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(4) Subparagraph 20(1)(p)(ii) of the Act is
replaced by the following:
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(ii) all amounts each of which is that part
of the amortized cost to the taxpayer at
the end of the year of a loan or lending
asset (other than a mark-to-market prop
erty, as defined in subsection 142.2(1))
that is established by the taxpayer to have
become uncollectible in the year and
that,
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(A) where the taxpayer is an insurer or
a taxpayer whose ordinary business
includes the lending of money, was
made or acquired in the ordinary
course of the taxpayer's business of
insurance or the lending of money, or
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(B) where the taxpayer is a financial
institution (as defined in subsection
142.2(1)) in the year, is a specified
debt obligation (as defined in that
subsection) of the taxpayer;
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(5) Subsection (1) applies to expenses
incurred after 1987.
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(6) Subsections (2) to (4) apply to taxation
years that end after February 22, 1994.
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14. (1) Subsection 27(1) of the Act is
replaced by the following:
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| Application of
Part I to
Crown
corporation
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27. (1) This Part applies to a federal Crown
corporation as if
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(a) any income or loss from a business
carried on by the corporation as agent of
Her Majesty, or from a property of Her
Majesty administered by the corporation,
were an income or loss of the corporation
from the business or the property , as the
case may be; and
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(b) any property, obligation or debt of any
kind whatever held, administered, entered
into or incurred by the corporation as agent
of Her Majesty were a property, obligation
or debt, as the case may be, of the corpora
tion.
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(2) Subsection (1) applies
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(a) for the purpose of section 181.71 of the
Act, as enacted by subsection 120(1), to
taxation years that end after June 1989;
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(b) for the purposes of section 187.61 of
the Act, as enacted by subsection 122(1),
and subsection 191.4(3) of the Act, as
enacted by subsection 129(1), after 1987;
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(c) for the purpose of section 190.211 of
the Act, as enacted by subsection 126(1),
after May 23, 1985; and
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(d) for all other purposes, after April 26,
1995.
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15. (1) Paragraph 28(1)(d) of the Act is
replaced by the following:
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(d) the total of all amounts each of which is
an amount included in computing the
taxpayer's income for the year from the
business because of subsection 13(1),
14(1), 80(13) or 80.3(3) or (5),
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(2) Paragraph 28(1)(e) of the Act is
amended by striking out the word ``and'' at
the end of subparagraph (i) and by replac
ing subparagraph (ii) with the following:
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(ii) in the case of amounts paid, or
deemed by this Act to have been paid, for
inventory, were in payment of or on
account of an amount that would be
deductible in computing the income from
the business for the year or any other
taxation year if that income were not
computed in accordance with the cash
method, and
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(iii) in any other case, were in payment of
or on account of an amount that would be
deductible in computing the income from
the business for a preceding taxation
year, the year or the following taxation
year if that income were not computed in
accordance with the cash method,
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(3) Subsection 28(1) of the Act is amended
by adding the following after paragraph
(e):
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(e.1) all amounts, other than amounts
described in section 30, that
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(i) would be deductible in computing the
income from the business for the year if
that income were not computed in accor
dance with the cash method,
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(ii) are not deductible in computing the
income from the business for any other
taxation year, and
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(iii) were paid in a preceding taxation
year in the course of carrying on the
business,
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(4) Subsection (1) applies to taxation
years that end after February 21, 1994.
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(5) Subsections (2) and (3) apply to
amounts paid after April 26, 1995, other
than amounts paid pursuant to an agree
ment in writing made by the payer on or
before April 26, 1995.
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16. (1) The portion of subparagraph
37(1)(a)(iii) of the French version of the Act
before clause (A) is replaced by the follow
ing:
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(iii) soit, si le contribuable est une
société , sous forme de paiements à une
société résidant au Canada et exonérée
d'impôt en application de l'alinéa
149(1)j), devant servir à des activités de
recherche scientifique et de développe
ment expérimental - recherche fonda
mentale ou appliquée - exercées au
Canada :
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(2) Subsection 37(10) of the Act is re
placed by the following:
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| Time for
election
|
(10) Any election made under clause
(8)(a)(ii)(B) for a taxation year by a taxpayer
shall be filed by the taxpayer on the day on
which the taxpayer first files a prescribed form
referred to in subsection (11) for the year.
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(3) Paragraph 37(13)(b) of the Act is
replaced by the following:
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(b) the work would be scientific research
and experimental development if it were
performed by the person or partnership,
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(4) Subsection (1) applies to taxation
years that end after November 1991.
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(5) Subsection (2) applies after February
21, 1994 to expenditures incurred at any
time, except that, for taxation years that
began before 1996, the reference in subsec
tion 37(10) of the Act, as enacted by
subsection (2), to ``subsection (11)'' shall be
read as a reference to ``subsection (1)''.
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(6) Subsection (3) applies to taxation
years that begin after 1995.
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17. (1) Sections 37.1 to 37.3 of the Act are
repealed.
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(2) Subsection (1) applies to the 1995 and
subsequent taxation years.
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18. (1) The formula ``A - B - C'' in the
definition ``exempt capital gains balance''
in subsection 39.1(1) of the Act is replaced
by the following:
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A - B - C - F
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(2) The definition ``exempt capital gains
balance'' in subsection 39.1(1) of the Act is
amended by striking out the word ``and'' at
the end of the description of B, by adding
the word ``and'' at the end of the description
of C and by adding the following after the
description of C:
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F is
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(a) if the entity is a trust described in
any of paragraphs (g) to (j) of the
definition ``flow-through entity'' in
this subsection, the total of all amounts
each of which is an amount included
before the year in the cost to the
individual of a property under subsec
tion 107(2.2) or paragraph 144(7.1)(c)
because of the individual's exempt
capital gains balance in respect of the
entity, and
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(b) in any other case, nil;
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(3) Subsections (1) and (2) apply to the
1994 and subsequent taxation years.
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19. (1) Paragraph 40(2)(e) of the Act is
repealed.
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(2) Subparagraph 40(2)(h)(i) of the Act is
replaced by the following:
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(i) all amounts added under paragraph
53(1)(f.1) to the cost to a corporation,
other than the controlled corporation, of
property disposed of to that corporation
by the controlled corporation that were
added to the cost of the property during
the period while the controlled corpora
tion was controlled by the taxpayer and
that can reasonably be attributed to
losses on the property that accrued during
the period while the controlled corpora
tion was controlled by the taxpayer,
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(3) Subsection 40(3.1) of the English
version of the Act is replaced by the
following:
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| Deemed gain
for certain
partners
|
(3.1) Where, at the end of a fiscal period of
a partnership, a member of the partnership is
a limited partner of the partnership, or is a
member of the partnership who was a speci
fied member of the partnership at all times
since becoming a member, except where the
member's partnership interest was held by the
member on February 22, 1994 and is an
excluded interest at the end of the fiscal
period,
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(a) the amount determined under subsec
tion (3.11) is deemed to be a gain from the
disposition, at the end of the fiscal period,
of the member's interest in the partnership;
and
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(b) for the purpose of section 110.6, the
interest is deemed to have been disposed of
by the member at that time.
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(4) Section 40 of the Act is amended by
adding the following after subsection
(3.13):
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| Specified
member of a
partnership
|
(3.131) Where it can reasonably be consid
ered that one of the main reasons that a
member of a partnership was not a specified
member of the partnership at all times since
becoming a member of the partnership is to
avoid the application of subsection (3.1) to the
member's interest in the partnership, the
member is deemed for the purpose of that
subsection to have been a specified member of
the partnership at all times since becoming a
member of the partnership.
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(5) Paragraph 40(3.14)(b) of the Act is
replaced by the following:
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(b) the member or a person not dealing at
arm's length with the member is entitled,
either immediately or in the future and
either absolutely or contingently, to receive
an amount or to obtain a benefit that would
be described in paragraph 96(2.2)(d) if that
paragraph were read without reference to
subparagraphs (ii) and (vi);
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(6) Section 40 of the Act is amended by
adding the following after subsection (3.2):
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| Where
subsection
(3.4) applies
|
(3.3) Subsection (3.4) applies where
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(a) a corporation, trust or partnership (in
this subsection and subsection (3.4) re
ferred to as the ``transferor'') disposes of a
particular capital property (other than de
preciable property of a prescribed class)
otherwise than in a disposition described in
any of paragraphs (c) to (g) of the definition
``superficial loss'' in section 54;
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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 and subsection (3.4) re
ferred to as the ``substituted property'') that
is, or is identical to, the particular property;
and
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(c) at the end of the period, the transferor or
a person affiliated with the transferor owns
the substituted property.
|
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| Loss on
certain
properties
|
(3.4) Where this subsection applies because
of subsection (3.3) to a disposition of a
particular property,
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(a) the transferor's loss, if any, from the
disposition is deemed to be nil, and
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(b) the amount of the transferor's loss, if
any, from the disposition (determined with
out reference to paragraph (2)(g) and this
subsection) is deemed to be a loss of the
transferor from a disposition of the particu
lar property at the time that is immediately
before the first time, after the disposition,
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(i) at which a 30-day period begins
throughout which neither the transferor
nor a person affiliated with the transferor
owns
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(A) the substituted property, or
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(B) a property that is identical to the
substituted property and that was ac
quired after the day that is 31 days
before the period begins,
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(ii) at which the property would, if it were
owned by the transferor, be deemed by
section 128.1 or subsection 149(10) to
have been disposed of by the transferor,
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(iii) that is immediately before control of
the transferor is acquired by a person or
group of persons, where the transferor is
a corporation,
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(iv) at which the transferor or a person
affiliated with the transferor is deemed
by section 50 to have disposed of the
property, where the substituted property
is a debt or a share of the capital stock of
a corporation, or
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(v) at which the winding-up of the
transferor begins (other than a winding-
up to which subsection 88(1) applies),
where the transferor is a corporation,
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and, for the purpose of paragraph (b), where a
partnership otherwise ceases to exist at any
time after the disposition, the partnership is
deemed not to have ceased to exist, and each
person who was a member of the partnership
immediately before the partnership would, but
for this subsection, 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 subparagraphs (b)(i)
to (v).
|
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| Deemed
identical
property
|
(3.5) For the purposes of subsections (3.3)
and (3.4),
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(a) a right to acquire a property (other than
a right, as security only, derived from a
mortgage, agreement for sale or similar
obligation) is deemed to be a property that
is identical to the property;
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(b) a share of the capital stock of a
corporation that is acquired in exchange for
another share in a transaction to which
section 51, 85.1, 86 or 87 applies is deemed
to be a property that is identical to the other
share;
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(c) where subsections (3.3) and (3.4) apply
to the disposition by a transferor of a share
of the capital stock of a corporation, and
after the disposition the corporation is
merged with one or more other corpora
tions, otherwise than in a transaction in
respect of which paragraph (b) applies to
the share, or is wound up in a winding-up to
which subsection 88(1) applies, the corpo
ration formed on the merger or the parent
(within the meaning assigned by subsection
88(1)), as the case may be, is deemed to own
the share while it is affiliated with the
transferor; and
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(d) where subsections (3.3) and (3.4) apply
to the disposition by a transferor of a share
of the capital stock of a corporation, and
after the disposition the share is redeemed,
acquired or cancelled by the corporation,
otherwise than in a transaction in respect of
which paragraph (b) or (c) applies to the
share, the transferor is deemed to own the
share while the corporation is affiliated
with the transferor.
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| Loss on shares
|
(3.6) Where at any time a taxpayer dis
poses, to a corporation that is affiliated with
the taxpayer immediately after the disposi
tion, of a share of a class of the capital stock
of the corporation (other than a share that is a
distress preferred share as defined in subsec
tion 80(1)),
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(a) the taxpayer's loss, if any, from the
disposition is deemed to be nil; and
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(b) in computing the adjusted cost base to
the taxpayer after that time of a share of a
class of the capital stock of the corporation
owned by the taxpayer immediately after
the disposition, there shall be added that
proportion of the amount of the taxpayer's
loss from the disposition (determined with
out reference to paragraph (2)(g) and this
subsection) that
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(i) the fair market value, immediately
after the disposition, of the share
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(ii) the fair market value, immediately
after the disposition, of all shares of the
capital stock of the corporation owned by
the taxpayer.
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|
(7) Section 40 of the Act is amended by
adding the following after subsection (8):
|
|
| Additions to
taxable
Canadian
property
|
(9) Where a non-resident person disposes of
a taxable Canadian property that the person
last acquired before April 27, 1995 and that
would not be a taxable Canadian property
immediately before the disposition if section
115 were read as it applied to dispositions that
occurred on April 26, 1995, the person's gain
or loss from the disposition is deemed to be the
amount determined by the formula
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A x B/C
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where
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A is the amount of the gain or loss determined
without reference to this subsection;
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