relating to any taxpayer information may, by notice served on all interested parties, be appealed forthwith by the Minister or by the person against whom the order or direction is made to

(3) Subsection 241(10) of the Act is replaced by the following:

Definitions

(10) In this section,

``authorized person''
« personne autorisée »

``authorized person'' means a person who is engaged or employed, or who was formerly engaged or employed, by or on behalf of Her Majesty in right of Canada to assist in carrying out the provisions of this Act, the Canada Pension Plan or the Unemployment Insurance Act;

``court of appeal''
« cour d'appel »

``court of appeal'' has the meaning assigned by the definition ``court of appeal'' in section 2 of the Criminal Code;

``official''
« fonctionnair e »

``official'' means any person who is employed in the service of, who occupies a position of responsibility in the service of, or who is engaged by or on behalf of,

      (a) Her Majesty in right of Canada or a province, or

      (b) an authority engaged in administering a law of a province similar to the Pension Benefits Standards Act, 1985,

    or any person who was formerly so employed, who formerly occupied such a position or who was formerly so engaged;

``taxpayer information''
« renseigneme nt confidentiel »

``taxpayer information'' means information of any kind and in any form relating to one or more taxpayers that is

      (a) obtained by or on behalf of the Minister for the purposes of this Act, or

      (b) prepared from information referred to in paragraph (a),

    but does not include information that does not directly or indirectly reveal the identity of the taxpayer to whom it relates.

References to Petroleum and Gas Revenu Tax Act

(11) The references in subsections (1), (3), (4) and (10) to ``this Act'' shall be read as references to ``this Act or the Petroleum and Gas Revenue Tax Act''.

138. (1) Section 244 of the Act is amended by adding the following after subsection (20):

Proof of return filed

(21) For the purposes of this Act, a document presented by the Minister purporting to be a print-out of the information in respect of a taxpayer received under section 150.1 by the Minister from a person shall be received as evidence and, in the absence of evidence to the contrary, is proof of the return filed by the person under that section.

Filing of information returns

(22) Where a person who is required by this Act or a regulation to file an information return in prescribed form with the Minister meets the criteria specified in writing by the Minister, the person may at any time file the information return with the Minister by way of electronic filing (within the meaning assigned by subsection 150.1(1)) and the person shall be deemed to have filed the information return with the Minister at that time, and a document presented by the Minister purporting to be a print-out of the information so received by the Minister shall be received as evidence and, in the absence of evidence to the contrary, is proof of the information return so deemed to have been filed.

(2) Subsection 244(21) of the Act, as enacted by subsection (1), applies to the 1992 and subsequent taxation years.

(3) Subsection 244(22) of the Act, as enacted by subsection (1), applies after 1991.

139. (1) The definition ``person'' in subsection 248(1) of the Act is replaced by the following:

``person''
« personne »

``person'', or any word or expression descriptive of a person, includes any corporation, and any entity exempt, because of subsection 149(1), from tax under Part I on all or part of the entity's taxable income and the heirs, executors, administrators or other legal representatives of such a person, according to the law of that part of Canada to which the context extends;

(2) Paragraphs (d) and (e) of the definition ``cost amount'' in subsection 248(1) of the Act are replaced by the following:

      (d) where the property was eligible capital property of the taxpayer in respect of a business, 4/3 of the amount that would, but for subsection 14(3), be determined by the formula

A x B / C

      where

      A is the cumulative eligible capital of the taxpayer in respect of the business at that time,

      B is the fair market value at that time of the property, and

      C is the fair market value at that time of all the eligible capital property of the taxpayer in respect of the business,

      (e) where the property was a debt owing to the taxpayer (other than the amount in respect of such property that was deducted under paragraph 20(1)(p) in computing the taxpayer's income for a taxation year ending before that time or of a net income stabilization account) or any other right of the taxpayer to receive an amount (other than a right to receive an amount in respect of a net income stabilization account), the amortized cost of the property to the taxpayer at that time or, where the property does not have an amortized cost to the taxpayer, the amount of the debt or right that was outstanding at that time,

(3) The portion of paragraph (a) of the definition ``death benefit'' in subsection 248(1) of the Act before subparagraph (i) is replaced by the following:

      (a) where the taxpayer is the only person who has received such an amount and who is a surviving spouse of the employee (which person is, in this definition, referred to as the ``surviving spouse''), the lesser of

(4) The portion of paragraph (b) of the definition ``personal trust'' in subsection 248(1) of the Act after subparagraph (ii) is replaced by the following:

      and, for the purposes of this paragraph and paragraph 53(2)(h), where all the beneficial interests in a particular inter vivos trust acquired by way of the transfer, assignment or other disposition of property to the particular trust were acquired by

        (iii) one person, or

        (iv) 2 or more persons who would be related to each other if

          (A) a trust and another person were related to each other, where the other person is a beneficiary under the trust or is related to a beneficiary under the trust, and

          (B) a trust and another trust were related to each other, where a beneficiary under the trust is a beneficiary under the other trust or is related to a beneficiary under the other trust,

        any beneficial interest in the particular trust acquired by such a person shall be deemed to have been acquired for no consideration;

(5) The portion of the definition ``small business corporation'' in subsection 248(1) of the Act after paragraph (c) is replaced by the following:

    including, for the purpose of paragraph 39(1)(c), a corporation that was at any time in the 12 months preceding that time a small business corporation, and, for the purpose of this definition, the fair market value of a net income stabilization account shall be deemed to be nil;

(6) The definition ``specified shareholder'' in subsection 248(1) of the Act is amended by striking out the word ``and'' at the end of paragraph (c), by adding the word ``and'' at the end of paragraph (d) and by adding the following after paragraph (d):

      (e) notwithstanding paragraph (b), where a beneficiary's share of the income or capital of the trust depends on the exercise by any person of, or the failure by any person to exercise, any discretionary power, the beneficiary shall be deemed to own each share of the capital stock of a corporation owned at that time by the trust;

(7) Subsection 248(1) of the Act is amended by adding the following in alphabetical order:

``amateur athlete trust''
« fiducie au profit d'un athlète amateur »

``amateur athlete trust'' has the meaning assigned by subsection 143.1(1);

``indexed debt obligation''
« titre de créance indexé »

``indexed debt obligation'' means a debt obligation the terms or conditions of which provide for an adjustment to an amount payable in respect of the obligation for a period during which the obligation was outstanding that is determined by reference to a change in the purchasing power of money;

``net income stabilization account''
« compte de stabilisation du revenu net »

``net income stabilization account'' means an account of a taxpayer under the net income stabilization account program under the Farm Income Protection Act;

``NISA Fund No. 2''
« second fond du compte de stabilisation du revenu net »

``NISA Fund No. 2'' means the portion of a taxpayer's net income stabilization account described in paragraph 8(2)(b) of the Farm Income Protection Act;

(8) Section 248 of the Act is amended by adding the following after subsection (9):

How trust created

(9.1) For the purposes of this Act, a trust shall be considered to be created by a taxpayer's will if the trust is created

    (a) under the terms of the taxpayer's will; or

    (b) by an order of a court in relation to the taxpayer's estate made under any law of a province that provides for the relief or support of dependants.

Vested indefeasibly

(9.2) For the purposes of this Act, property shall be deemed not to have vested indefeasibly

    (a) in a trust under which a taxpayer's spouse is a beneficiary, where the trust is created by the will of the taxpayer, unless the property vested indefeasibly in the trust before the death of the spouse; and

    (b) in an individual (other than a trust), unless the property vested indefeasibly in the individual before the death of the individual.

(9) Subsection 248(11) of the Act is replaced by the following:

Compound interest

(11) Interest computed at a prescribed rate under any of subsections 129(2.1) and (2.2), 131(3.1) and (3.2), 132(2.1) and (2.2), 133(7.01) and (7.02), 159(7), 160.1(1), 161(1), (2) and (11), 164(3) to (4), 181.8(1) and (2) (as these two subsections read in their application to the 1991 and earlier taxation years), 185(2), 187(2) and 189(7), section 190.23 (as it read in its application to the 1991 and earlier taxation years) and subsections 193(3), 195(3), 202(5) and 227(8.3), (9.2) and (9.3) of this Act and subsection 182(2) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952 (as that subsection read in its application to taxation years beginning before 1986) and subsection 191(2) of that Act (as that subsection read in its application to the 1984 and earlier taxation years) shall be compounded daily and, where interest is computed on an amount under any of those provisions and is unpaid or unapplied on the day it would, but for this subsection, have ceased to be computed under that provision, interest at the prescribed rate shall be computed and compounded daily on the unpaid or unapplied interest from that day to the day it is paid or applied and shall be paid or applied as would be the case if interest had continued to be computed under that provision after that day.

(10) Section 248 of the Act is amended by adding the following after subsection (24):

Beneficially interested

(25) For the purposes of this Act, a person or partnership is beneficially interested in a trust if the person or partnership has any right (whether immediate or future, whether absolute or contingent or whether conditional on or subject to the exercise of any discretionary power by any person or persons) to receive any of the income or capital of the trust either directly from the trust or indirectly through one or more other trusts.

(11) Paragraph (d) of the definition ``cost amount'' in subsection 248(1) of the Act, as enacted by subsection (2), applies

    (a) in the case of a corporation, to taxation years of the corporation beginning after June 1987, and

    (b) in any other case, to fiscal periods beginning after 1987,

except that, in its application before July 14, 1990, paragraph (d) of the definition ``cost amount'' in subsection 248(1) of the Act, as enacted by subsection (2), shall be read as follows:

      (d) where the property was eligible capital property in respect of a business, 4/3 of the amount that would, but for subsection 14(3), be the cumulative eligible capital of the taxpayer in respect of the business at that time,

(12) Paragraph (e) of the definition ``cost amount'' in subsection 248(1) of the Act, as enacted by subsection (2), subsection (5), and the definitions ``net income stabilization account'' and ``NISA Fund No. 2'' in subsection 248(1) of the Act, as enacted by subsection (7), apply to the 1991 and subsequent taxation years.

(13) Subsection (3) applies to the 1993 and subsequent taxation years.

(14) Subsection (4) applies after 1987.

(15) Subsection (6) applies after 1991.

(16) The definition ``amateur athlete trust'' in subsection 248(1) of the Act, as enacted by subsection (7), applies to the 1988 and subsequent taxation years.

(17) The definition ``indexed debt obligation'' in subsection 248(1) of the Act, as enacted by subsection (7), applies to indexed debt obligations issued after October 16, 1991.

(18) Subsection 248(9.1) of the Act, as enacted by subsection (8), applies to the 1990 and subsequent taxation years.

(19) Subsection 248(9.2) of the Act, as enacted by subsection (8), applies in respect of deaths occurring after December 20, 1991.

(20) Subsection (9) applies to refunds paid or applied with respect to taxation years beginning after 1991.

(21) Subsection (10) applies after 1990.

140. (1) Subsection 252(2) of the Act is replaced by the following:

Relationships

(2) In this Act, words referring to

    (a) a parent of a taxpayer include a person

      (i) whose child the taxpayer is,

      (ii) whose child the taxpayer had previously been within the meaning of paragraph (1)(b), or

      (iii) who is a parent of the taxpayer's spouse;

    (b) a brother of a taxpayer include a person who is

      (i) the brother of the taxpayer's spouse, or

      (ii) the spouse of the taxpayer's sister;

    (c) a sister of a taxpayer include a person who is

      (i) the sister of the taxpayer's spouse, or

      (ii) the spouse of the taxpayer's brother;

    (d) a grandparent of a taxpayer include a person who is

      (i) the grandfather or grandmother of the taxpayer's spouse, or

      (ii) the spouse of the taxpayer's grandfather or grandmother;

    (e) an aunt or great-aunt of a taxpayer include the spouse of the taxpayer's uncle or great-uncle, as the case may be;

    (f) an uncle or great-uncle of a taxpayer include the spouse of the taxpayer's aunt or great-aunt, as the case may be; and

    (g) a niece or nephew of a taxpayer include the niece or nephew, as the case may be, of the taxpayer's spouse.

(2) Subsection 252(3) of the Act is replaced by the following:

Extended meaning of ``spouse'' and ``former spouse''

(3) For the purposes of paragraphs 56(1)(b) and (c), section 56.1, paragraphs 60(b), (c) and (j), section 60.1, subsections 70(6) and (6.1), 73(1) and (5) and 104(4), (5.1) and (5.4), the definition ``pre-1972 spousal trust'' in subsection 108(1), subsection 146(16), subparagraph 146.3(2)(f)(iv), paragraph 146.3(14)(b), subsections 147.3(5) and (7) and 148(8.1) and (8.2), subparagraph 210(c)(ii) and subsections 248(22) and (23), ``spouse'' and ``former spouse'' of a particular individual include another individual of the opposite sex who is a party to a voidable or void marriage with the particular individual.

(3) Section 252 of the Act is amended by adding the following after subsection (3):

Idem

(4) In this Act,

    (a) words referring to a spouse at any time of a taxpayer include the person of the opposite sex who cohabits at that time with the taxpayer in a conjugal relationship and

      (i) has so cohabited with the taxpayer throughout a 12-month period ending before that time, or

      (ii) is a parent of a child of whom the taxpayer is a parent

    and, for the purposes of this paragraph, where at any time the taxpayer and the person cohabit in a conjugal relationship, they shall, at any particular time after that time, be deemed to be cohabiting in a conjugal relationship unless they were not cohabiting at the particular time for a period of at least 90 days that includes the particular time because of a breakdown of their conjugal relationship;

    (b) references to marriage shall be read as if a conjugal relationship between 2 individuals who are, because of paragraph (a), spouses of each other were a marriage;

    (c) provisions that apply to a person who is married apply to a person who is, because of paragraph (a), a spouse of a taxpayer; and

    (d) provisions that apply to a person who is unmarried do not apply to a person who is, because of paragraph (a), a spouse of a taxpayer.

(4) Subsections (1) and (3) apply after 1992.

(5) Subsection (2) applies to the 1991 and subsequent taxation years.

141. (1) Paragraph 258(3)(b) of the Act is replaced by the following:

    (b) any other share that

      (i) is a grandfathered share, or

      (ii) was issued before 8:00 p.m. Eastern Daylight Saving Time, June 18, 1987 and was not deemed by paragraph 112(2.2)(f) to have been issued after that time

    by a corporation from a corporation not resident in Canada, if the dividend would have been a dividend in respect of which no deduction could have been made under subsection 112(1) or (2) or 138(6) because of subsection 112(2.2) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, as it read on June 17, 1987, if the corporation that paid the dividend were a taxable Canadian corporation

(2) Subsection (1) applies to dividends received or deemed to be received on shares acquired after 8:00 p.m. Eastern Daylight Saving Time, June 18, 1987.

142. (1) Paragraph 259(3)(c) of the Act is replaced by the following:

    (c) it has never borrowed money except where the borrowing was for a term not exceeding 90 days and was not part of a series of loans or other transactions and repayments;

(2) Subsection (1) applies to borrowings occurring after 1990.

PART VI

1986, c. 6

AN ACT TO AMEND THE INCOME TAX ACT AND RELATED STATUTES AND TO AMEND THE CANADA PENSION PLAN, THE UNEMPLOYMENT INSURANCE ACT, 1971, THE FINANCIAL ADMINISTRATION ACT AND THE PETROLEUM AND GAS REVENUE TAX ACT

153. Subsections 227(10.2) to (10.9) of the Income Tax Act

PART IX

1991, c. 49

SCHEDULE II (CONTAINING THE REVISED VERSION OF AN ACT TO AMEND THE INCOME TAX ACT, THE CANADA PENSION PLAN, THE CULTURAL PROPERTY EXPORT AND IMPORT ACT, THE INCOME TAX CONVENTIONS INTERPRETATION ACT, THE TAX COURT OF CANADA ACT, THE UNEMPLOYMENT INSURANCE ACT, THE CANADA-NEWFOUNDLAND ATLANTIC ACCORD IMPLEMENTATION ACT, THE CANADA-NOVA SCOTIA OFFSHORE PETROLEUM RESOURCES ACCORD IMPLEMENTATION ACT AND CERTAIN RELATED ACTS)

157. (1) Subsection 15(3) of Schedule II (containing the revised version of An Act to amend the Income Tax Act, the Canada Pension Plan, the Cultural Property Export and Import Act, the Income Tax Conventions Interpretation Act, the Tax Court of Canada Act, the Unemployment Insurance Act, the Canada-Newfoundland Atlantic Accord Implementation Act, the Canada-Nova Scotia Offshore Petroleum Resources Accord Implementation Act and certain related Acts, being chapter 49 of the Statutes of Canada, 1991), is repealed.

(2) Subsection 15(14) of Schedule II is repealed.

(3) Subsections (1) and (2) shall be deemed to have come into force on December 17, 1991.

159. Where an election or request referred to in subsection 14(3), 28(3), 61(7), 84(6) or (7), 121(7), 150(2), 151(2), 192(35) or 198(8) of Schedule II was made before December 11, 1993, the election or request shall be deemed to have been made before 1992.