(e) the individual's cumulative net investment loss at the end of the year;

(2) The portion of paragraph (b) of the definition ``non-qualifying real property'' in subsection 110.6(1) of the Act after subparagraph (ii) is replaced by the following:

      principally in an active business carried on by the corporation or by persons described in any of clauses (a)(ii)(C) to (H), but not including a share of the capital stock of a corporation the fair market value of which is derived principally from real property owned by another corporation, a partnership or a trust, or any combination thereof, the shares of the capital stock of which, or the interests in which, as the case may be, would, if they were disposed of at the determination time by the individual, not be non-qualifying real property of the individual,

(3) The portion of paragraph (c) of the definition ``non-qualifying real property'' in subsection 110.6(1) of the Act after subparagraph (ii) is replaced by the following:

      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), but not including an interest in a partnership the fair market value of which is derived principally from real property owned by another partnership, a corporation or a trust, or any combination thereof, the shares of the capital stock of which or the interests in which, as the case may be, would, if they were disposed of at the determination time by the individual, not be non-qualifying real property of the individual,

(4) The portion of paragraph (d) of the definition ``non-qualifying real property'' in subsection 110.6(1) of the Act after subparagraph (ii) is replaced by the following:

      principally in an active business carried on by the trust or by persons described in any of clauses (a)(ii)(C) to (H), but not including an interest in a trust the fair market value of which is derived principally from real property owned by another trust, a corporation or a partnership, or any combination thereof, the shares of the capital stock of which or the interests in which, as the case may be, would, if they were disposed of at the determination time by the individual, not be non-qualifying real property of the individual, or

(5) Subsection 110.6(15) of the Act is replaced by the following:

Value of assets of corporations

(15) 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 definition ``share of the capital stock of a family farm corporation'' in subsection 70(10) and the definition ``small business corporation'' in subsection 248(1),

    (a) where a person (in this subsection referred to as the ``insured''), whose life was insured under an insurance policy owned by a particular corporation, owned shares of the capital stock (in this subsection referred to as the ``subject shares'') of the particular corporation, any corporation connected with the particular corporation or with which the particular corporation is connected or any corporation connected with any such corporation or with which any such corporation is connected (within the meaning of subsection 186(4) on the assumption that the corporation referred to in this subsection was a payer corporation within the meaning of that subsection),

      (i) the fair market value of the life insurance policy shall, at any time before the death of the insured, be deemed to be its cash surrender value (within the meaning assigned by subsection 148(9)) at that time, and

      (ii) the total fair market value of assets (other than assets described in subparagraph (c)(i), (ii) or (iii) of the definition ``qualified small business corporation share'' in subsection (1), subparagraph (b)(i), (ii) or (iii) of the definition ``share of the capital stock of a family farm corporation'' in subsection (1) or paragraph (a), (b) or (c) of the definition ``small business corporation'' in subsection 248(1), as the case may be) of any of those corporations that are

        (A) the proceeds, the right to receive the proceeds or attributable to the proceeds, of the life insurance policy of which the particular corporation was a beneficiary, and

        (B) used, directly or indirectly, within the 24-month period beginning at the time of the death of the insured or, where written application therefor is made by the particular corporation within that period, within such longer period as the Minister considers reasonable in the circumstances, to redeem, acquire or cancel the subject shares owned by the insured immediately before the death of the insured,

      not in excess of the fair market value of the assets immediately after the death of the insured, shall, until the later of

        (C) the redemption, acquisition or cancellation, and

        (D) the day that is 60 days after the payment of the proceeds under the policy,

      be deemed not to exceed the cash surrender value (within the meaning assigned by subsection 148(9)) of the policy immediately before the death of the insured; and

    (b) the fair market value of an asset of a particular corporation that is a share of the capital stock or indebtedness of another corporation with which the particular corporation is connected shall be deemed to be nil and, for the purpose of this paragraph, a particular corporation is connected with another corporation only where

      (i) the particular corporation is connected (within the meaning assigned by paragraph (d) of the definition ``qualified small business corporation share'' in subsection (1)) with the other corporation, and

      (ii) the other corporation is not connected (within the meaning of subsection 186(4) as determined without reference to subsection 186(2) and on the assumption that the other corporation is a payer corporation within the meaning of subsection 186(4)) with the particular corporation,

    except that this paragraph applies only in determining whether a share of the capital stock of another corporation with which the particular corporation is connected is a qualified small business corporation share or a share of the capital stock of a family farm corporation and in determining whether the other corporation is a small business corporation.

(6) Subsection (1) applies to the 1985 and subsequent taxation years except that, in its application to the 1985 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 in respect of the individual for the year under paragraph 3(b) in respect of capital gains and capital losses if the only properties referred to in paragraph 3(b) were properties disposed of by the individual after 1984, and

and, notwithstanding subsections 152(4) to (5) of the Act, such assessments and determinations in respect of any taxation years may be made as are necessary to give effect to subsection (1).

(7) Subsections (2) to (4) apply to the 1992 and subsequent taxation years.

(8) Subsection (5) applies to dispositions occurring after 1991.

51. (1) The definition ``exempt share'' in subsection 112(2.6) of the Act is amended by striking out the word ``or'' at the end of paragraph (a), by adding the word ``or'' at the end of paragraph (b) and by adding the following after paragraph (b):

      (c) a share that was, at the time the dividend referred to in subsection (2.4) was received, a share described in paragraph (e) of the definition ``term preferred share'' in subsection 248(1) during the applicable period referred to in that paragraph;

(2) Subparagraph 112(4)(d)(ii) of the Act is replaced by the following:

      (ii) a dividend (other than a taxable dividend or a dividend deemed by subsection 131(1) to be a capital gains dividend),

(3) Subparagraph 112(4.1)(d)(ii) of the Act is replaced by the following:

      (ii) a dividend (other than a taxable dividend or a dividend deemed by subsection 131(1) to be a capital gains dividend),

(4) Subparagraph 112(4.2)(d)(ii) of the Act is replaced by the following:

      (ii) a dividend (other than a taxable dividend or a dividend deemed by subsection 131(1) to be a capital gains dividend),

(5) Paragraph 112(7)(b) of the Act is replaced by the following:

    (b) the amount determined by the formula

A x B
C

    where

    A is the total of all amounts each of which is the amount determined in respect of an old share exchanged by the holder at the particular time equal to the lesser of

          (i) the total of all amounts each of which is received or designated by the holder in respect of a taxable dividend, a capital dividend or a life insurance capital dividend on the old share, and

          (ii) the adjusted cost base to the holder of the old share immediately before the particular time,

    B is the adjusted cost base to the holder of the new share immediately after the exchange, and

    C is the adjusted cost base to the holder of all new shares immediately after the exchange,

(6) Subsection (1) applies after December 21, 1992.

(7) Subsections (2) and (4) apply to the determination of losses arising in the 1990 and subsequent taxation years and, where a taxpayer elected under subsection 84(6) 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, in the taxpayer's 1985 to 1989 taxation years, in which case, notwithstanding subsections 152(4) to (5) of the Income Tax Act, such assessments and determinations in respect of the taxpayer's 1985 to 1989 taxation years shall be made as are necessary to give effect to subsections (2) and (4).

(8) Subsection (3) applies to the 1990 and subsequent taxation years and, where a taxpayer elected under subsection 84(7) 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, to the taxpayer's 1985 to 1989 taxation years, in which case, notwithstanding subsections 152(4) to (5) of the Income Tax Act, such assessments and determinations in respect of the taxpayer's 1985 to 1989 taxation years shall be made as are necessary to give effect to subsection (3).

(9) Subsection (5) applies to losses arising in the 1992 and subsequent taxation years.

52. (1) The portion of section 114 of the Act before paragraph (b) is replaced by the following:

Individual resident in Canada for only part of year

114. Notwithstanding subsection 2(2), where an individual is resident in Canada throughout part of a taxation year, and throughout another part of the year is non-resident, the individual's taxable income for the year is the amount, if any, by which the total of

    (a) the individual's income for the period or periods in the year throughout which the individual is resident in Canada, computed as though that period or those periods were the whole taxation year, and

(2) Subsection (1) applies to the 1992 and subsequent taxation years except that, where a taxpayer so elects by notifying the Minister of National Revenue in writing before the end of the sixth month after the month in which this Act is assented to, subsection (1) does not apply to the taxpayer's 1992 taxation year.

53. (1) The portion of paragraph 118.3(2)(a) of the Act after subparagraph (ii) is replaced by the following:

    or, where that person is the individual's parent, grandparent, child or grandchild, could have claimed such a deduction if the individual were not married and that person had no income for the year and had attained the age of 18 years before the end of the year, and

(2) Subsection (1) applies to the 1993 and subsequent taxation years.

54. (1) Clause 118.5(1)(a)(ii.2)(A) of the French version of the Act is replaced by the following:

        (A) le particulier n'avait pas atteint l'bge de 16 ans avant la fin de l'annie,

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

55. (1) The portion of section 118.91 of the Act before paragraph (a) is replaced by the following:

Part-year residents

118.91 Notwithstanding sections 118 to 118.9, where an individual is resident in Canada throughout part of a taxation year and throughout another part of the year is non-resident, for the purpose of computing the individual's tax payable under this Part for the year,

(2) The portion of paragraph 118.91(b) of the Act after subparagraph (ii) is replaced by the following:

    to the period or periods in the year throughout which the individual is resident in Canada, computed as though that period or those periods were the whole taxation year,

(3) Subsections (1) and (2) apply to the 1992 and subsequent taxation years except that, where a taxpayer elects in accordance with subsection 52(2), subsections (1) and (2) do not apply to the taxpayer's 1992 taxation year.

56. (1) Subparagraph 122.3(1)(c)(ii) of the Act is replaced by the following:

      (ii) on which the individual was resident in Canada

(2) Paragraph 122.3(1)(e) of the Act is amended by replacing the word ``or'' at the end of subparagraph (i) with ``and'' and by replacing subparagraph (ii) with the following:

      (ii) where section 114 applies to the individual in respect of the year, the total of

        (A) the individual's income for the period or periods in the year referred to in paragraph 114(a), and

        (B) the amount that would be determined under paragraph 114(b) in respect of the individual for the year if subsection 115(1) were read without reference to paragraphs 115(1)(d) to (f)

(3) Subsection (1) applies to the 1992 and subsequent taxation years except that, where a taxpayer elects in accordance with subsection 52(2), subsection (1) does not apply to the taxpayer's 1992 taxation year.

(4) Subsection (2) applies to the 1993 and subsequent taxation years.

57. (1) The portion of subsection 122.5(3) of the Act before paragraph (a) is replaced by the following:

Deemed payment on account

(3) Where a return of income (other than a return of income filed under subsection 70(2), paragraph 104(23)(d) or 128(2)(e) or subsection 150(4)) is filed under this Part for a taxation year in respect of an eligible individual and the individual applies therefor in writing, 1/4 of the amount, if any, by which the total of

(2) Paragraph 122.5(5)(a) of the Act is replaced by the following:

    (a) where an individual is a qualified relation of another individual for a taxation year, only one of them may apply under that subsection for the year;

(3) The portion of subsection 122.5(6) of the Act before paragraph (a) is replaced by the following:

Qualified relation of deceased eligible individual

(6) Notwithstanding paragraph (5)(c), on written application made, on or before the day on or before which a return of income (other than a return of income filed under subsection 70(2), paragraph 104(23)(d) or 128(2)(e) or subsection 150(4)) of a deceased person is required to be filed under this Part for the taxation year in which the person died (or would have been so required if the person were liable to pay tax under this Part for that year), by an individual who

(4) Subsections (1) to (3) apply to the 1992 and subsequent taxation years.

58. (1) 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 is the lesser of

    (a) its tax payable under Part VI (determined without reference to subsections 190.1(1.1) and (3)) for the year, and

    (b) the amount determined by the formula

A - B