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(p) for the purpose of determining the
funds' capital gains redemptions (as de
fined in subsection 131(6) or 132(4)), for
their taxation years that include the transfer
time,
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(i) the total of the cost amounts to the
transferor of all its properties at the end
of the year is deemed to be the total of all
amounts each of which is
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(A) the transferor's proceeds of dis
position of a property that was trans
ferred to a transferee on the qualifying
exchange, or
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(B) the cost amount to the transferor at
the end of the year of a property that
was not transferred on the qualifying
exchange, and
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(ii) the transferee is deemed not to have
acquired any property that was trans
ferred to it on the qualifying exchange;
and
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(q) except as provided in subparagraph
(o)(i) , the transferor is, notwithstanding
subsections 131(8) and 132(6), deemed to
be neither a mutual fund corporation nor a
mutual fund trust for taxation years that
begin after the transfer time.
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(3) Paragraph (b) of the definition ``qual
ifying exchange'' in subsection 132.2(2) of
the Act is replaced by the following:
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(b) no person disposing of shares of the
transferor to the transferor within that
60-day period (otherwise than pursuant
to the exercise of a statutory right of
dissent) receives any consideration for
the shares other than units of the transfer
ee, and
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(4) Subsections (1) to (3) apply after June
1994, except that, where
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(a) a qualifying exchange (as defined in
subsection 132.2(2) of the Act) between
funds occurs before November 1996, and
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(b) the funds jointly elect in writing filed
with the Minister of National Revenue
before the end of the third month after
the month in which this Act is assented to,
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subsection 132.2(1) of the Act, as amended
by subsection (2), shall be read without ref
erence to paragraph 132.2(1)(p), as enacted
by subsection (2), in its application to the ex
change.
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86. (1) Paragraph 133(6)(b) of the Act is
replaced by the following:
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(b) shall, with all due dispatch, make that
allowable refund after mailing the notice of
assessment if an application for it has been
made in writing by the corporation within
the period within which the Minister would
be allowed under subsection 152(4) to
assess tax payable by the corporation for
the year if that subsection were read without
reference to paragraph 152(4)(a) .
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(2) Subsection (1) applies after April 27,
1989.
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87. (1) Subsection 136(1) of the Act is
replaced by the following:
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| Cooperative
not private
corporation
|
136. (1) Notwithstanding any other provi
sion of this Act, a cooperative corporation that
would, but for this section, be a private
corporation is deemed not to be a private
corporation except for the purposes of sec
tions 15.1, 125, 125.1, 127, 127.1, 152 and
157, the definition ``mark-to-market proper
ty'' in subsection 142.2(1) and the definition
``small business corporation'' in subsection
248(1) as it applies for the purpose of para
graph 39(1)(c).
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(2) Subsection (1) applies to taxation
years that end after February 22, 1994.
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88. (1) Section 141.1 of the Act is replaced
by the following:
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| Deemed not
to be a private
corporation
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141.1 Notwithstanding any other provision
of this Act, an insurance corporation (other
than a life insurance corporation) that would,
but for this section, be a private corporation is
deemed not to be a private corporation for the
purposes of subsection 55(5), the definition
``capital dividend account'' in subsection
89(1) and sections 123.2 and 129.
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(2) Subsection (1) applies to taxation
years that end after June 1995.
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89. (1) The portion of the definition
``specified debt obligation'' in subsection
142.2(1) of the Act after paragraph (b) is
replaced by the following:
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other than an interest in
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(c) an income bond, an income deben
ture, a small business development bond,
a small business bond or a prescribed
property, or
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(d) an instrument issued by or made with
a person to whom the taxpayer is related
or with whom the taxpayer does not
otherwise deal at arm's length, or in
which the taxpayer has a significant
interest.
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(2) Subsection (1) applies to taxation
years that end after February 22, 1994.
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90. (1) The portion of subsection 142.3(1)
of the Act before paragraph (a) is replaced
by the following:
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| Amounts to
be included
and deducted
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142.3 (1) Subject to subsection (3) , where
a taxpayer that is, in a taxation year, a financial
institution holds a specified debt obligation at
any time in the year,
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(2) Paragraph 142.3(1)(c) of the Act is
replaced by the following:
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(c) except as provided by this section ,
paragraphs 12(1)(d) and (i) and 20(1)(l) and
(p) and section 142.4, no amount shall be
included or deducted in respect of payments
under the obligation (other than fees and
similar amounts) in computing the income
of the taxpayer for the year.
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(3) Subsection 142.3(2) of the Act is
replaced by the following:
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| Failure to
report accrued
amounts
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(2) Subject to subsection (3), where
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(a) a taxpayer holds a specified debt
obligation at any time in a particular
taxation year in which the taxpayer is a
financial institution, and
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(b) all or part of an amount required by
paragraph (1)(a) or subsection 12(3) to be
included in respect of the obligation in
computing the taxpayer's income for a
preceding taxation year was not so in
cluded,
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that part of the amount shall be included in
computing the taxpayer's income for the par
ticular year, to the extent that it was not in
cluded in computing the taxpayer's income
for a preceding taxation year.
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| Exception for
certain
obligations
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(3) Subsections (1) and (2) do not apply for
a taxation year in respect of a taxpayer's
specified debt obligation that is
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(a) a mark-to-market property for the year;
or
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(b) an indexed debt obligation, other than a
prescribed obligation.
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(4) Subsections (1) to (3) apply to taxation
years that end after February 22, 1994,
except that those subsections do not apply to
debt obligations disposed of before Febru
ary 23, 1994.
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91. (1) Paragraph (b) of the definition
``tax basis'' in subsection 142.4(1) of the Act
is replaced by the following:
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(b) an amount included under subsection
12(3) or 16(2) or (3), paragraph
142.3(1)(a) or subsection 142.3(2) in
respect of the obligation in computing
the taxpayer's income for a taxation year
that began before that time,
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(2) Paragraph (j) of the definition ``tax
basis'' in subsection 142.4(1) of the Act is
replaced by the following:
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(j) the amount of a payment received by
the taxpayer under the obligation at or
before that time, other than
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(i) a fee or similar payment, and
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(ii) proceeds of disposition of the
obligation,
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(3) Paragraph 142.4(3)(a) of the Act is
replaced by the following:
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(a) except as provided by paragraph
79.1(7)(d) or this section, no amount shall
be included or deducted in respect of the
disposition in computing the taxpayer's
income; and
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(4) Subsections 142.4(4) and (5) of the Act
are replaced by the following:
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| Inclusions and
deductions re
disposition
|
(4) Subject to subsection (5), where after
1994 a taxpayer disposes of a specified debt
obligation in a taxation year,
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(a) where the transition amount in respect
of the disposition of the obligation is
positive, it shall be included in computing
the income of the taxpayer for the year;
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(b) where the transition amount in respect
of the disposition of the obligation is
negative, the absolute value of the transi
tion amount shall be deducted in computing
the income of the taxpayer for the year;
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(c) where the taxpayer has a gain from the
disposition of the obligation,
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(i) the current amount of the gain shall be
included in computing the income of the
taxpayer for the year, and
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(ii) there shall be included in computing
the taxpayer's income for taxation years
that end on or after the day of disposition
the amount allocated, in accordance with
prescribed rules, to the year in respect of
the residual portion of the gain; and
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(d) where the taxpayer has a loss from the
disposition of the obligation,
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(i) the current amount of the loss shall be
deducted in computing the taxpayer's
income for the year, and
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(ii) there shall be deducted in computing
the taxpayer's income for taxation years
that end on or after the day of disposition
the amount allocated, in accordance with
prescribed rules, to the year in respect of
the residual portion of the loss.
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| Gain or loss
not amortized
|
(5) Where after February 22, 1994 a
taxpayer disposes of a specified debt obliga
tion in a taxation year, and
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(i) an indexed debt obligation (other than
a prescribed obligation), or
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(ii) a debt obligation prescribed in re
spect of the taxpayer,
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(b) the disposition occurred
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(ii) after 1994 in connection with the
transfer of all or part of a business of the
taxpayer to a person or partnership, or
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(iii) because of paragraph 142.6(1)(c), or
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(c) in the case of a taxpayer other than a life
insurance corporation,
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(i) the disposition occurred before 1996,
and
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(ii) the taxpayer elects in writing, filed
with the Minister before July 1997, to
have this paragraph apply,
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the following rules apply:
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(d) subsection (4) does not apply to the
disposition,
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(e) there shall be included in computing the
taxpayer's income for the year the amount,
if any, by which the taxpayer's proceeds of
disposition exceed the tax basis of the
obligation to the taxpayer immediately
before the disposition, and
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(f) there shall be deducted in computing the
taxpayer's income for the year the amount,
if any, by which the tax basis of the
obligation to the taxpayer immediately
before the disposition exceeds the taxpay
er's proceeds of disposition.
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(5) Paragraph 142.4(6)(b) of the Act is
replaced by the following:
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(b) where the amount determined under
paragraph (c) in respect of the disposition of
a specified debt obligation by a taxpayer is
negative, the absolute value of that amount
is the taxpayer's loss from the disposition of
the obligation; and
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(6) The description of C in paragraph
142.4(6)(c) of the Act is replaced by the
following:
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C is the taxpayer's transition amount in
respect of the disposition.
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(7) Subsections 142.4(7) to (9) of the Act
are replaced by the following:
|
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| Current
amount
|
(7) For the purposes of subsections (4) and
(8), the current amount of a taxpayer's gain or
loss from the disposition of a specified debt
obligation is
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(a) where the taxpayer has a gain from the
disposition of the obligation, the part, if any,
of the gain that is reasonably attributable to
a material increase in the probability, or
perceived probability, that the debtor will
make all payments as required by the
obligation; and
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(b) where the taxpayer has a loss from the
disposition of the obligation, the amount
that the taxpayer claims not exceeding the
part, if any, of the loss that is reasonably
attributable to a default by the debtor or a
material decrease in the probability, or
perceived probability, that the debtor will
make all payments as required by the
obligation.
|
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| Residual
portion of
gain or loss
|
(8) For the purpose of subsection (4), the
residual portion of a taxpayer's gain or loss
from the disposition of a specified debt
obligation is the amount, if any, by which the
gain or loss exceeds the current amount of the
gain or loss.
|
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| Disposition of
part of
obligation
|
(9) Where a taxpayer disposes of part of a
specified debt obligation, section 142.3 and
this section apply as if the part disposed of and
the part retained were separate specified debt
obligations.
|
|
| Penalties and
bonuses
|
(10) Notwithstanding subsection 18(9.1),
where a taxpayer that holds a specified debt
obligation receives a penalty or bonus because
of the repayment before maturity of all or part
of the principal amount of the debt obligation,
the payment is deemed to be received by the
taxpayer as proceeds of disposition of the
specified debt obligation.
|
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| Payments
received on or
after
disposition
|
(11) For the purposes of this section, where
at any time a taxpayer receives a payment
(other than proceeds of disposition) under a
specified debt obligation on or after the
disposition of the obligation, the payment is
deemed not to have been so received at that
time but to have been so received immediately
before the disposition.
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(8) Subsections (1) to (7) apply to taxation
years that end after February 22, 1994.
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|
92. (1) Subsections 142.5(5) to (7) of the
Act are replaced by the following:
|
|
| Transition -
inclusion re
non-capital
amounts
|
(5) Where an amount is deducted under
subsection (4) in computing a taxpayer's
income , there shall be included, in computing
the taxpayer's income for each taxation year
that begins before 1999 and ends after October
30, 1994, the total of all amounts prescribed
for the year .
|
|
| Transition -
deduction re
net capital
gains
|
(6) Such amount as a taxpayer elects, not
exceeding a prescribed amount in respect of
capital properties disposed of by the taxpayer
because of subsection (2), is deemed to be an
allowable capital loss of the taxpayer for its
taxation year that includes October 31, 1994
from the disposition of property (or, where the
taxpayer is non-resident throughout the year,
from the disposition of taxable Canadian
property) .
|
|
| Transition -
inclusion re
net capital
gains
|
(7) A taxpayer that elects an amount under
subsection (6) is deemed, for each taxation
year that begins before 1999 and ends after
October 30, 1994, to have a taxable capital
gain for the year from the disposition of
property (or, where the taxpayer is non-resi
dent throughout the year, from the disposition
of taxable Canadian property) equal to the
total of all amounts prescribed for the year.
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(2) Subsection (1) applies to taxation
years that end after October 30, 1994.
|
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|
93. (1) Section 142.6 of the Act is amended
by adding the following after subsection (7):
|
|
| Accrued
capital gains
and losses
election
|
(8) Where a taxpayer that is a financial
institution in its first taxation year that ends
after February 22, 1994 so elects by notifying
the Minister in writing before July 1997 or
within 90 days after the day on which a notice
of assessment of tax payable under this Part
for the year or notification that no tax is
payable under this Part for the year is mailed
to the taxpayer,
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