Order of deduction	(17) For the purpose of clause (2)(a)(iii)(A), amounts deducted under this section in computing an individual's taxable income for a taxation year that ended before 1990 shall be deemed to have first been deducted in respect of amounts that were included in computing the individual's income under this Part for the year because of subparagraph 14(1)(a)(v) before being deducted in respect of any other amounts that were included in computing the individual's income under this Part for the year.
	(11) Subsection 110.6(18) of the Act is repealed.
	(12) Section 110.6 of the Act is amended by adding the following in numerical order:
Election for property owned on February 22, 1994	(19) Subject to subsection (20), where an individual (other than a trust) or a personal trust (each of which is referred to in this subsection and subsections (20) to (29) as the ``elector''), elects in prescribed form to have the provisions of this subsection apply in respect of
	(a) a capital property (other than an interest in a trust referred to in any of paragraphs (f) to (j) of the definition ``flow-through entity'' in subsection 39.1(1)) owned at the end of February 22, 1994 by the elector, the property shall be deemed, except for the purposes of sections 7 and 35 and subparagraph 110(1)(d.1)(ii),
	(i) to have been disposed of by the elector at that time for proceeds of disposition equal to the greater of
	(A) the amount determined by the formula
	A - B
	where
	A is the amount designated in respect of the property in the election, and
	B is the amount, if any, that would, if the disposition were a disposition for the purpose of section 7 or 35, be included under that section as a result of the disposition in computing the income of the elector, and
	(B) the adjusted cost base to the elector of the property immediately before the disposition, and
	(ii) to have been reacquired by the elector immediately after that time at a cost equal to
	(A) where the property is an interest in or a share of the capital stock of a flow-through entity (within the meaning assigned by subsection 39.1(1)) of the elector, the cost to the elector of the property immediately before the disposition referred to in subparagraph (i),
	(B) where an amount would, if the disposition referred to in subparagraph (i) were a disposition for the purpose of section 7 or 35, be included under that section as a result of the disposition in computing the income of the elector, the lesser of
	(I) the elector's proceeds of disposition of the property determined under subparagraph (i), and
	(II) the amount determined by the formula
	A - B
	where
	A is the amount, if any, by which the fair market value of the property at that time exceeds the amount that would, if the disposition referred to in subparagraph (i) were a disposition for the purpose of section 7 or 35, be included under that section as a result of the disposition in computing the income of the elector, and
	B is the amount that would be determined by the formula in subclause (C)(II) in respect of the property if clause (C) applied to the property, and
	(C) in any other case, the lesser of
	(I) the designated amount, and
	(II) the amount, if any, by which the fair market value of the property at that time exceeds the amount determined by the formula
	A - 1.1B
	where
	A is the designated amount, and
	B is the fair market value of the property at that time;
	(b) a business carried on by the elector (otherwise than as a member of a partnership) on February 22, 1994,
	(i) the amount that would be determined under subparagraph 14(1)(a)(v) at the end of that day in respect of the elector if
	(A) all the eligible capital property owned at that time by the elector in respect of the business were disposed of by the elector immediately before that time for proceeds of disposition equal to the amount designated in the election in respect of the business, and
	(B) the fiscal period of the business ended at that time
	shall be deemed to be a taxable capital gain of the elector for the taxation year in which the fiscal period of the business that includes that time ends from the disposition of a particular property and, for the purposes of this section, the particular property shall be deemed to have been disposed of by the elector at that time, and
	(ii) for the purpose of paragraph 14(3)(b), the amount of the taxable capital gain determined under subparagraph (i) shall be deemed to have been claimed, by a person who does not deal at arm's length with each person or partnership that does not deal at arm's length with the elector, as a deduction under this section in respect of a disposition at that time of the eligible capital property; and
	(c) an interest owned at the end of February 22, 1994 by the elector in a trust referred to in any of paragraphs (f) to (j) of the definition ``flow-through entity'' in subsection 39.1(1), the elector shall be deemed to have a capital gain for the year from the disposition on February 22, 1994 of property equal to the lesser of
	(i) the total of amounts designated in elections made under this subsection by the elector in respect of interests in the trust, and
	(ii) 4/3 of the amount that would, if all of the trust's capital properties were disposed of at the end of February 22, 1994 for proceeds of disposition equal to their fair market value at that time and that portion of the trust's capital gains and capital losses or its net taxable capital gains, as the case may be, arising from the dispositions as can reasonably be considered to represent the elector's share thereof were allocated to or designated in respect of the elector, be the increase in the annual gains limit of the elector for the 1994 taxation year as a result of the dispositions.
Application of subsection (1 9)	(20) Subsection (19) applies to a property or to a business, as the case may be, of an elector only if
	(a) where the elector is an individual (other than a trust),
	(i) its application to all of the properties in respect of which elections were made under that subsection by the elector or a spouse of the elector and to all the businesses in respect of which elections were made under that subsection by the elector
	(A) would result in an increase in the amount deductible under subsection (3) in computing the taxable income of the elector or a spouse of the elector, and
	(B) in respect of each of the 1994 and 1995 taxation years,
	(I) where no part of the taxable capital gain resulting from an election by the elector is included in computing the income of a spouse of the elector, would not result in the amount determined under paragraph (3)(a) for the year in respect of the elector being exceeded by the lesser of the amounts determined under paragraphs (3)(b) and (c) for the year in respect of the elector, and
	(II) where no part of the taxable capital gain resulting from an election by the elector is included in computing the income of the elector, would not result in the amount determined under paragraph (3)(a) for the year in respect of a spouse of the elector being exceeded by the lesser of the amounts determined under paragraphs (3)(b) and (c) for the year in respect of the spouse,
	(ii) the amount designated in the election in respect of the property exceeds 11/10 of its fair market value at the end of February 22, 1994, or
	(iii) the amount designated in the election in respect of the business is $1.00 or exceeds 11/10 of the fair market value at the end of February 22, 1994 of all the eligible capital property owned at that time by the elector in respect of the business; and
	(b) where the elector is a personal trust, its application to all of the properties in respect of which an election was made under that subsection by the elector would result in
	(i) an increase in the amount deemed by subsection 104(21.2) to be a taxable capital gain of an individual (other than a trust) who was a beneficiary under the trust at the end of February 22, 1994 and resident in Canada at any time in the individual's taxation year in which the trust's taxation year that includes that day ends, or
	(ii) where subsection (12) applies to the trust for the trust's taxation year that includes that day, an increase in the amount deductible under that subsection in computing the trust's taxable income for that year.
Effect of election on non-qualifyin g real property	(21) Where an elector is deemed by subsection (19) to have disposed of a non-qualifying real property,
	(a) in computing the elector's taxable capital gain from the disposition, there shall be deducted the amount determined by the formula
	0.75(A - B)
	where
	A is the elector's capital gain from the disposition, and
	B is the elector's eligible real property gain from the disposition; and
	(b) in determining at any time after the disposition the capital cost to the elector of the property where it is a depreciable property and the adjusted cost base to the elector of the property in any other case (other than where the property was at the end of February 22, 1994 an interest in or a share of the capital stock of a flow-through entity within the meaning assigned by subsection 39.1(1)), there shall be deducted 4/3 of the amount determined under paragraph (a) in respect of the property.
Adjusted cost base	(22) Where an elector is deemed by paragraph (19)(a) to have reacquired a property, there shall be deducted in computing the adjusted cost base to the elector of the property at any time after the reacquisition the amount, if any, by which
	(a) the amount determined by the formula
	A - 1.1B
	where
	A is the amount designated in the election under subsection (19) in respect of the property, and
	B is the fair market value of the property at the end of February 22, 1994
	exceeds
	(b) where the property is an interest in or a share of the capital stock of a flow-through entity (within the meaning assigned by subsection 39.1(1)), 4/3 of the taxable capital gain that would have resulted from the election if the amount designated in the election were equal to the fair market value of the property at the end of February 22, 1994 and, in any other case, the fair market value of the property at the end of February 22, 1994.
Disposition of partnership interest	(23) Where an elector is deemed by subsection (19) to have disposed of an interest in a partnership, in computing the adjusted cost base to the elector of the interest immediately before the disposition
	(a) there shall be added the amount determined by the formula
	(A - B) x C/D + E
	where
	A is the total of all amounts each of which is the elector's share of the partnership's income (other than a taxable capital gain from the disposition of a property) from a source or from sources in a particular place for its fiscal period that includes February 22, 1994,
	B is the total of all amounts each of which is the elector's share of the partnership's loss (other than an allowable capital loss from the disposition of a property) from a source or from sources in a particular place for that fiscal period,
	C is the number of days in the period that begins the first day of that fiscal period and ends February 22, 1994,
	D is the number of days in that fiscal period, and
	E is 4/3 of the amount that would be determined under paragraph 3(b) in computing the elector's income for the taxation year in which that fiscal period ends if the elector had no taxable capital gains or allowable capital losses other than those arising from dispositions of property by the partnership that occurred before February 23, 1994; and
	(b) there shall be deducted the amount that would be determined under paragraph (a) if the formula in that paragraph were read as
	(B - A) x C/D - E
Time for election	(24) An election made under subsection (19) shall be filed with the Minister
	(a) where the elector is an individual (other than a trust),
	(i) if the election is in respect of a business of the elector, on or before the individual's balance-due day for the taxation year in which the fiscal period of the business that includes February 22, 1994 ends, and
	(ii) in any other case, on or before the individual's balance-due day for the 1994 taxation year; and
	(b) where the elector is a personal trust, on or before March 31 of the calendar year following the calendar year in which the taxation year of the trust that includes February 22, 1994 ends.
Revocation of election	(25) Subject to subsection (28), an elector may revoke an election made under subsection (19) by filing a written notice of the revocation with the Minister before 1998.
Late election	(26) Where an election made under subsection (19) is filed with the Minister after the day (referred to in this subsection and subsections (27) and (29) as the ``election filing date'') on or before which the election is required by subsection (24) to have been filed and on or before the day that is 2 years after the election filing date, the election shall be deemed for the purposes of this section (other than subsection (29)) to have been filed on the election filing date if an estimate of the penalty in respect of the election is paid by the elector when the election is filed with the Minister.
Amended election	(27) Subject to subsection (28), an election made under subsection (19) in respect of a property or a business shall be deemed to be amended and the election, as amended, shall be deemed to have been filed on the election filing date if
	(a) an amended election in prescribed form in respect of the property or the business is filed with the Minister before 1998; and
	(b) an estimate of the penalty, if any, in respect of the amended election is paid by the elector when the amended election is filed with the Minister.
Election that cannot be revoked or amended	(28) An election made under subsection (19) cannot be revoked or amended where the amount designated in the election exceeds 11/10 of
	(a) if the election is in respect of a property, the fair market value of the property at the end of February 22, 1994; and
	(b) if the election is in respect of a business, the fair market value at the end of February 22, 1994 of all the eligible capital property owned at that time by the elector in respect of the business.
Amount of penalty	(29) The penalty in respect of an election to which subsection (26) or (27) applies is the amount determined by the formula
	A x B 300