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(B) the lesser of the fair market value
of the land immediately before its
disposition and the amount, if any, by
which the cost amount to the vendor of
the land (determined without refer
ence to this subsection) exceeds the
total of the capital gains (determined
without reference to subparagraphs
40(1)(a)(ii) and (iii)) in respect of
dispositions of the land within 3 years
before the particular time by the
taxpayer or by a person with whom the
taxpayer was not dealing at arm's
length to the taxpayer or to another
person with whom the taxpayer was
not dealing at arm's length, and
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(A) the fair market value of the
building at the particular time, and
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(B) the lesser of the cost amount and
the capital cost to the taxpayer of the
building immediately before its dis
position,
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and, notwithstanding any other provision of
this Act, the proceeds of disposition of the
land are deemed to be the amount, if any, by
which
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(iii) the total of the proceeds of disposi
tion of the building and of the land
determined without reference to this
subsection and subsection (21.2)
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(iv) the proceeds of disposition of the
building as determined under this para
graph,
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and the cost to the purchaser of the land
shall be determined without reference to
this subsection; and
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(b) where paragraph (a) does not apply with
respect to the disposition and, at any time
before the disposition, the taxpayer or a
person with whom the taxpayer did not deal
at arm's length owned the land subjacent to,
or immediately contiguous to and necessary
for the use of, the building, the proceeds of
disposition of the building are deemed to be
an amount equal to the total of
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(i) the proceeds of disposition of the
building determined without reference to
this subsection and subsection (21.2) ,
and
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(ii) 1/4 of the amount by which the
greater of
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(A) the cost amount to the taxpayer of
the building, and
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(B) the fair market value of the build
ing
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immediately before its disposition ex
ceeds the proceeds of disposition referred
to in subparagraph (i).
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| Loss on
certain
transfers
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(21.2) Where
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(a) a corporation, trust or partnership (in
this subsection referred to as the ``transfer
or'') disposes at a particular time (otherwise
than in a disposition described in any of
paragraphs (c) to (g) of the definition
``superficial loss'' in section 54) of a
depreciable property of a particular pre
scribed class of the transferor,
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(i) the capital cost to the transferor of the
transferred property, and
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(ii) that proportion of the undepreciated
capital cost to the transferor of all
property of the particular class immedi
ately before that time that
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(A) the fair market value of the
transferred property at that time
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(B) the fair market value of all proper
ty of the particular class immediately
before that time
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exceeds the amount that would otherwise
be the transferor's proceeds of disposition
of the transferred property at the particular
time, and
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(c) on the 30th day after the particular time,
a person or partnership (in this subsection
referred to as the ``subsequent owner'') who
is the transferor or a person affiliated with
the transferor owns or has a right to acquire
the transferred property (other than a right,
as security only, derived from a mortgage,
agreement for sale or similar obligation),
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the following rules apply:
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(d) sections 85 and 97 do not apply to the
disposition,
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(e) for the purposes of applying this section
and section 20 and any regulations made for
the purpose of paragraph 20(1)(a) to the
transferor for taxation years that end after
the particular time,
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(i) the transferor is deemed to have
disposed of the transferred property for
proceeds equal to the lesser of the
amounts determined under subpara
graphs (b)(i) and (ii) with respect to the
transferred property,
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(ii) where 2 or more properties of a
prescribed class of the transferor are
disposed of at the same time, subpara
graph (i) applies as if each property so
disposed of had been separately disposed
of in the order designated by the taxpayer
or, if the taxpayer does not designate an
order, in the order designated by the
Minister,
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(iii) the transferor is deemed to own a
property that was acquired before the
beginning of the taxation year that in
cludes the particular time at a capital cost
equal to the amount of the excess de
scribed in paragraph (b), and that is
property of the particular class, until the
time that is immediately before the first
time, after the particular time,
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(A) at which a 30-day period begins
throughout which neither the transfer
or nor a person affiliated with the
transferor owns or has a right to
acquire the transferred property (other
than a right, as security only, derived
from a mortgage, agreement for sale or
similar obligation),
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(B) at which the transferred property is
not used by the transferor or a person
affiliated with the transferor for the
purpose of earning income and is used
for another purpose,
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(C) at which the transferred property
would, if it were owned by the transfer
or, be deemed by section 128.1 or
subsection 149(10) to have been dis
posed of by the transferor,
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(D) that is immediately before control
of the transferor is acquired by a
person or group of persons, where the
transferor is a corporation, or
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(E) at which the winding-up of the
transferor begins (other than a wind
ing-up to which subsection 88(1) ap
plies), where the transferor is a corpo
ration, and
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(iv) the property described in subpara
graph (iii) is considered to have become
available for use by the transferor at the
time at which the transferred property is
considered to have become available for
use by the subsequent owner,
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(f) for the purposes of subparagraphs (e)(iii)
and (iv), where a partnership otherwise
ceases to exist at any time after the particu
lar time, the partnership is deemed not to
have ceased to exist, and each person who
was a member of the partnership immedi
ately before the partnership would, but for
this paragraph, have ceased to exist is
deemed to remain a member of the partner
ship, until the time that is immediately after
the first time described in clauses (e)(iii)(A)
to (E), and
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(g) for the purposes of applying this section
and section 20 and any regulations made for
the purpose of paragraph 20(1)(a) to the
subsequent owner,
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(i) the subsequent owner's capital cost of
the transferred property is deemed to be
the amount that was the transferor's
capital cost of the transferred property,
and
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(ii) the amount by which the transferor's
capital cost of the transferred property
exceeds its fair market value at the
particular time is deemed to have been
deducted under paragraph 20(1)(a) by
the subsequent owner in respect of prop
erty of that class in computing income for
taxation years that ended before the
particular time.
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(5) Subsection 13(24) of the Act is re
placed by the following:
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| Acquisition of
control
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(24) Where control of a corporation has
been acquired at any time by a person or group
of persons and, within the 12-month period
that ended immediately before that time, the
corporation or a partnership of which it was a
majority interest partner acquired depreciable
property (other than property that was owned
by the corporation or partnership or by a
person that would, if section 251.1 were read
without reference to the definition ``con
trolled'' in subsection 251.1(2), be affiliated
with the corporation throughout the period
that began immediately before the 12-month
period began and ended at the time the
property was acquired by the corporation or
partnership) that was not used, or acquired for
use, by the corporation or partnership in a
business that was carried on by it immediately
before the 12-month period began ,
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(a) for the purposes of the description of A
in the definition ``undepreciated capital
cost'' in subsection (21) and of sections 127
and 127.1, the property is, subject to
paragraph (b), deemed not to have been
acquired by the corporation or partnership
before that time and to have been acquired
by it immediately after that time; and
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(b) where the property was disposed of by
it before that time and was not reacquired by
it before that time, for the purposes of the
description of A in that definition, the
property is deemed to have been acquired
by the corporation or partnership immedi
ately before the property was disposed of.
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(6) Paragraph 13(27)(d) of the Act is
replaced by the following:
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(d) the time the property
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(i) is delivered to the taxpayer, or to a
person or partnership (in this paragraph
referred to as the ``other person'') that
will use the property for the benefit of the
taxpayer, or, where the property is not of
a type that is deliverable, is made
available to the taxpayer or the other
person, and
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(ii) is capable, either alone or in com
bination with other property in the pos
session at that time of the taxpayer or the
other person , of being used by or for the
benefit of the taxpayer or the other person
to produce a commercially saleable
product or to perform a commercially
saleable service, including an intermedi
ate product or service that is used or
consumed, or to be used or consumed, by
or for the benefit o f the taxpayer or the
other person in producing or performing
any such product or service,
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(7) Subsections (1) and (2) apply to
dispositions of former properties that occur
after the 1993 taxation year.
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(8) Subsection (3) applies after April 26,
1995.
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(9) Subject to section 156, subsection (4)
applies to dispositions of property that
occur after April 26, 1995, except that,
where
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(a) a property is disposed of after April
26, 1995 and before June 20, 1996, and
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(b) the transferor elects 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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the portion of subparagraph 13(21.2)(e)(iii)
of the Act before clause (A), as enacted by
subsection (4), shall be read as follows:
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(iii) the transferor is deemed to own a
property that was acquired before the
beginning of the taxation year that in
cludes the particular time at a capital cost
equal to the amount of the excess de
scribed in paragraph (b), and that is of a
separate prescribed class that is the same
class as the particular class, until the time
that is immediately before the first time,
after the particular time,
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(10) Subsection (5) applies to acquisitions
of control that occur after April 26, 1995.
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(11) Subsection (6) applies to property
acquired after 1989.
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8. (1) The portion of subparagraph
14(1)(a)(v) of the Act after the description
of D is repealed.
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(2) Section 14 of the Act is amended by
adding the following after subsection (1):
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| Deemed
taxable capital
gain
|
(1.1) For the purposes of section 110.6 and
of paragraph 3(b) as it applies for the purposes
of that section, an amount included under
subparagraph (1)(a)(v) in computing a tax
payer's income for a particular taxation year
from a business is deemed to be a taxable
capital gain of the taxpayer for that year from
the disposition in that year of qualified farm
property to the extent of the lesser of
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(a) the amount included under subpara
graph (1)(a)(v) in computing the taxpayer's
income for the particular year from the
business, and
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(b) the amount determined by the formula
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A - B
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A is 3/4 of the amount determined in
respect of the taxpayer for the particular
year equal to the amount, if any, by
which
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(i) the total of all amounts each of
which is the taxpayer's proceeds from
a disposition in the particular year or a
preceding taxation year that began
after 1987 of an eligible capital proper
ty in respect of the business that, at the
time of disposition, was a qualified
farm property (as defined in subsection
110.6(1)) of the taxpayer
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(ii) the total of all amounts each of
which is
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(A) an eligible capital expenditure
of the taxpayer in respect of the
business that was made or incurred
in respect of a qualified farm proper
ty disposed of by the taxpayer in the
particular year or a preceding taxa
tion year that began after 1987, or
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(B) an outlay or expense of the
taxpayer that was not deductible in
computing the taxpayer's income
and was made or incurred for the
purpose of making a disposition
referred to in subparagraph (i), and
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B is the total of all amounts each of which
is
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(i) that portion of an amount deemed
by subparagraph (1)(a)(v) (as it ap
plied in respect of the business to fiscal
periods that began after 1987 and
ended before February 23, 1994) to be
a taxable capital gain of the taxpayer
that can reasonably be attributed to a
disposition of a qualified farm proper
ty of the taxpayer, or
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(ii) an amount deemed by this section
to be a taxable capital gain of the
taxpayer for a taxation year preceding
the particular year from the disposition
of qualified farm property of the
taxpayer.
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(3) The portion of subsection 14(6) of the
Act before paragraph (a) is replaced by the
following:
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| Exchange of
property
|
(6) Where in a taxation year (in this
subsection referred to as the ``initial year'') a
taxpayer disposes of an eligible capital prop
erty (in this section referred to as the taxpay
er's ``former property'') and the taxpayer so
elects under this subsection in the taxpayer's
return of income for the year in which the
taxpayer acquires an eligible capital property
that is a replacement property for the taxpay
er's former property, such amount, not ex
ceeding the amount that would otherwise be
included in the amount determined for E in the
definition ``cumulative eligible capital'' in
subsection (5) (if the description of E in that
definition were read without reference to ``3/4
of'') in respect of a business, as has been used
by the taxpayer before the end of the first
taxation year after the initial year to acquire
the replacement property
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(4) Paragraph 14(7)(a) of the Act is
replaced by the following:
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(a) it is reasonable to conclude that the
property was acquired by the taxpayer to
replace the former property ;
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(a.1) it was acquired by the taxpayer for the
same or a similar use as the use to which the
taxpayer put the former property;
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(5) Section 14 of the Act is amended by
adding the following after subsection (11):
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| Loss on
certain
transfers
|
(12) Where
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(a) a corporation, trust or partnership (in
this subsection referred to as the ``transfer
or'') disposes at any time in a taxation year
of a particular eligible capital property in
respect of a business of the transferor in
respect of which it would, but for this
subsection, be permitted a deduction under
paragraph 24(1)(a) as a consequence of the
disposition, and
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(b) during the period that begins 30 days
before and ends 30 days after the disposi
tion, the transferor or a person affiliated
with the transferor acquires a property (in
this subsection referred to as the ``substi
tuted property'') that is, or is identical to,
the particular property and, at the end of that
period, a person or partnership that is either
the transferor or a person or partnership
affiliated with the transferor owns the
substituted property,
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the transferor is deemed, for the purposes of
this section and sections 20 and 24, to continue
to own eligible capital property in respect of
the business, and not to have ceased to carry
on the business, until the time that is immedi
ately before the first time, after the disposi
tion,
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(c) at which a 30-day period begins
throughout which neither the transferor nor
a person affiliated with the transferor owns
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(i) the substituted property, or
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