C is the total of all amounts by which the farm loss of the taxpayer for the year is required to be reduced because of section 80;
	(3) The definition ``net capital loss'' in subsection 111(8) of the Act is replaced by the following:
``net capital loss'' « perte en capital nette »	``net capital loss'' of a taxpayer for a taxation year means the amount determined by the formula
	A - B + C - D
	where
	A is the amount, if any, determined under subparagraph 3(b)(ii) in respect of the taxpayer for the year,
	B is the lesser of the total determined under subparagraph 3(b)(i) in respect of the taxpayer for the year and the amount determined for A in respect of the taxpayer for the year,
	C is the least of
	(a) the amount of the allowable business investment losses of the taxpayer for the taxpayer's seventh preceding taxation year,
	(b) the amount, if any, by which the amount of the non-capital loss of the taxpayer for the taxpayer's seventh preceding taxation year exceeds the total of all amounts in respect of that non-capital loss deducted in computing the taxpayer's taxable income or claimed by the taxpayer under paragraph 186(1)(c) or (d) for the year or for any preceding taxation year, and
	(c) where the taxpayer is a corporation the control of which was acquired by a person or group of persons before the end of the year and after the end of the taxpayer's seventh preceding taxation year, nil, and
	D is the total of all amounts by which the net capital loss of the taxpayer for the year is required to be reduced because of section 80;
	(4) The first formula in the definition ``non-capital loss'' in subsection 111(8) of the Act is replaced by the following:
	(A + B) - (C + D + D.1 + D.2)
	(5) The definition ``non-capital loss'' in subsection 111(8) of the Act is amended by striking out the word ``and'' at the end of the description of D, by adding the word ``and'' at the end of the description of D.1 and by adding the following after the description of D.1:
	D.2 is the total of all amounts by which the non-capital loss of the taxpayer for the year is required to be reduced because of section 80;
	(6) Subsections (1) to (5) apply to taxation years that end after February 21, 1994.
	37. (1) Paragraph 114(a) of the Act is replaced by the following:
	(a) the individual's income for the period or periods in the year throughout which the individual is resident in Canada, computed without regard to section 61.2 and as though that period or those periods were the whole taxation year, and
	(2) Subsection (1) applies to taxation years that end after February 21, 1994.
	38. (1) Paragraph 115(1)(a) of the Act is amended by adding the following after subparagraph (iii.2):
	(iii.21) the amount, if any, included under section 56.3 in computing the non-resident person's income for the year,
	(2) Subsection (1) applies to taxation years that end after February 21, 1994.
	39. (1) Subsection 138(11.93) of the Act is replaced by the following:
Property acquired on default in payment	(11.93) Where, at any time in a taxation year of an insurer, the beneficial ownership of property is acquired or reacquired by the insurer in consequence of the failure to pay all or any part of an amount (in this subsection referred to as the ``insurer's claim'') owing to the insurer at that time in respect of a bond, debenture, mortgage, agreement of sale or any other form of indebtedness owned by the insurer, the following rules apply to the insurer:
	(a) section 79.1 does not apply in respect of the acquisition or reacquisition;
	(b) the insurer shall be deemed to have acquired or reacquired, as the case may be, the property at an amount equal to the fair market value of the property, immediately before that time;
	(c) the insurer shall be deemed to have disposed at that time of the portion of the indebtedness represented by the insurer's claim for proceeds of disposition equal to that fair market value and, immediately after that time, to have reacquired that portion of the indebtedness at a cost of nil;
	(d) the acquisition or reacquisition shall be deemed to have no effect on the form of the indebtedness; and
	(e) in computing the insurer's income for the year or a subsequent taxation year, no amount is deductible under paragraph 20(1)(l) in respect of the insurer's claim.
	(2) Subsection (1) applies to property acquired or reacquired after February 21, 1994, other than acquisitions or reacquisitions pursuant to a court order made before February 22, 1994.
	40. (1) The Act is amended by adding the following after section 160.3:
Liability in respect of transfers by insolvent corporations	160.4 (1) Where property is transferred at any time by a corporation to a taxpayer with whom the corporation does not deal at arm's length at that time and the corporation is not entitled because of subsection 61.3(3) to deduct an amount under section 61.3 in computing its income for a taxation year because of the transfer or because of the transfer and one or more other transactions, the taxpayer is jointly and severally liable with the corporation to pay an amount of the corporation's tax under this Part for the year equal to the amount, if any, by which the fair market value of the property at that time exceeds the fair market value at that time of the consideration given for the property, but nothing in this subsection limits the liability of the corporation under any other provision of this Act.
Indirect transfers	(2) Where
	(a) property is transferred at any time from a taxpayer (in this subsection referred to as the ``transferor'') to another taxpayer (in this subsection referred to as the ``transferee'') with whom the transferor does not deal at arm's length,
	(b) the transferor is liable because of subsection (1) or this subsection to pay an amount of the tax of another person (in this subsection referred to as the ``debtor'') under this Part, and
	(c) it can reasonably be considered that one of the reasons of the transfer would, but for this subsection, be to prevent the enforcement of this section,
	the transferee is jointly and severally liable with the transferor and the debtor to pay an amount of the debtor's tax under this Part equal to the lesser of the amount of such tax that the transferor was liable to pay at that time and the amount, if any, by which the fair market value of the property at that time exceeds the fair market value at that time of the consideration given for the property, but nothing in this subsection limits the liability of the debtor or the transferor under any provision of this Act.
Minister may assess recipient	(3) The Minister may at any time assess a person in respect of any amount payable by the person because of this section and the provisions of this Division apply, with such modifications as the circumstances require, in respect of an assessment made under this section, as though it had been made under section 152.
Rules applicable	(4) Where a corporation and another person have, because of subsection (1) or (2), become jointly and severally liable in respect of part or all of a liability of the corporation under this Act
	(a) a payment by the other person on account of that person's liability shall to the extent thereof discharge the joint liability; and
	(b) a payment by the corporation on account of the corporation's liability discharges the other person's liability only to the extent that the payment operates to reduce the corporation's liability to an amount less than the amount in respect of which the other person was, by subsection (1) or (2), as the case may be, made liable.
	(2) Subsection (1) applies to transfers that occur after December 20, 1994.
	41. (1) Section 191.3 of the Act is amended by adding the following after subsection (1):
Consideration for agreement	(1.1) For the purposes of Part I of this Act, where property is acquired at any time by a transferee corporation as consideration for entering into an agreement with a transferor corporation that is filed under this section,
	(a) where the property was owned by the transferor corporation immediately before that time,
	(i) the transferor corporation shall be deemed to have disposed of the property at that time for proceeds equal to the fair market value of the property at that time, and
	(ii) the transferor corporation shall not be entitled to deduct any amount in computing its income as a consequence of the transfer of the property, except any amount arising as a consequence of subparagraph (i);
	(b) the cost at which the property was acquired by the transferee corporation at that time shall be deemed to be equal to the fair market value of the property at that time;
	(c) the transferee corporation shall not be required to add an amount in computing its income solely because of the acquisition at that time of the property; and
	(d) no benefit shall be deemed to have been conferred on the transferor corporation as a consequence of the transferor corporation entering into an agreement filed under this section.
	(2) Subsection (1) applies to the 1988 and subsequent taxation years.
	42. Section 220 of the Act is amended by adding the following after subsection (3.2):
Designations under section 80 and subsection 80.03(7)	(3.21) For the purposes of subsection (3.2), a designation in any form prescribed for the purpose of paragraph 80(2)(i) or any of subsections 80(5) to (11) or 80.03(7) shall be deemed to be an election under a prescribed provision of this Act.
	43. (1) The definition ``restricted farm loss'' in subsection 248(1) of the Act is replaced by the following:
``restricted farm loss'' « perte agricole restreinte »	``restricted farm loss'' has the meaning assigned by subsection 31(1.1);
	(2) Subsection 248(1) of the Act is amended by adding the following in alphabetical order:
``bankrupt'' « failli »	``bankrupt'' has the meaning assigned by the Bankruptcy and Insolvency Act;
``estate of the bankrupt'' « actifs du failli »	``estate of the bankrupt'' has the same meaning as in the Bankruptcy and Insolvency Act;
	(3) Section 248 of the Act is amended by adding the following after subsection (25):
Debt obligations	(26) For greater certainty, where at any time a person or partnership (in this subsection referred to as the ``debtor'') becomes liable to repay money borrowed by the debtor or becomes liable to pay an amount (other than interest)
	(a) as consideration for any property acquired by the debtor or services rendered to the debtor, or
	(b) that is deductible in computing the debtor's income,
	for the purposes of applying the provisions of this Act relating to the treatment of the debtor in respect of the liability, the liability shall be considered to be an obligation, issued at that time by the debtor, that has a principal amount at that time equal to the amount of the liability at that time.
Parts of debt obligations	(27) For greater certainty,
	(a) unless the context requires otherwise, an obligation issued by a debtor includes any part of a larger obligation that was issued by the debtor;
	(b) the principal amount of that part shall be considered to be the portion of the principal amount of that larger obligation that relates to that part; and
	(c) the amount for which that part was issued shall be considered to be the portion of the amount for which that larger obligation was issued that relates to that part.
	(4) Subsections (1) to (3) apply to taxation years that end after February 21, 1994.
	44. (1) The portion of subsection 256(7) of the Act before paragraph (a) is replaced by the following:
Acquiring control	(7) For the purposes of subsection 13(24), sections 37 and 55, subsections 66(11), (11.4) and (11.5), 66.5(3) and 66.7(10) and (11), section 80, paragraph 80.04(4)(h), subsections 85(1.2), 87(2.1) and (2.11), 88(1.1) and (1.2) and 89(1.1), sections 111 and 127 and subsection 249(4),
	(2) Subsection 256(8) of the Act is replaced by the following:
Deemed acquisition of shares	(8) Where at any time a taxpayer acquires a right referred to in paragraph 251(5)(b) with respect to shares and it can reasonably be concluded that one of the main purposes of the acquisition is
	(a) to avoid any limitation on the deductibility of any non-capital loss, net capital loss, farm loss, expense or other amount referred to in subsection 66(11), 66.5(3) or 66.7(10) or (11),
	(b) to avoid the application of subsection 13(24), paragraph 37(1)(h) or subsection 55(2), 66(11.4) or (11.5) or 111(4), (5.1), (5.2) or (5.3),
	(c) to avoid the application of paragraph (j) or (k) of the definition ``investment tax credit'' in subsection 127(9), or
	(d) to affect the application of section 80,
	in determining whether control of the corporation is acquired for the purposes of subsection 13(24), sections 37 and 55, subsections 66(11), (11.4) and (11.5), 66.5(3) and 66.7(10) and (11), section 80, paragraph 80.04(4)(h), sections 111 and 127 and subsection 249(4), the taxpayer shall be deemed to have acquired the shares at that time.
	(3) Subsection (1) applies to amalgamations, acquisitions, redemptions and cancellations that occur after February 21, 1994.
	(4) Subsection (2) applies to acquisitions that occur after February 21, 1994, except that, with respect to acquisitions that occur before June 24, 1993,
	(a) the expression ``subsection 55(2), 66(11.4)'' in paragraph 256(8)(b) of the Act, as enacted by subsection (2), shall be read as ``subsection 66(11.4)''; and
	(b) the expression ``sections 37 and 55'' in the portion of subsection 256(8) of the Act after paragraph (d), as enacted by subsection (2), shall be read as ``section 37''.