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These amendments to the Income Tax Act implement certain
measures announced in the Budget of February 22, 1994. These
measures are summarized below.
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(1) Capital Gains Exemption: eliminates the $100,000 lifetime
capital gains exemption; provides an election in respect of gains
accrued before the date of the Budget.
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(2) Employee Benefits: extends the taxation of employer-provided
benefits to include the first $25,000 of life insurance.
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(3) Age Tax Credit: provides a reduction in the amount of the credit
based on an individual's income level.
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(4) Home Buyers' Plan: modifies the provisions of the Home
Buyers' Plan and extends it indefinitely for first-time home buyers.
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(5) Charitable Donations Tax Credit: lowers the threshold at
which the tax credit is calculated at the highest individual marginal tax
rate.
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(6) Business Meals and Entertainment Expenses: reduces the
percentage of such expenses that may be recognized for tax purposes
from 80 to 50 per cent.
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(7) Tax Shelters - Partnership Interests: requires that limited and
other passive partners report any negative adjusted cost base in their
partnership interest as a capital gain.
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(8) Divisive Corporate Reorganizations: curtails a tax avoidance
technique that allowed capital gains on the disposition of corporate
assets to be avoided in certain circumstances.
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(9) Investment Tax Credits: reduces the rate at which the credit is
calculated in respect of certain regions; eliminates the regional
component of the credit in respect of scientific research and experimen
tal development; discontinues the Special Investment Tax Credit.
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(10) Expenditure Limit for Scientific Research and Experimental
Development: prorates the expenditure limit for a Canadian-controlled
private corporation based on the corporation's business limit for the
year.
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(11) Small Business Deduction: progressively reduces the small
business deduction available to Canadian-controlled private corpora
tions having taxable capital over $10 million employed in Canada so
that the deduction is eliminated at the $15 million level.
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(12) Mine Reclamation Funds: permits a tax deduction for
contributions into these funds in the year in which the contributions are
made.
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