exceeds
	(b) the amount that would be described under paragraph (a) if the descriptions of A, B and D in subsection (1) were read as follows:
	``A is the individual's income from the business for the particular period (determined as if paragraphs 34.2(2)(a) to (d) applied in computing that income),
	B is the lesser of
	(i) the total of all amounts each of which is an amount included in the value of A in respect of the business and that is deemed to be a taxable capital gain for the purpose of section 110.6, and
	(ii) the total of the maximum amounts deductible under section 110.6 in computing the individual's taxable income for the taxation year that includes the end of the particular period,
	D is the number of days on which the individual carries on the business that are in the particular period.'',
	for the purpose of applying subsection 34.2(4) to the 1996 and subsequent taxation years, the December 31, 1995 income of the individual in respect of the business is deemed to be the amount determined under paragraph (b).
No additional income inclusion	(8) Subsections (1) and (2) do not apply in computing an individual's income for a taxation year from a business where
	(a) the individual dies or otherwise ceases to carry on the business in the year; or
	(b) the individual becomes a bankrupt in the calendar year in which the taxation year ends.
Definitions	34.2 (1) The definitions in this subsection apply in this section.
``December 31, 1995 income'' « revenu au 31 décembre 1995 »	``December 31, 1995 income'' in respect of a business carried on by a taxpayer means the amount determined by the formula
	(A - B - C + D) x E
	where
	A is the total of all amounts each of which is the taxpayer's income from the business for a qualifying fiscal period,
	B is the total of all amounts each of which is the taxpayer's loss from the business for a qualifying fiscal period,
	C is the lesser of
	(a) the total of all amounts each of which is an amount included in computing the taxpayer's income or loss from the business for a qualifying fiscal period and that is deemed to be a taxable capital gain for the purpose of section 110.6, and
	(b) the total of the maximum amounts deductible under section 110.6 in computing the taxpayer's taxable income for the taxation year in which the qualifying fiscal periods end,
	D is
	(a) where the taxpayer is a professional corporation, the total salary or wages deductible in computing the value of A or B in respect of the business that is payable by the corporation to an individual
	(i) who is a practising member of the professional body under the authority of which the corporation practised the profession, and
	(ii) who is a specified shareholder of the corporation, and
	(b) in any other case, nil, and
	E is
	(a) where the taxpayer is a professional corporation a taxation year of which ended at the end of 1995 because of the application of paragraph 249.1(1)(b), the amount determined by the formula
	F - G F
	where
	F is the number of days in all qualifying fiscal periods of the business, and
	G is the number of days in the year, and
	(b) in any other case, 1.
``qualifying fiscal period'' « exercice admissible »	``qualifying fiscal period'' of a business of a taxpayer means
	(a) where at the end of 1994 the taxpayer carried on the business and no fiscal period of the business ended at that time, a fiscal period of the business that
	(i) begins after the beginning of the taxpayer's taxation year that includes the end of 1995, and
	(ii) ends
	(A) at the end of 1995 because of the application of paragraph 249.1(1)(b) or because of the application of section 25 and paragraph 249.1(1)(b), or
	(B) immediately before the end of 1995 because of the application of subsection 99(2) and paragraph 249.1(1)(b),
	(b) a fiscal period of the business that ends at the end of 1995 because of the application of paragraph 249.1(1)(b) where
	(i) the taxpayer is an individual who carries on the business as a member of a partnership at the end of 1995,
	(ii) the individual acquired the individual's interest in the partnership in 1995 from a professional corporation,
	(iii) the professional corporation carried on the business at the end of 1994 as a member of the partnership and does not have a share of the income or loss of the partnership for the fiscal period,
	(iv) the individual is a practising member of the professional body under the authority of which the professional corporation practised the profession, and
	(v) the individual was a specified shareholder of the professional corporation immediately before acquiring the interest, and
	(c) where
	(i) the taxpayer is a professional corporation that has a taxation year that ends at the end of 1995 because of the application of paragraph 249.1(1)(b), and
	(ii) at the end of 1994 the business was carried on by the professional corporation as a member of a partnership, or by an individual
	(A) who transferred an interest in the partnership to the professional corporation before the end of 1995,
	(B) who is a practising member of the professional body under the authority of which the professional corporation practises the profession,
	(C) who was a specified shareholder of the professional corporation immediately after the transfer, and
	(D) who does not have a share of the income or loss of the partnership for the first fiscal period of the partnership that ends in 1995,
	a fiscal period of the business that ends in that taxation year.
``specified percentage'' « pourcentage déterminé »	``specified percentage'' of a taxpayer for a particular taxation year in respect of a business means
	(a) where the first taxation year in which a qualifying fiscal period of the business ends is 1995, or subsection 34.1(4), (5) or (6) applies in respect of the business, and the particular year ends in
	(i) 1995, 95%,
	(ii) 1996, 85%,
	(iii) 1997, 75%,
	(iv) 1998, 65%,
	(v) 1999, 55%,
	(vi) 2000, 45%,
	(vii) 2001, 35%,
	(viii) 2002, 25%,
	(ix) 2003, 15%, and
	(x) any other year, 0%, and
	(b) where the first taxation year in which a qualifying fiscal period of a business of the taxpayer ends is 1996 and the particular year ends in
	(i) 1996, 95%,
	(ii) 1997, 85%,
	(iii) 1998, 75%,
	(iv) 1999, 65%,
	(v) 2000, 55%,
	(vi) 2001, 45%,
	(vii) 2002, 35%,
	(viii) 2003, 25%,
	(ix) 2004, 15%, and
	(x) any other year, 0%.
Computation of December 31, 1995 income	(2) For the purpose of the definition ``December 31, 1995 income'' in subsection (1), a taxpayer's income or loss from a business for a qualifying fiscal period shall be computed as if
	(a) this Act were read without reference to paragraph 28(1)(b);
	(b) the taxpayer had made the election referred to in paragraph 34(a) in respect of the business for the period;
	(c) the maximum amount deductible in respect of any reserve, allowance or other amount were deducted; and
	(d) the taxpayer had not received any taxable dividend.
Business defined	(3) For the purposes of the definition ``qualifying fiscal period'' in subsection (1) and subparagraphs (6)(b)(i) and (c)(i), a reference to a particular business of a taxpayer includes another business substituted therefor, or for which the particular business was substituted, by the taxpayer where
	(a) all or substantially all of the gross revenue of the particular business is derived from the sale, leasing, rental or development of properties or the rendering of services; and
	(b) all or substantially all of the gross revenue of the other business is derived from the sale, leasing, rental or development, as the case may be, of similar properties or the rendering of similar services.
Reserve	(4) Subject to subsection (6), where a taxpayer carries on a business in a particular taxation year, there may be deducted in computing the taxpayer's income for the year from the business, as a reserve in respect of December 31, 1995 income, such amount as the taxpayer claims not exceeding the least of
	(a) the specified percentage for the particular year of the taxpayer's December 31, 1995 income in respect of the business;
	(b) where an amount was deductible under this subsection in computing the taxpayer's income for a preceding taxation year from the business, the amount included under subsection (5) in computing the taxpayer's income for the particular year from the business; and
	(c) the taxpayer's income for the particular year computed before deducting any amount under this subsection in respect of the business or under any of paragraph 60(w), sections 61.2 to 61.4 and subsection 80(17).
Reserve included in income	(5) There shall be included in computing a taxpayer's income for a taxation year from a business the amount deducted under subsection (4) in computing the taxpayer's income therefrom for the preceding taxation year.
No reserve	(6) No deduction shall be made under subsection (4) in computing a taxpayer's income for a taxation year from a business where
	(a) at the end of the year or at any time in the following taxation year,
	(i) the taxpayer's income from the business is exempt from tax under this Part, or
	(ii) the taxpayer is non-resident and does not carry on the business through a permanent establishment (as defined by regulation) in Canada;
	(b) the taxpayer is a corporation and the year ends immediately before another taxation year
	(i) at the beginning of which the business is not carried on principally by the corporation nor by members of a partnership of which the corporation is a member,
	(ii) in which the corporation becomes a bankrupt, or
	(iii) in which the corporation is dissolved or wound up (other than in circumstances to which subsection 88(1) applies); or
	(c) the taxpayer is an individual, and
	(i) at the beginning of the year, the business is not carried on principally by the individual nor by members of a partnership of which the individual is a member,
	(ii) the individual dies or becomes a bankrupt in the calendar year in which the taxation year ends, or
	(iii) the individual is a trust that ceases to exist in the year.
Anti- avoidance rule	(7) Where it is reasonable to conclude that one of the main reasons a person carries on a business or is a member of a partnership is to avoid the application of subparagraph (6)(b)(i) or (c)(i), the person is deemed not to carry on the business, and not to be a member of the partnership, for the purposes of those subparagraphs.
	(2) Subsection (1) applies after 1994.