131. (1) Paragraph 133(1)(c) of the Act is replaced by the following:
	(c) the only taxable capital gains and allowable capital losses referred to in paragraph 3(b) were from dispositions of taxable Canadian property,
	(2) Paragraph 133(1)(d) of the Act is amended by replacing the reference to the expression ``4/3 of'' with a reference to the word ``twice''.
	(3) Paragraph (a) of the definition ``Canadian property'' in subsection 133(8) of the Act is replaced by the following:
	(a) taxable Canadian property, and
	(4) The description of M in paragraph (c) of the definition ``capital gains dividend account'' in subsection 133(8) of the Act is replaced by the following:
	M is the total of the corporation's capital gains for taxation years ending in the period from dispositions in the period of taxable Canadian property, and
	(5) The portion of the definition ``non-resident-owned investment corporation'' in subsection 133(8) of the Act after paragraph (d) is replaced by the following:
	(e) it has, on or before the earlier of February 27, 2000 and the day that is 90 days after the beginning of its first taxation year that begins after 1971, elected in prescribed manner to be taxed under this section, and
	(f) it has not, before the end of the last taxation year in the period, revoked in prescribed manner its election,
	except that
	(g) a new corporation (within the meaning assigned by section 87) formed as a result of an amalgamation after June 18, 1971 of two or more predecessor corporations is not a non-resident-owned investment corporation unless each of the predecessor corporations was, immediately before the amalgamation, a non-resident-owned investment corporation,
	(h) where a corporation is a new corporation described in paragraph (g), and each of the predecessor corporations elected in a timely manner under paragraph (e), paragraph (e) shall be read, in its application to the new corporation, without reference to the words ``the earlier of February 27, 2000 and'', and
	(i) subject to section 134.1, a corporation is not a non-resident-owned investment corporation in any taxation year that ends after the earlier of,
	(i) the first time, if any, after February 27, 2000 at which the corporation effects an increase in capital, and
	(ii) the corporation's last taxation year that begins before 2003;
	(6) Subsection 133(8) of the Act is amended by adding the following in alphabetical order:
``increase in capital'' « augmentatio n de capital »	``increase in capital'' in respect of a corporation means a transaction (other than a transaction carried out pursuant to an agreement in writing made before February 28, 2000, referred to in this definition as a ``specified transaction'') in the course of which the corporation issues additional shares of its capital stock or incurs indebtedness, if the transaction has the effect of increasing the total of
	(a) the corporation's liabilities, and
	(b) the fair market value of all the shares of its capital stock
	to an amount that is substantially greater than that total would have been on February 27, 2000 if all specified transactions had been carried out immediately before that day;
	(7) Subsections (1), (3) and (4) apply after October 1, 1996.
	(8) Subsection (2) applies to taxation years that end after February 27, 2000 except that, for the taxation year of a corporation 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 paragraph 133(1)(d) of the Act, as enacted by subsection (2), 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 taxpayer for the year, multiplied by''.
	(9) Subsections (5) and (6) apply after February 27, 2000.
	132. (1) The Act is amended by adding the following after section 134:
NRO - transition	134.1 (1) This section applies to a corporation that
	(a) was a non-resident-owned investment corporation in a taxation year;
	(b) is not a non-resident-owned investment corporation in the following taxation year (in this section referred to as the corporation's ``first non-NRO year''); and
	(c) elects in writing filed with the Minister on or before the corporation's filing-due date for its first non-NRO year to have this section apply.
Application	(2) A corporation to which this section applies is deemed to be a non-resident-owned investment corporation in its first non-NRO year for the purposes of applying, in respect of dividends paid on shares of its capital stock in its first non-NRO year to a non-resident person or a non-resident-owned investment corporation, subsections 133(6) to (9) (other than the definition ``non-resident-owned investment corporation'' in subsection 133(8)) and section 212 and any tax treaty.
Revocation	134.2 (1) This section applies to a corporation that
	(a) revokes at any time (in this section described as the ``revocation time'') its election to be taxed under section 133;
	(b) elects to have this section apply, by filing an election in writing with the Minister on or before the corporation's filing-due date for the taxation year of the corporation (in this section referred to as the ``revocation year'') that would have included the revocation time if the corporation had not so elected; and
	(c) specifies in the election a time (in this section referred to as the ``elected time'') that is in the revocation year and is not after the revocation time.
Consequences	(2) Where this section applies to a corporation,
	(a) the corporation's taxation year that would have included the elected time, if the corporation had not elected to have this section apply, is deemed to end immediately before the elected time;
	(b) a new taxation year of the corporation is deemed to begin at the elected time; and
	(c) notwithstanding paragraph (f) of the definition ``non-resident-owned investment corporation'' in subsection 133(8), the corporation is deemed to be a non-resident-owned investment corporation for the period that begins at the beginning of the revocation year and ends immediately before the elected time.
	(2) Section 134.1 of the Act, as enacted by subsection (1), applies to a corporation that ceases to be a non-resident-owned investment corporation because of a transaction or event that occurs, or a circumstance that arises, in a taxation year of the corporation that ends after February 27, 2000.
	(3) Section 134.2 of the Act, as enacted by subsection (1), applies to revocations made after February 27, 2000.
	(4) An election under paragraph 134.1(1)(c) or 134.2(1)(b) of the Act, as enacted by subsection (1), is deemed to have been made in a timely manner if it is made on or before the electing corporation's filing-due date for its first taxation year that ends after this Act receives royal assent.
	133. (1) Subparagraph 138(5)(b)(i) of the Act is replaced by the following:
	(i) interest on borrowed money used to acquire designated insurance property for the year, or to acquire property for which designated insurance property for the year was substituted property, for the period in the year during which the designated insurance property was held by the insurer in respect of the business,
	(2) Paragraph 138(5)(b) of the Act is amended by adding the word ``or'' at the end of subparagraph (ii), by striking out the word ``or'' at the end of subparagraph (iii) and by repealing subparagraph (iv).
	(3) The portion of subsection 138(11.3) of the Act after paragraph (b) is replaced by the following:
	the following rules apply:
	(c ) the insurer is deemed to have disposed of the property at the beginning of the year for proceeds of disposition equal to its fair market value at that time and to have reacquired the property immediately after that time at a cost equal to that fair market value,
	(d) where paragraph (a) applies, any gain or loss arising from the disposition is deemed not to be a gain or loss from designated insurance property of the insurer in the year, and
	(e) where paragraph (b) applies, any gain or loss arising from the disposition is deemed to be a gain or loss from designated insurance property of the insurer in the year.
	(4) Paragraph 138(11.5)(b) of the Act is replaced by the following:
	(b) the transferor has, at that time or within 60 days after that time , transferred all or substantially all of the property (in this subsection referred to as the ``transferred property) that is owned by it at that time and that was designated insurance property in respect of the business for the taxation year that, because of paragraph (h), ended immediately before that time
	(i) to a corporation (in this subsection referred to as the ``transferee'') that is a qualified related corporation (within the meaning assigned by subsection 219(8)) of the transferor that began immediately after that time to carry on that insurance business in Canada, and
	(ii ) for consideration that includes shares of the capital stock of the transferee,
	(5) Paragraph 138(11.91)(e) of the Act is replaced by the following:
	(e) the insurer is deemed to have disposed, immediately before the beginning of the particular taxation year, of each property owned by it at that time that is designated insurance property in respect of the business referred to in paragraph (a) for the particular taxation year, for proceeds of disposition equal to the fair market value at that time and to have reacquired, at the beginning of the particular taxation year , the property at a cost equal to that fair market value, and
	(6) Paragraph 138(11.94)(b) of the Act is replaced by the following:
	(b) the transferor has, at that time or within 60 days after that time ,
	(i) in the case of a transferor that is a life insurer and that carries on an insurance business in Canada and in a country other than Canada in the year , transferred all or substantially all of the property (in subsection (11.5) referred to as the ``transferred property'') that is owned by it at that time and that was designated insurance property in respect of the business for the taxation year that, because of paragraph (11.5)(h), ended immediately before that time, or
	(ii) in any other case, transferred all or substantially all of the property owned by it at that time and used by it in the year in, or held by it in the year in the course of, carrying on that insurance business in Canada in that year (in subsection (11.5) referred to as the ``transferred property'')
	to a corporation resident in Canada (in this subsection referred to as the ``transferee'') that is a subsidiary wholly-owned corporation of the transferor that , immediately after that time, began to carry on that insurance business in Canada for consideration that includes shares of the capital stock of the transferee,
	(7) The definition ``designated insurance property'' in subsection 138(12) of the Act is replaced by the following:
``designated insurance property'' « bien d'assurance désigné »	``designated insurance property'' for a taxation year of an insurer (other than an insurer resident in Canada that at no time in the year carried on a life insurance business) that, at any time in the year, carried on an insurance business in Canada and in a country other than Canada, means property determined in accordance with prescribed rules except that, in its application to any taxation year, ``designated insurance property'' for the 1998 or a preceding taxation year means property that was, under this subsection as it read in its application to taxation years that ended in 1996 , property used by it in the year in, or held by it in the year in the course of, carrying on an insurance business in Canada;
	(8) Subsections (1) to (3) and (7) apply to the 1997 and subsequent taxation years.
	(9) Subsections (4) to (6) apply to the 1999 and subsequent taxation years except that, where a taxpayer or a taxpayer's legal representative so elects in writing and files with the Minister of National Revenue before 2002 its election in respect of one or more of paragraph 138(11.5)(b) of the Act, as enacted by subsection (4), paragraph 138(11.91)(e) of the Act, as enacted by subsection (5), or paragraph 138(11.94)(b) of the Act, as enacted by subsection (6), each of the subsections in respect of which the election was made applies to the taxpayer's 1997 and subsequent taxation years.
	134. (1) Section 138.1 of the Act is amended by adding the following after subsection (3):
Deemed gains and losses	(3.1) Where an amount is deemed under subsection (3) to be a capital gain or capital loss of a policyholder or other beneficiary (in this subsection referred to as the ``taxpayer'') of a related segregated fund trust, in respect of capital gains or losses realized in a taxation year of the related segregated fund trust that includes either February 28, 2000 or October 17, 2000, and the related segregated fund trust so elects under this subsection in its return of income for the year,
	(a) the portion of the gains and losses that are in respect of capital gains or losses from dispositions of property that occurred before February 28, 2000 is deemed to be that proportion of the gains or losses that the number of days that are in the year and before February 28, 2000 is of the number of days that are in the year;
	(b) the portion of the gains and losses that is in respect of capital gains or losses from dispositions of property that occurred in the year and in the period that begins at the beginning of February 28, 2000 and ends at the end of October 17, 2000, is deemed to be that proportion of the gains or losses that the number of days that are in the year and in that period is of the number of days that are in the year; and
	(c) the portion of the gains and losses that is in respect of capital gains or losses from dispositions of property that occurred in the year and in the period that begins at the beginning of October 18, 2000 and ends at the end of the year, is deemed to be that proportion of the gains or losses that the number of days that are in the year and in that period is of the number of days that are in the year.
Deemed gains	(3.2) Where a taxation year of a taxpayer begins after October 17, 2000 and a capital gain or a capital loss is deemed by subsection (3) to be a capital gain or a capital loss of the taxpayer and not that of a related segregated fund trust,
	(a) where the capital gain or capital loss was in respect of capital gains or capital losses from dispositions of property by the related segregated fund trust that occurred before February 28, 2000, 3/2 of the capital gain or the capital loss is deemed to be a capital gain or a capital loss, as the case may be, of the taxpayer from the disposition of capital property by the taxpayer in the year;
	(b) where the capital gain or capital loss was in respect of capital gains or capital losses from dispositions of property by the related segregated fund trust that occurred after February 27, 2000 and before October 18, 2000, 4/3 of the capital gain or the capital loss is deemed to be a capital gain or a capital loss, as the case may be, of the taxpayer from the disposition by the taxpayer of capital property in the year; and
	(c) in any other case, the capital gain or capital loss is deemed to be a capital gain or a capital loss, as the case may be, of the taxpayer from the disposition of capital property by the taxpayer in the year.
	(2) Subsection (1) applies to taxation years that end after February 27, 2000.
	135. (1) The portion of subsection 141(5) of the Act before paragraph (a) is replaced by the following:
Exclusion from taxable Canadian property	(5) For the purpose of paragraph (d) of the definition ``taxable Canadian property'' in subsection 248(1) , a share of the capital stock of a corporation is deemed to be listed at any time on a stock exchange prescribed for the purpose of that definition where
	(2) Subsection (1) applies after December 15, 1998.
	136. (1) The portion of subsection 142.2(1) of the Act before the definition ``financial institution'' is replaced by the following:
Definitions	142.2 (1) In this section and sections 142.3 to 142.7 ,
	(2) Subsection (1) applies after June 27, 1999.
	137. (1) Subsection 142.6(2) of the Act is replaced by the following:
Ceasing to use property in Canadian business	(1.1) If at a particular time in a taxation year a taxpayer that is a non-resident financial institution (other than a life insurance corporation) ceases to use, in connection with a business or part of a business carried on by the taxpayer in Canada immediately before the particular time, a property that is a mark-to-market property of the taxpayer for the year or a specified debt obligation, but that is not a property that was disposed of by the taxpayer at the particular time,
	(a) the taxpayer is deemed
	(i) to have disposed of the property immediately before the time that was immediately before the particular time for proceeds equal to its fair market value at the time of disposition and to have received those proceeds at the time of disposition in the course of carrying on the business or the part of the business, as the case may be, and
	(ii) to have reacquired the property at the particular time at a cost equal to those proceeds; and