| Financial
institution
rules
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(g.2) for the purposes of paragraphs
142.4(4)(c) and (d) and subsections
142.5(5) and (7) and 142.6(1), the new
corporation shall be deemed to be the same
corporation as, and a continuation of, each
predecessor corporation;
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(5) Subsections (1), (2) and (4) and
paragraph 87(2)(e.2) of the Act, as enacted
by subsection (3), apply to taxation years
that end after February 22, 1994.
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(6) Paragraph 87(2)(e.3) of the Act, as
enacted by subsection (3), applies to
amalgamations occurring, and
windings-up beginning, after February 22,
1994.
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(7) Paragraph 87(2)(e.4) of the Act, as
enacted by subsection (3), applies to
amalgamations occurring after October
1994.
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(8) Paragraph 87(2)(e.5) of the Act, as
enacted by subsection (3), applies to
amalgamations occurring at any time
(including, for greater certainty,
amalgamations occurring before this Act is
assented to).
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55. (1) The portion of paragraph 88(1)(a)
of the Act before subparagraph (i) is
replaced by the following:
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(a) subject to paragraphs (a.1) and (a.3),
each property (other than an interest in a
partnership) of the subsidiary that was
distributed to the parent on the winding-up
shall be deemed to have been disposed of by
the subsidiary for proceeds equal to
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(2) Subsection 88(1) of the Act is amended
by adding the following after paragraph
(a.2):
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(i) the subsidiary was a financial
institution in its taxation year in which its
assets were distributed to the parent on
the winding up, and
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(ii) the parent was a financial institution
in its taxation year in which it received
the assets of the subsidiary on the
winding up,
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each specified debt obligation (other than a
mark-to-market property) of the subsidiary
that was distributed to the parent on the
winding-up shall, except for the purpose of
subsection 69(11), be deemed not to have
been disposed of, and for the purpose of this
paragraph, ``financial institution'',
``mark-to-market property'' and ``specified
debt obligation'' have the meanings
assigned by subsection 142.2(1);
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(3) The portion of paragraph 88(1)(c) of
the Act before subparagraph (i) is replaced
by the following:
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(c) subject to paragraph 87(2)(e.3) (as
modified by paragraph (e.2)), and
notwithstanding paragraph 87(2)(e.1) (as
modified by paragraph (e.2)), the cost to the
parent of each property of the subsidiary
distributed to the parent on the winding-up
shall be deemed to be
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(4) The portion of paragraph 88(1)(e.2) of
the Act before subparagraph (i) is replaced
by the following:
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(e.2) paragraphs 87(2)(c), (d.1), (e.1), (e.3),
(g) to (l), (l.3) to (u), (x), (y.1), (z.1), (z.2),
(cc), (ll), (nn), (pp), (rr), (tt) and (uu),
subsection 87(6) and, subject to section 78,
subsection 87(7) apply to the winding-up as
if the references therein to
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(5) Subsection 88(1) of the Act is amended
by striking out the word ``and'' at the end of
paragraph (f) and by adding the following
after paragraph (g):
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(h) for the purposes of subsections 112(5) to
(5.2) and (5.4) and the definition
``mark-to-market property'' in subsection
142.2(1), the parent shall be deemed, in
respect of each property distributed to it on
the winding-up, to be the same corporation
as, and a continuation of, the subsidiary;
and
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(i) for the purpose of subsection 142.5(2),
the subsidiary's taxation year in which its
assets were distributed to the parent on the
winding-up shall be deemed to have ended
immediately before the time when the
assets were distributed.
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(6) Subsections (1) to (4) apply to
windings-up that begin after February 22,
1994.
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(7) Paragraph 88(1)(h) of the Act, as
enacted by subsection (5), applies to
windings-up that begin at any time
(including, for greater certainty,
windings-up that began before this Act is
assented to).
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(8) Paragraph 88(1)(i) of the Act, as
enacted by subsection (5), applies to
windings-up that begin after October 1994.
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56. (1) The portion of subsection 112(3) of
the Act before paragraph (a) is replaced by
the following:
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| Loss on share
that is capital
property
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(3) Subject to subsections (5.5) and (5.6),
where a corporation owns a share that is a
capital property and receives a taxable
dividend, a capital dividend or a life insurance
capital dividend in respect of that share, the
amount of any loss of the corporation arising
from transactions with reference to the share
on which the dividend was received shall,
unless it is established by the corporation that
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(2) The portion of subsection 112(3.1) of
the Act before paragraph (a) is replaced by
the following:
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| Loss on share
that is capital
property of
partnership
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(3.1) Subject to subsections (5.5) and (5.6),
where a corporation is a member of a
partnership and the corporation receives a
taxable dividend, a capital dividend or a life
insurance capital dividend in respect of a share
that is a capital property of the partnership, the
corporation's share of any loss of the
partnership arising with respect to the share on
which the dividend was received shall, unless
it is established by the corporation that
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(3) The portion of subsection 112(3.2) of
the Act before paragraph (a) is replaced by
the following:
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| Loss on share
that is capital
property of
trust
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(3.2) Subject to subsections (5.5) and (5.6),
where a corporation is a beneficiary of a trust
(other than a prescribed trust) that owns a
share that is capital property and the
corporation receives a taxable dividend in
respect of that share pursuant to a designation
under subsection 104(19) or the trust has made
a designation under subsection 104(20) in
respect of the corporation for a capital
dividend or a life insurance capital dividend
on that share, the amount of any loss of the
trust arising with respect to the share on which
the dividend was subject to a designation
shall, unless it is established by the
corporation that
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(4) The portion of subsection 112(4) of the
Act before paragraph (a) is replaced by the
following:
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| Loss on share
that is not
capital
property
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(4) Subject to subsections (5.5) and (5.6),
where a taxpayer owns a share that is not a
capital property and receives a dividend in
respect of that share, the amount of any loss of
the taxpayer arising from transactions with
reference to the share on which the dividend
was received shall, unless it is established by
the taxpayer that
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(5) The portion of subsection 112(4.2) of
the Act before paragraph (a) is replaced by
the following:
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| Loss on share
that is not
capital
property of
partnership
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(4.2) Subject to subsections (5.5) and (5.6),
where a taxpayer is a member of a partnership
and the taxpayer receives a dividend in respect
of a share that is not a capital property of the
partnership, the taxpayer's share of any loss of
the partnership arising with respect to the
share on which the dividend was received
shall, unless it is established by the taxpayer
that
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(6) The portion of subsection 112(4.3) of
the Act before paragraph (a) is replaced by
the following:
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| Loss on share
that is not
capital
property of
trust
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(4.3) Subject to subsections (5.5) and (5.6),
where a taxpayer is a beneficiary of a trust
(other than a prescribed trust) that owns a
share that is not capital property and the
taxpayer receives a taxable dividend in
respect of that share pursuant to a designation
under subsection 104(19) or the trust has made
a designation under subsection 104(20) in
respect of the taxpayer for a dividend other
than a taxable dividend on that share, the
amount of any loss of the trust arising with
respect to the share on which the dividend was
subject to a designation shall, unless it is
established by the taxpayer that
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(7) Section 112 of the Act is amended by
adding the following after subsection (4.3):
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| Disposition of
share by
financial
institution
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(5) Subsection (5.2) applies to the
disposition of a share by a taxpayer in a
taxation year where
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(a) the taxpayer is a financial institution in
the year;
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(b) the share is a mark-to-market property
for the year; and
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(c) the taxpayer received a dividend on the
share at a time when the taxpayer and
persons with whom the taxpayer was not
dealing at arm's length held in total more
than 5% of the issued shares of any class of
the capital stock of the corporation from
which the dividend was received.
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| Share held for
less than one
year
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(5.1) Subsection (5.2) applies to the
disposition of a share by a taxpayer in a
taxation year where
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(a) the disposition is an actual disposition;
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(b) the taxpayer held the share for less than
365 days; and
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(c) the share was a mark-to-market property
of the taxpayer for a taxation year that
begins after October 1994 and in which the
taxpayer was a financial institution.
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| Adjustment re
dividends
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(5.2) Subject to subsection (5.3), where
subsection (5) or (5.1) provides that this
subsection applies to the disposition of a share
by a taxpayer at any time, the taxpayer's
proceeds of disposition shall be deemed to be
the amount determined by the formula
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A + B - (C - D)
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where
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A is the taxpayer's proceeds determined
without reference to this subsection,
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B is the lesser of
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(a) the loss, if any, from the disposition of
the share that would be determined
before the application of this subsection
if the cost of the share to any taxpayer
were determined without reference to
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(i) paragraphs 87(2)(e.2) and (e.4),
88(1)(c), 138(11.5)(e) and
142.5(2)(b),
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(ii) subsection 85(1), where the
provisions of that subsection are
required by paragraph 138(11.5)(e) to
be applied, and
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(iii) paragraph 142.6(1)(d), and
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(b) the total of all amounts each of which
is
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(i) where the taxpayer is a corporation,
a taxable dividend received by the
taxpayer on the share, to the extent of
the amount that was deductible under
this section or subsection 115(1) or
138(6) in computing the taxpayer's
taxable income or taxable income
earned in Canada for any taxation year,
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(ii) where the taxpayer is a partnership,
a taxable dividend received by the
taxpayer on the share, to the extent of
the amount that was deductible under
this section or subsection 115(1) or
138(6) in computing the taxable
income or taxable income earned in
Canada for any taxation year of
members of the partnership,
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(iii) where the taxpayer is a trust, an
amount designated under subsection
104(19) in respect of a taxable
dividend on the share, or
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(iv) a dividend (other than a taxable
dividend or a dividend deemed by
subsection 131(1) to be a capital gains
dividend) received by the taxpayer on
the share,
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C is the total of all amounts each of which is
the amount by which
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(a) the taxpayer's proceeds of disposition
on a deemed disposition of the share
before that time were increased because
of this subsection,
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(b) where the taxpayer is a corporation or
trust, a loss of the taxpayer on a deemed
disposition of the share before that time
was reduced because of subsection (3),
(3.2), (4) or (4.3), or
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(c) where the taxpayer is a partnership, a
loss of a member of the partnership on a
deemed disposition of the share before
that time was reduced because of
subsection (3.1) or (4.2), and
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D is the total of all amounts each of which is
the amount by which the taxpayer's
proceeds of disposition on a deemed
disposition of the share before that time
were decreased because of this subsection.
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| Adjustment
not applicable
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(5.3) For the purpose of determining the
cost of a share to a taxpayer on a deemed
reacquisition of the share after a deemed
disposition of the share, the taxpayer's
proceeds of disposition shall be determined
without regard to subsection (5.2).
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| Deemed
dispositions
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(5.4) Where a taxpayer disposes of a share
at any time,
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(a) for the purpose of determining whether
subsection (5.2) applies to the disposition,
the conditions in subsections (5) and (5.1)
shall be applied without regard to a deemed
disposition and reacquisition of the share
before that time; and
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(b) total amounts under subsection (5.2) in
respect of the disposition shall be
determined from the time when the
taxpayer actually acquired the share.
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| Stop-loss
rules not
applicable
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(5.5) Subsections (3) to (4), (4.2) and (4.3)
do not apply to the disposition of a share by a
taxpayer in a taxation year that begins after
October 1994 where
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(a) the share is a mark-to-market property
for the year and the taxpayer is a financial
institution in the year; or
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(b) subsection (5.2) applies to the
disposition.
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| Stop-loss
rules
restricted
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(5.6) In determining whether any of
subsections (3) to (4), (4.2) and (4.3) apply to
the disposition of a share by a taxpayer, each
of those subsections shall be read without
reference to paragraph (a) of the subsection
where
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(a) the disposition occurs
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(i) because of subsection 142.5(2) in a
taxation year that includes October 31,
1994, or
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(ii) because of paragraph 142.6(1)(b)
after October 30, 1994; or
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(b) the share was a mark-to-market property
of the taxpayer for a taxation year that
begins after October 1994 in which the
taxpayer was a financial institution.
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(8) Subsection 112(6) 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):
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(c) ``financial institution'' and
``mark-to-market property'' have the
meanings assigned by subsection 142.2(1).
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(9) Subsections (1) to (6) and subsection
112(5.6) of the Act, as enacted by subsection
(7), apply to dispositions occurring after
October 30, 1994.
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(10) Subsections 112(5) to (5.5) of the Act,
as enacted by subsection (7), apply to
dispositions in taxation years that begin
after October 1994.
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(11) Subsection (8) applies to taxation
years that begin after October 1994.
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57. (1) Paragraph 138(3)(b) of the Act is
repealed.
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(2) Paragraph 138(3)(d) of the Act is
repealed.
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(3) Subsection 138(4) of the Act is
amended by adding the word ``and'' at the
end of paragraph (a) and by repealing
paragraph (b).
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(4) Paragraph 138(4)(c) of the Act is
repealed.
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(5) Subsection 138(5.2) of the Act is
repealed.
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(6) Section 138 of the Act is amended by
adding the following after subsection (9):
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| Application of
financial
institution
rules
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(10) Where in a taxation year an insurer
(other than an insurer resident in Canada that
does not carry on a life insurance business)
carried on an insurance business in Canada
and in a country other than Canada, in
computing the income of the insurer for the
year from carrying on an insurance business in
Canada,
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(a) sections 142.3 and 142.5 apply with
respect to property used by it in the year in,
or held by it in the year in the course of,
carrying on that business; and
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(b) section 142.4 applies with respect to the
disposition of property that, in the taxation
year in which the insurer disposed of it, was
property used by it in the year in, or held by
it in the year in the course of, carrying on
that business.
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