are deemed to be owned at that time by the taxpayer and not by the person who actually owned the shares at that time;
	(b) a group of persons in respect of a corporation means any 2 or more persons each of whom owns shares of the capital stock of the corporation;
	(c) a corporation that is controlled by one or more members of a particular group of persons in respect of that corporation is considered to be controlled by that group of persons; and
	(d) a corporation may be controlled by a person or a particular group of persons even though the corporation is also controlled or deemed to be controlled by another person or group of persons.
	(6) Subsections (1) and (4), except para graph 84.1(2.01)(c) of the Act, as enacted by subsection (4), apply to the 1994 and subse quent taxation years.
	(7) Paragraph 84.1(2.01)(c) of the Act, as enacted by subsection (4), applies in respect of the determination of the adjusted cost base of a share after June 20, 1996.
	41. (1) The portion of subsection 85(2) of the Act before paragraph (b) is replaced by the following:
Transfer of property to corporation from partnership	(2) Where
	(a) a partnership has disposed, to a taxable Canadian corporation for consideration that includes shares of the corporation's capital stock, of any partnership property that was
	(i) a capital property (other than real property, or an interest in or an option in respect of real property, where the part nership was not a Canadian partnership at the time of the disposition),
	(ii) a property described in any of para graphs (1.1)(c) to (f), or
	(iii) a property that would be described in paragraph (1.1)(g) or (g.1) if the refer ences in those paragraphs to ``taxpayer'' were read as ``partnership'', and
	(2) Subparagraph 85(4)(b)(ii) of the Act is replaced by the following:
	(ii) the taxpayer's proceeds of disposition of the property or, where the property is an eligible capital property, 4/3 of the taxpayer's eligible capital amount result ing from the disposition of the property, and
	(3) Subsection 85(4) of the Act is re pealed.
	(4) Subsection 85(5) of the Act is replaced by the following:
Rules on transfers of depreciable property	(5) Where subsection (1) or (2) has applied to a disposition at any time of depreciable property to a person (in this subsection referred to as the ``transferee'') and the capital cost to the transferor of the property exceeds the transferor's proceeds of disposition of the property, for the purposes of sections 13 and 20 and any regulations made for the purpose of paragraph 20(1)(a),
	(a) the capital cost to the transferee of the property is deemed to be the amount that was its capital cost to the transferor; and
	(b) the excess is deemed to have been deducted by the transferee under paragraph 20(1)(a) in respect of the property in computing income for taxation years that ended before that time .
	(5) Subsection 85(5.1) of the Act is re pealed.
	(6) Subsection (1) applies to dispositions that occur after June 20, 1996.
	(7) Subsection (2) applies
	(a) in the case of a corporation, to dispositions by it of property that occur after the beginning of its first taxation year that begins after June 1988; and
	(b) in any other case, to dispositions of property in respect of a business that occur after the beginning of the first fiscal period, that begins after 1987, of the business.
	(8) Subject to section 156, subsections (3) to (5) apply to dispositions of property that occur after April 26, 1995.
	42. (1) Subsection 87(2) of the Act is amended by adding the following after paragraph (g.2):
Superficial losses	(g.3) for the purposes of applying subsec tions 13(21.2), 14(12), 18(15) and 40(3.4) to any property that was disposed of by a predecessor corporation before the amal gamation, the new corporation is deemed to be the same corporation as, and a continua tion of, each predecessor corporation;
Superficial losses - capital property	(g.4) for the purpose of applying paragraph 40(3.5)(c) in respect of any share that was acquired by a predecessor corporation, the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;
	(2) Paragraph 87(2)(j.91) of the Act is replaced by the following:
Part I.3 and Part VI tax	(j.91) for the purpose of determining the amount deductible under subsection 181.1(4) or 190.1(3) by the new corporation for any taxation year, the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corpo ration, except that this paragraph does not affect the determination of the fiscal period of any corporation or the tax payable by any predecessor corporation ;
	(3) Paragraph 87(2)(l.21) of the Act is replaced by the following:
	(l.21) for the purposes of section 61.3, the definition ``unrecognized loss'' in subsec tion 80(1) and subsection 80.01(10), the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;
	(4) Paragraph 87(2)(x) of the Act is replaced by the following:
Taxable dividends	(x) for the purposes of subsections 112(3) to (4.22) ,
	(i) any taxable dividend received on a share that was deductible from the prede cessor corporation's income for a taxa tion year under section 112 or subsection 138(6) is deemed to be a taxable divi dend received on the share by the new corporation that was deductible from the new corporation's income under section 112 or subsection 138(6), as the case may be,
	(ii) any dividend (other than a taxable dividend) received on a share by the predecessor corporation is deemed to have been received on the share by the new corporation, and
	(iii) a share acquired by the new corpora tion from a predecessor corporation is deemed to have been owned by the new corporation throughout any period of time throughout which it was owned by a predecessor corporation;
	(5) Paragraph 87(2)(y.1) of the Act is repealed.
	(6) Paragraph 87(2)(bb) of the Act is replaced by the following:
Mutual fund and investment corporations	(bb) where the new corporation is a mutual fund corporation or an investment corpora tion, there shall be added to
	(i) the amount determined under each of paragraphs (a) and (b) of the definition ``capital gains dividend account'' in subsection 131(6), and
	(ii) the values of A and B in the definition ``refundable capital gains tax on hand'' in that subsection
	in respect of the new corporation at any time the amounts so determined and the values of those factors immediately before the amalgamation in respect of each predeces sor corporation that was, immediately be fore the amalgamation, a mutual fund corporation or an investment corporation;
Flow-through entities	(bb.1) where a predecessor corporation was, immediately before the amalgam ation, an investment corporation, a mort gage investment corporation or a mutual fund corporation and the new corporation is an investment corporation, a mortgage investment corporation or a mutual fund corporation, as the case may be, for the purpose of section 39.1, the new corpora tion is deemed to be the same corporation as, and a continuation of, the predecessor corporation;
	(7) Paragraph 87(2)(qq) of the Act is replaced by the following:
Continuation of corporation	(qq) for the purpose of computing the new corporation's investment tax credit at the end of any taxation year, the new corpora tion is deemed to be the same corporation as, and a continuation of, each predecessor corporation, except that this paragraph does not affect the determination of the fiscal period of any corporation or the tax payable by any predecessor corporation ;
	(8) Paragraph 87(2.1)(b) of the Act is replaced by the following:
	(b) determining the extent to which subsec tions 111(3) to (5.4) and paragraph 149(10)(c) apply to restrict the deductibili ty by the new corporation of any non-capital loss, net capital loss, restricted farm loss, farm loss or limited partnership loss, as the case may be,
	(9) Subsection 87(2.11) of the Act is replaced by the following:
Vertical amalgama- tions	(2.11) Where a new corporation is formed by the amalgamation of a particular corpora tion and one or more of its subsidiary wholly- owned corporations, the new corporation is deemed to be the same corporation as, and a continuation of, the particular corporation for the purposes of applying sections 111 and 126, subsections 127(5) to (26) and 181.1(4) to (7), Part IV and subsections 190.1(3) to (6) in respect of the particular corporation.
	(10) Subsection 87(9) of the Act is amended by adding the following after paragraph (a.4):
	(a.5) for the purpose of applying subsection (10) in respect of the merger, any share issued by the parent on the merger is deemed to have been issued by the new corporation;
	(11) Section 87 of the Act is amended by adding the following after subsection (9):
Share deemed listed	(10) Where
	(a) the new corporation formed as a result of an amalgamation is a public corporation,
	(b) the new corporation issues a share (in this subsection referred to as the ``new share'') of its capital stock in exchange for a share (in this subsection referred to as the ``old share'') of the capital stock of a predecessor corporation,
	(c) immediately before the amalgamation, the old share was listed on a prescribed stock exchange, and
	(d) the new share is redeemed, acquired or cancelled by the new corporation within 60 days after the amalgamation,
	the new share is deemed, for the purposes of subsections 115(1) and 116(6) and the defini tions ``qualified investment'' in subsections 146(1) and 146.3(1) and in section 204, to be listed on the exchange until the earliest time at which it is so redeemed, acquired or can celled.
Vertical amalgama- tions	(11) Where at any time there is an amalgam ation of a corporation (in this subsection referred to as the ``parent'') and one or more other corporations (each of which in this subsection is referred to as the ``subsidiary'') each of which is a subsidiary wholly-owned corporation of the parent,
	(a) the shares of the subsidiary are deemed to have been disposed of by the parent immediately before the amalgamation for proceeds equal to the proceeds that would be determined under paragraph 88(1)(b) if subsections 88(1) and (1.7) applied, with any modifications that the circumstances require, to the amalgamation; and
	(b) the cost to the new corporation of each capital property of the subsidiary acquired on the amalgamation is deemed to be the amount that would have been the cost to the parent of the property if the property had been distributed at that time to the parent on a winding-up of the subsidiary and subsec tions 88(1) and (1.7) had applied to the winding-up.
	(12) Subsections (1) and (2) apply to amalgamations that occur, and windings- up that begin, after April 26, 1995.
	(13) Subsection (3) applies to taxation years that end after February 21, 1994.
	(14) Subsection (4) applies to the 1994 and subsequent taxation years, except that, in its application to dispositions of shares that occur before April 27, 1995, paragraph 87(2)(x) of the Act, as enacted by subsection (4), shall be read as follows:
	(x) for the purposes of subsections 112(3) to (4.3),
	(i) any taxable dividend received on a share that was deductible from the prede cessor corporation's income for a taxa tion year under section 112 or subsection 138(6) is deemed to be a taxable dividend received on the share by the new corpora tion that was deductible from the new corporation's income under section 112 or 138(6), as the case may be,
	(ii) any capital dividend or life insurance capital dividend received on a share by the predecessor corporation is deemed to be a capital dividend or life insurance capital dividend, as the case may be, received on the share by the new corpora tion, and
	(iii) a share acquired by the new corpora tion from a predecessor corporation is deemed to have been owned by the new corporation throughout any period of time throughout which it was owned by a predecessor corporation;
	(15) Subsection (5) applies to taxes pay able for taxation years that begin after 1986.
	(16) Paragraph 87(2)(bb) of the Act, as enacted by subsection (6), applies to amal gamations that occur after 1991, except that, for amalgamations that occurred after 1991 and before February 23, 1994, sub paragraph 87(2)(bb)(i) of the Act, as en acted by that subsection, shall be read as follows:
	(i) the amount determined under each of paragraphs (a) to (g) of the definition ``capital gains dividend account'' in subsection 131(6), and
	(17) Paragraph 87(2)(bb.1) of the Act, as enacted by subsection (6), applies to amal gamations that occur after 1993.
	(18) Subsections (7) and (9) apply to amalgamations that occur after April 26, 1995.
	(19) Subsection (8) applies to a corpora tion that becomes or ceases to be exempt from tax under Part I of the Act after April 26, 1995.
	(20) Subsection (10) and subsection 87(10)) of the Act, as enacted by subsection (11), apply to amalgamations that occur after April 26, 1995, except that, in its application to amalgamations that oc curred before July 1996, paragraph 87(10)(a) of the Act, as enacted by subsec tion (11), shall be read as follows:
	(a) a new corporation is formed as a result of an amalgamation,
	(21) Subject to subsection (22), subsec tion 87(11) of the Act, as enacted by subsection (11), applies to amalgamations that occur after 1994, and for the purpose of paragraph 87(11)(b) of the Act, as enacted by subsection (11), any designation by a new corporation of an amount under paragraph 88(1)(d) of the Act that is filed with the Minister of National Revenue by the end of the third month after the month in which this Act is assented to is deemed to have been made by the new corporation in its return of income under Part I of the Act for its first taxation year.
	(22) Where the new corporation formed on an amalgamation that occurred before June 20, 1996 so elects in writing, filed with the Minister of National Revenue with the return of income under Part I of the Act for the parent's taxation year that ended im mediately before the amalgamation, or within 90 days after any assessment or reassessment of tax payable under that Part for the year, subsection 87(11) of the Act, as enacted by subsection (11), does not apply to the amalgamation.
	43. (1) The portion of subparagraph 88(1)(c)(vi) of the Act before subclause (B)(I) is replaced by the following:
	(vi) property distributed to the parent on the winding-up where, as part of the series of transactions or events that includes the winding-up ,
	(A) the parent acquired control of the subsidiary, and
	(B) any property distributed to the parent on the winding-up or any other property acquired by any person in substitution therefor is acquired by
	(2) Sub-subclause 88(1)(c)(vi)(B)(III)2 of the Act is replaced by the following:
	2. of which a particular person would be, at any time during the course of the series and after control of the subsidiary was last acquired by the parent, a speci fied shareholder if all the shares then owned by persons (other than specified persons) referred to in subclause (II) and acquired by those persons as part of the series were owned at that time by the particular person;
	(3) Paragraph 88(1)(c.2) of the Act is amended by striking out the word ``and'' at the end of subparagraph (i), by adding the word ``and'' at the end of subparagraph (ii) and by adding the following after subpara graph (ii):
	(iii) in determining whether a person is at any time a specified shareholder of a corporation, the reference in the defini tion ``specified shareholder'' in subsec tion 248(1) to ``or of any other corpora tion that is related to the corporation'' shall be read as ``or of any other corpora tion that is related to the corporation and that has a direct or indirect interest in any issued shares of the capital stock of the corporation'';