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(i) where the property is capital property
(other than depreciable property), 100%,
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(ii) where the property is eligible capital
property in respect of a business of the
trust, 100%, and
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(iii) in any other case, 75%;
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(c) the taxpayer is deemed to have disposed
of all or part, as the case may be, of the
capital interest for proceeds equal to the
amount, if any, by which
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(i ) the cost at which the taxpayer would
be deemed by paragraph (b) to have
acquired the property if the specified
percentage referred to in that paragraph
were 100%
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(ii) the total of all amounts each of which
is an eligible offset at that time of the
taxpayer in respect of the capital interest
or the part of it;
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(8) Subsection 107(2) of the Act is
amended by striking out the word ``and'' at
the end of paragraph (d) and by adding the
following after paragraph (d):
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(d.1) the property is deemed to be taxable
Canadian property of the taxpayer where
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(i) the taxpayer is non-resident at that
time,
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(ii) that time is before October 2, 1996,
and
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(iii) the property was deemed by
paragraph 51(1)(f), 85(1)(i) or
85.1(1)(a), subsection 87(4) or (5) or
paragraph 97(2)(c) to be taxable
Canadian property of the trust; and
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(9) The portion of subparagraph
107(2)(f)(ii) of the Act before the formula is
replaced by the following:
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(ii) for the purpose of determining after
that time the amount required by
paragraph 14(1)(b) to be included in
computing the taxpayer's income in
respect of any subsequent disposition of
property of the business, there shall be
added to the value otherwise determined
for Q in the definition ``cumulative
eligible capital'' in subsection 14(5) the
amount determined by the formula
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(10) Section 107 of the Act is amended by
adding the following after subsection (2):
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| No rollover
on election by
a trust
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(2.001) Where a trust makes a distribution
of a property to a beneficiary of the trust in full
or partial satisfaction of the beneficiary's
capital interest in the trust and so elects in
prescribed form filed with the Minister with
the trust's return of income for its taxation
year in which the distribution occurred,
subsection (2) does not apply to the
distribution if
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(a) the trust is resident in Canada at the time
of the distribution;
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(b) the property is taxable Canadian
property; or
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(c) the property is capital property used in,
eligible capital property in respect of, or
property described in the inventory of, a
business carried on by the trust through a
permanent establishment (as defined by
regulation) in Canada immediately before
the time of the distribution.
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| No rollover
on election by
a beneficiary
|
(2.002) Where a non-resident trust makes a
distribution of a property (other than a
property described in paragraph (2.001)(b) or
(c)) to a beneficiary of the trust in full or partial
satisfaction of the beneficiary's capital
interest in the trust and the beneficiary makes
an election under this subsection in prescribed
form filed with the Minister with the
beneficiary's return of income for the
beneficiary's taxation year in which the
distribution occurred,
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(a) subsection (2) does not apply to the
distribution; and
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(b) for the purpose of subparagraph
(1)(a)(ii), the cost amount of the interest to
the beneficiary is deemed to be nil.
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(11) The portion of subsection 107(2.01)
of the Act before paragraph (a) is replaced
by the following:
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| Distribution
of principal
residence
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(2.01) Where property that would, if a
personal trust had designated the property
under paragraph (c.1) of the definition
``principal residence'' in section 54, be a
principal residence (within the meaning of
that definition) of the trust for a taxation year,
is at any time (in this subsection referred to as
``that time'') distributed by the trust to a
taxpayer in circumstances in which subsection
(2) applies and the trust so elects in its return
of income for the taxation year that includes
that time,
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(12) Subsection 107(2.1) of the Act is
replaced by the following:
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| Other
distributions
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(2.1) Where at any time a property of a trust
is distributed by the trust to a beneficiary
under the trust, there would, if this Act were
read without reference to paragraphs (h) and
(i) of the definition ``disposition'' in
subsection 248(1), be a resulting disposition
of all or any part of the beneficiary's capital
interest in the trust (which interest or part, as
the case may be, is in this subsection referred
to as the ``former interest'') and the rules in
subsection (2) and section 132.2 do not apply
in respect of the distribution,
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(a) the trust is deemed to have disposed of
the property for proceeds equal to its fair
market value at that time;
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(b) the beneficiary is deemed to have
acquired the property at a cost equal to the
proceeds determined under paragraph (a) ;
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(c) subject to paragraph (e) , the
beneficiary's proceeds of disposition of the
portion of the former interest disposed of
by the beneficiary on the distribution are
deemed to be equal to the amount, if any, by
which
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(i) the proceeds determined under
paragraph (a) (other than the portion, if
any, of the proceeds that is a payment to
which paragraph (h) or (i) of the
definition ``disposition'' in subsection
248(1) applies)
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(ii) where the property is not a Canadian
resource property or foreign resource
property, the amount, if any, by which
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(A) the fair market value of the
property at that time
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(B) the cost amount to the trust of the
property immediately before that time,
and
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(C) the portion, if any, of the excess
that would be determined under this
subparagraph if this subparagraph
were read without reference to this
clause that represents a payment to
which paragraph (h) or (i) of the
definition ``disposition'' in subsection
248(1) applies, and
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(iii) all amounts each of which is an
eligible offset at that time of the taxpayer
in respect of the former interest;
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(d) notwithstanding paragraphs (a) to (c),
where the trust is non-resident at that time,
the property is not described in paragraph
(2.001)(b) or (c) and, if this Act were read
without reference to this paragraph, there
would be no income, loss, taxable capital
gain or allowable capital loss of a taxpayer
in respect of the property because of the
application of subsection 75(2) to the
disposition at that time of the property,
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(i) the trust is deemed to have disposed of
the property for proceeds equal to the
cost amount of the property,
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(ii) the beneficiary is deemed to have
acquired the property at a cost equal to
the fair market value of the property, and
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(iii) the beneficiary's proceeds of
disposition of the portion of the former
interest disposed of by the beneficiary on
the distribution are deemed to be equal to
the amount, if any, by which
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(A) the fair market value of the
property
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(B) the portion, if any, of the amount of
the distribution that is a payment to
which paragraph (h) or (i) of the
definition ``disposition'' in subsection
248(1) applies, and
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(C) all amounts each of which is an
eligible offset at that time of the
taxpayer in respect of the former
interest; and
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(e) where the trust is a mutual fund trust, the
distribution occurs in a taxation year of the
trust before its 2003 taxation year, the trust
has elected under subsection 107(2.11) in
respect of the year and the trust so elects in
respect of the distribution in prescribed
form filed with the trust's return of income
for the year,
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(i) this subsection shall be read without
reference to paragraph (c), and
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(ii) the beneficiary's proceeds of
disposition of the portion of the former
interest disposed of by the beneficiary on
the distribution are deemed to be equal to
the amount determined under paragraph
(a).
|
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| Gains not
distributed to
beneficiaries
|
(2.11) Where a trust makes one or more
distributions of property in a taxation year in
circumstances in which subsection (2.1)
applies (or, in the case of property distributed
after October 1, 1996 and before 2000, in
circumstances in which subsection (5)
applied)
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(a) where the trust is resident in Canada at
the time of each of those distributions and
has so elected in prescribed form filed with
the trust's return for the year or a preceding
taxation year, the income of the trust for the
year (determined without reference to
subsection 104(6)) shall, for the purposes of
subsections 104(6) and (13), be computed
without regard to all of those distributions
to non-resident persons (including a
partnership other than a Canadian
partnership); and
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(b) where the trust is resident in Canada at
the time of each of those distributions and
has so elected in prescribed form filed with
the trust's return for the year or a preceding
taxation year, the income of the trust for the
year (determined without reference to
subsection 104(6)) shall, for the purposes of
subsections 104(6) and (13), be computed
without regard to all of those distributions.
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(13) Subparagraph 107(2.2)(a)(ii) of the
Act is amended by replacing the reference
to the expression ``4/3 of'' with a reference
to the word ``twice''.
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(14) Subsection 107(3) of the Act is
repealed.
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(15) Subsection 107(4) of the Act is
replaced by the following:
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| Trusts in
favour of
spouse,
common-law
partner or self
|
(4) Subsection (2.1) applies (and subsection
(2) does not apply) at any time to property
distributed to a beneficiary by a trust
described in paragraph 104(4)(a) where
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(a) the beneficiary is not
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(i) in the case of a post-1971 spousal or
common-law partner trust, the spouse or
common-law partner referred to in
paragraph 104(4)(a),
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(ii) in the case of an alter ego trust, the
taxpayer referred to in paragraph
104(4)(a), and
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(iii) in the case of a joint spousal or
common-law partner trust, the taxpayer,
spouse or common-law partner referred
to in paragraph 104(4)(a); and
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(b) a taxpayer, spouse or common-law
partner referred to in subparagraph (a)(i),
(ii) or (iii), as the case may be, is alive on the
day of the distribution.
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(16) The portion of subsection 107(4.1) of
the Act after paragraph (c) is replaced by
the following:
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subsection (2.1) applies (and subsection (2)
does not apply) in respect of the distribution.
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(17) Subsection 107(4.1) of the Act, as
enacted by subsection (16), is replaced by
the following:
|
|
| Where
subsection
75(2)
applicable to
trust
|
(4.1) Subsection (2.1) applies (and
subsection (2) does not apply) in respect of a
distribution of any property of a particular
personal trust or prescribed trust by the
particular trust to a taxpayer who was a
beneficiary under the particular trust where
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(a) the distribution was in satisfaction of all
or any part of the taxpayer's capital interest
in the particular trust;
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(b) subsection 75(2) was applicable at a
particular time in respect of any property of
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(i) the particular trust, or
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(ii) a trust the property of which included
a property that, through one or more
dispositions to which subsection
107.4(3) applied, became a property of
the particular trust, and the property was
not, at any time after the particular time
and before the distribution, the subject of
a disposition for proceeds of disposition
equal to the fair market value of the
property at the time of the disposition;
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(c) the taxpayer was neither
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(i) the person (other than a trust described
in subparagraph (b)(ii)) from whom the
particular trust directly or indirectly
received the property, or property for
which the property was substituted, nor
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(ii) an individual in respect of whom
subsection 73(1) would be applicable on
the transfer of capital property from the
person described in subparagraph (i); and
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(d) the person described in subparagraph
(c)(i) was in existence at the time the
property was distributed.
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|
(18) Subsection 107(5) of the Act is
replaced by the following:
|
|
| Distribution to
non-resident
|
(5) Subsection (2.1) applies (and subsection
(2) does not apply) in respect of a distribution
of a property (other than a share of the capital
stock of a non-resident-owned investment
corporation or property described in any of
subparagraphs 128.1(4)(b)(i) to (iii)) by a trust
resident in Canada to a non-resident taxpayer
(including a partnership other than a Canadian
partnership) in satisfaction of all or part of the
taxpayer's capital interest in the trust.
|
|
| Instalment
interest
|
(5.1) Where, solely because of the
application of subsection (5), paragraphs
(2)(a) to (c) do not apply to a distribution in a
taxation year of taxable Canadian property by
a trust, in applying sections 155, 156 and
156.1 and subsections 161(2), (4) and (4.01)
and any regulations made for the purpose of
those provisions, the trust's total taxes payable
under this Part and Part I.1 for the year are
deemed to be the lesser of
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(a) the trust's total taxes payable under this
Part and Part I.1 for the year, determined
before taking into consideration the
specified future tax consequences for the
year, and
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(b) the amount that would be determined
under paragraph (a) if subsection (5) did not
apply to each distribution in the year of
taxable Canadian property to which the
rules in subsection (2) do not apply solely
because of the application of subsection
(5).
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(19) Subsections (1) to (4) apply to the
2000 and subsequent taxation years except
that, in respect of transfers in 2000 or 2001,
for the purposes of subsection 107(1) of the
Act, as enacted by this section, the residence
of a transferee trust shall be determined
without reference to section 94 of the Act, as
it read before 2002.
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|
(20) Subsection (5) applies to
distributions made after October 1, 1996.
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(21) Subsections (6) and (7), subsection
107(2.002) of the Act, as enacted by
subsection (10), and subsections (11) and
(14) to (16) apply to distributions made
after 1999 except that, for distributions
made to a beneficiary before the particular
day on which this Act receives royal assent,
an election under subsection 107(2.002) of
the Act, as enacted by subsection (10), is
deemed to have been made in a timely
manner if it is made on or before the
beneficiary's filing-due date for the
taxation year that includes the particular
day.
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(22) Subsection (8) applies in
determining after October 1, 1996 whether
property is taxable Canadian property.
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|
(23) Subsections (9) and (13) apply to
taxation years that end after February 27,
2000 except that, for a beneficiary's
taxation year that includes either February
28, 2000 or October 17, 2000 or began after
February 28, 2000 and ended before
October 17, 2000, the reference to the word
``twice'' in subparagraph 107(2.2)(a)(ii) of
the Act, as enacted by subsection (13), shall
be read as a reference to the expression ``the
fraction that is the reciprocal of the fraction
in paragraph 38(a), as enacted by
subsection 22(1) of the Income Tax
Amendments Act, 2000, that applies to the
beneficiary for the year, multiplied by''.
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|
(24) Subsection 107(2.001) of the Act, as
enacted by subsection (10), applies to
distributions made after October 1, 1996
except that, for distributions made from a
trust before the particular day on which this
Act receives royal assent, an election under
that subsection 107(2.001) is deemed to
have been made in a timely manner if it is
made on or before the trust's filing-due date
for the taxation year that includes the
particular day.
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|
|
(25) Subsection 107(2.1) of the Act, as
enacted by subsection (12), applies to
distributions made after 1999 (other than
distributions made before March 2000 in
satisfaction of rights described in
subsection 52(6) of the Act that were
acquired before 2000).
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|
(26) Subsection 107(2.11) of the Act, as
enacted by subsection (12), applies to
distributions made after October 1, 1996
except that, for distributions made from a
trust before the particular day on which this
Act receives royal assent, an election under
that subsection 107(2.11) is deemed to have
been made in a timely manner if it is made
on or before the trust's filing-due date for
the taxation year that includes the
particular day.
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|
(27) Subsection (17) applies to
distributions made on or after March 16,
2001.
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|
(28) Subsection (18) applies to
distributions made after October 1, 1996
except that, for distributions made after
October 1, 1996 and before 2000, subsection
107(5) of the Act, as enacted by subsection
(18), shall be read as follows:
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|
(5) Where subsection (2) applies to a
distribution at any time by a trust resident in
Canada of a property (other than a share of the
capital stock of a non-resident-owned
investment corporation or property described
in any of subparagraphs 128.1(4)(b)(i) to (iii))
to a non-resident taxpayer (including a
partnership other than a Canadian partnership)
who is a beneficiary under the trust in
satisfaction of the taxpayer's capital interest
in the trust, notwithstanding paragraphs (2)(a)
to (c),
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