Notional
interest
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(5) For the purposes of the description of
IBA in subsection (2), a reasonable amount on
account of notional interest for a calculation
period in respect of a branch advance is the
amount that would be payable on account of
interest for the period by a notional borrower,
having regard to the duration of the advance,
the currency in which repayment is required
and all other terms, as adjusted by paragraph
(c), of the advance, if
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(a) the borrower were a person that dealt at
arm's length with the bank, that carried on
the bank's Canadian banking business and
that had the same credit-worthiness and
borrowing capacity as the bank;
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(b) the advance were a loan by the bank to
the borrower; and
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(c) any of the terms of the advance
(excluding the rate of interest, but including
the structure of the interest calculation,
such as whether the rate is fixed or floating
and the choice of any reference rate referred
to) that are not terms that would be made
between the bank as lender and the
borrower, having regard to all the
circumstances, including the nature of the
Canadian banking business, the use of the
advanced funds in the business and normal
risk management practices for banks, were
instead terms that would be agreed to by the
bank and the borrower.
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Weak
currency
debt -
interpretation
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20.3 (1) The definitions in this subsection
apply in this section.
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``exchange
date''
« date de
l'échange »
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``exchange date'' in respect of a weak
currency debt of a taxpayer means, if the
debt is incurred or assumed by the taxpayer
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(a) in respect of borrowed money that is
denominated in the final currency, the
day that the debt is incurred or assumed
by the taxpayer; and
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(b) in respect of borrowed money that is
not denominated in the final currency, or
in respect of the acquisition of property,
the day on which the taxpayer uses the
borrowed money or the acquired
property, directly or indirectly, to acquire
funds that are, or to settle an obligation
that is, denominated in the final currency.
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``hedge''
« opération de
couverture »
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``hedge'' in respect of a weak currency debt
owing by a taxpayer means any agreement
made by the taxpayer
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(a) that can reasonably be regarded as
having been made by the taxpayer
primarily to reduce the taxpayer's risk,
with respect to payments of principal or
interest in respect of the debt, of
fluctuations in the value of the weak
currency; and
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(b) that is identified by the taxpayer as a
hedge in respect of the debt in a
designation in prescribed form filed with
the Minister on or before the 30th day
after the day the taxpayer enters into the
agreement.
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``weak
currency
debt''
« dette en
devise faible »
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``weak currency debt'' of a taxpayer means a
particular debt in a foreign currency (in this
section referred to as the ``weak
currency''), incurred or assumed by the
taxpayer at a particular time after February
27, 2000, in respect of a borrowing of
money or an acquisition of property,
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(i) the borrowed money is
denominated in a currency (in this
section referred to as the ``final
currency'') other than the weak
currency, is used for the purpose of
earning income from a business or
property and is not used to acquire
funds in a currency other than the final
currency,
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(ii) the borrowed money or the
acquired property is used, directly or
indirectly, to acquire funds that are
denominated in a currency (in this
section referred to as the ``final
currency'') other than the weak
currency, that are used for the purpose
of earning income from a business or
property and that are not used to
acquire funds in a currency other than
the final currency,
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(iii) the borrowed money or the
acquired property is used, directly or
indirectly, to settle an obligation that is
denominated in a currency (in this
section referred to as the ``final
currency'') other than the weak
currency, that is incurred or assumed
for the purpose of earning income from
a business or property and that is not
incurred or assumed to acquire funds
in a currency other than the final
currency, or
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(iv) the borrowed money or the
acquired property is used, directly or
indirectly, to settle another weak
currency debt in respect of which the
final currency (which is deemed to be
the final currency in respect of the
particular debt) is a currency other
than the currency of the particular
debt;
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(b) where the amount of the particular
debt (together with any other debt that
would, but for this paragraph, be a weak
currency debt, and that can reasonably be
regarded as having been incurred or
assumed by the taxpayer as part of a
series of transactions that includes the
incurring or assumption of the particular
debt) exceeds $500,000; and
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(c) where the rate at which interest is
payable in the weak currency in respect
of the particular debt exceeds by more
than two percentage points the rate at
which interest would have been payable
in the final currency if at the particular
time the taxpayer had instead incurred or
assumed an equivalent amount of debt in
the final currency on the same terms
(other than the rate of interest), with such
modifications as the difference in
currency requires.
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Interest and
gain
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(2) Notwithstanding any other provision of
this Act, the following rules apply in respect
of a weak currency debt of a taxpayer (other
than a corporation described in one or more of
paragraphs (a), (b), (c) and (e) of the definition
``specified financial institution'' in subsection
248(1)):
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(a) no deduction on account of interest that
accrues on the debt after the day that is the
later of June 30, 2000 and the exchange date
shall exceed the amount of interest that
would, if at the time of incurring or
assuming the debt the taxpayer had instead
incurred or assumed an equivalent amount
of debt, the principal and interest in respect
of which were denominated in the final
currency, on the same terms (other than the
rate of interest and with such other
modifications as the difference in currency
requires), have accrued on the equivalent
debt after that day;
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(b) the amount, if any, of the taxpayer's gain
or loss (in this section referred to as a
``foreign exchange gain or loss'') for a
taxation year on the settlement or
extinguishment of the debt that arises
because of the fluctuation in the value of
any currency shall be included or deducted,
as the case may be, in computing the
taxpayer's income for the year from the
business or the property to which the debt
relates; and
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(c) the amount of any interest on the debt
that was, because of this subsection, not
deductible is deemed, for the purpose of
computing the taxpayer's foreign exchange
gain or loss on the settlement or
extinguishment of the debt, to be an amount
paid by the taxpayer to settle or extinguish
the debt.
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Hedges
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(3) In applying subsection (2) in
circumstances where a taxpayer has entered
into a hedge in respect of a weak currency
debt, the amount paid or payable in the weak
currency for a taxation year on account of
interest on the debt, or paid in the weak
currency in the year on account of the debt's
principal, shall be decreased by the amount of
any foreign exchange gain, or increased by the
amount of any foreign exchange loss, on the
hedge in respect of the amount so paid or
payable.
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Repayment of
principal
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(4) If the amount (expressed in the weak
currency) outstanding on account of principal
in respect of a weak currency debt is reduced
before maturity (whether by repayment or
otherwise), the amount (expressed in the weak
currency) of the reduction is deemed, except
for the purposes of determining the rate of
interest that would have been charged on an
equivalent loan in the final currency and
applying paragraph (b) of the definition
``weak currency debt'' in subsection (1), to
have been a separate debt from the time the
debt was incurred or assumed by the taxpayer.
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(2) Section 20.2, as enacted by subsection
(1), applies after June 27, 1999 except that
in its application to amounts allocated or
provided before the day that is 14 days after
August 8, 2000, the definition ``branch
advance'' in subsection 20.2(1), as enacted
by subsection (1), shall be read as follows:
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``branch advance'' of an authorized foreign
bank at a particular time means an amount
allocated or provided by, or on behalf of, the
bank to, or for the benefit of, its Canadian
banking business under terms that were
documented, on or before December 31,
2000, to the same extent as, and in a form
similar to the form in which, the bank would
ordinarily document a loan by it to a person
with whom it deals at arm's length.
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(3) Section 20.3 of the Act, as enacted by
subsection (1), applies to taxation years that
end after February 27, 2000.
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(4) A designation described in paragraph
(b) of the definition ``hedge'' in subsection
20.3(1) of the Act, as enacted by subsection
(1), is deemed to have been filed in a timely
manner if it is filed on or before the later of
July 31, 2000 and the 30th day after the day
the taxpayer agrees to the hedge.
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15. (1) Subsection 21(2) of the Act is
replaced by the following:
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Borrowed
money used
for
exploration or
development
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(2) Where in a taxation year a taxpayer has
used borrowed money for the purpose of
exploration, development or the acquisition of
property and the expenses incurred by the
taxpayer in respect of those activities are
Canadian exploration and development
expenses, Canadian exploration expenses,
Canadian development expenses, Canadian
oil and gas property expenses, foreign
resource expenses in respect of a country , or
foreign exploration and development
expenses, as the case may be, if the taxpayer
so elects under this subsection in the
taxpayer's return of income for the year,
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(a) in computing the taxpayer's income for
the year and for such of the three
immediately preceding taxation years as
the taxpayer had, paragraphs 20(1)(c), (d),
(e) and (e.1) do not apply to the amount or
to the part of the amount specified in the
taxpayer's election that, but for that
election, would be deductible in computing
the taxpayer's income (other than exempt
income or income that is exempt from tax
under this Part ) for any such year in respect
of the borrowed money used for the
exploration, development or acquisition of
property, as the case may be; and
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(b) the amount or the part of the amount, as
the case may be, described in paragraph (a)
is deemed to be Canadian exploration and
development expenses, Canadian
exploration expenses, Canadian
development expenses, Canadian oil and
gas property expenses, foreign resource
expenses in respect of a country , or foreign
exploration and development expenses, as
the case may be, incurred by the taxpayer in
the year.
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(2) Subsection 21(4) of the Act is amended
by striking out the word ``and'' at the end of
paragraph (a) and by replacing the portion
after paragraph (a) with the following:
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(b) in each taxation year, if any, after that
preceding taxation year and before the
particular year, made an election under this
subsection covering the total amount that, but
for that election, would have been deductible
in computing the taxpayer's income (other
than exempt income or income that is exempt
from tax under this Part ) for each such year in
respect of the borrowed money used for the
exploration, development or acquisition of
property, as the case may be, and
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(c) so elects in the taxpayer's return of
income for the particular year,
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the following rules apply:
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(d) paragraphs 20(1)(c), (d), (e) and (e.1) do
not apply to the amount or to the part of the
amount specified in the election that, but for
the election, would be deductible in
computing the taxpayer's income (other
than exempt income or income that is
exempt from tax under this Part ) for the
particular year in respect of the borrowed
money used for the exploration,
development or acquisition of property, and
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(e) the amount or part of the amount, as the
case may be, is deemed to be Canadian
exploration and development expenses,
Canadian exploration expenses, Canadian
development expenses, Canadian oil and
gas property expenses, foreign resource
expenses in respect of a country , or foreign
exploration and development expenses, as
the case may be, incurred by the taxpayer in
the particular year.
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(3) Subsections (1) and (2) apply to
taxation years that begin after 2000.
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16. (1) Paragraph 24(2)(d) of the Act is
replaced by the following:
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(d) for the purpose of determining after that
time the amount required to be included
under paragraph 14(1)(b) in computing the
income of the spouse, the common-law
partner or the corporation in respect of any
subsequent disposition of property of the
business, there shall be added to the amount
otherwise determined for Q in the definition
``cumulative eligible capital'' in subsection
14(5) the amount, if any, determined for Q
in that definition in respect of the business
of the individual immediately before the
individual ceased to carry on business.
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(2) Subsection (1) applies to taxation
years that end after February 27, 2000.
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17. (1) Subsection 27(2) of the Act is
replaced by the following:
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Presumption
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(2) Notwithstanding any other provision of
this Act, a prescribed federal Crown
corporation and any corporation controlled by
such a corporation are each deemed not to be
a private corporation and paragraphs
149(1)(d) to (d.4) do not apply to those
corporations .
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(2) Subsection (1) applies to taxation
years and fiscal periods that begin after
1998.
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18. (1) Paragraphs 28(4)(a) and (b) of the
Act are replaced by the following:
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(a) for the year, if the taxpayer was
non-resident throughout the year ; and
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(b) for the part of the year throughout which
the taxpayer was resident in Canada, if the
taxpayer was resident in Canada at any time
in the year.
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(2) Subsection 28(4.1) of the Act is
repealed.
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(3) Subsection (1) applies to the 1998 and
subsequent taxation years.
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(4) Subsection (2) applies after December
23, 1998.
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19. (1) The definition ``foreign bank'' in
subsection 33.1(1) of the Act is replaced by
the following:
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``foreign
bank''
« banque
étrangère »
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``foreign bank'' has the meaning assigned by
the definition ``foreign bank'' in section 2
of the Bank Act ( read without reference to
paragraph (g)), except that an authorized
foreign bank is not considered to be a
foreign bank in respect of its Canadian
banking business;
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(2) Subsection (1) applies after June 27,
1999.
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20. (1) The definition ``mining property''
in subsection 35(2) of the Act is replaced by
the following:
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``mining
property''
« bien
minier »
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``mining property'' means
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(a) a right, licence or privilege to
prospect, explore, drill or mine for
minerals in a mineral resource in
Canada , or
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(b) real property in Canada (other than
depreciable property) the principal value
of which depends on its mineral resource
content;
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(2) Subsection (1) applies to shares
received after December 21, 2000.
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21. (1) Subsection 37(1) of the Act is
amended by adding the following after
paragraph (d):
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(d.1) the total of all amounts each of which
is the super-allowance benefit amount
(within the meaning assigned by subsection
127(9)) for the year or for a preceding
taxation year in respect of the taxpayer in
respect of a province,
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(2) Subsection (1) applies to taxation
years that begin after February 2000 except
that, if a taxpayer's first taxation year that
begins after February 2000 ends before
2001, subsection (1) applies to the
taxpayer's taxation years that begin after
2000.
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22. (1) Paragraph 38(a) of the Act is
replaced by the following:
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(a) subject to paragraphs (a.1) and (a.2) , a
taxpayer's taxable capital gain for a
taxation year from the disposition of any
property is 1/2 of the taxpayer's capital gain
for the year from the disposition of the
property;
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(2) Paragraph 38(a.1) of the Act is
amended by replacing the reference to the
fraction ``3/8'' with a reference to the
fraction ``1/4''.
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(3) Section 38 of the Act is amended by
adding the following after paragraph (a.1):
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(a.2) a taxpayer's taxable capital gain for a
taxation year from the disposition of a
property is 1/4 of the taxpayer's capital gain
for the year from the disposition of the
property where
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(i) the disposition is the making of a gift
to a qualified donee (other than a private
foundation) of a property described, in
respect of the taxpayer, in paragraph
110.1(1)(d) or in the definition ``total
ecological gifts'' in subsection 118.1(1),
or
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(ii) the disposition is deemed by section
70 to have occurred and the taxpayer is
deemed by subsection 118.1(5) to have
made a gift described in subparagraph (i)
of the property;
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(4) Paragraphs 38(b) and (c) of the Act
are amended by replacing the references to
the fraction ``3/4'' with references to the
fraction ``1/2''.
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(5) Subsections (1) and (4) apply to the
2000 and subsequent taxation years except
that
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(a) for a taxation year of a taxpayer that
ended before February 28, 2000, the
references to the fraction ``1/2'' in
paragraph 38(a) of the Act, as enacted by
subsection (1), and in paragraphs 38(b)
and (c) of the Act, as enacted by
subsection (4), shall be read as references
to the fraction ``3/4'',
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(b) for a taxpayer's taxation year that
began after February 28, 2000 and ended
before October 17, 2000, the references to
the fraction ``1/2'' in paragraph 38(a) of
the Act as enacted by subsection (1) and
in paragraphs 38(b) and (c) of the Act, as
enacted by subsection (4), shall be read as
references to the fraction ``2/3'',
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(c) for a taxation year of a taxpayer that
includes February 28, 2000 but does not
include October 18, 2000, the references
to the fraction ``1/2'' in paragraph 38(a)
of the Act, as enacted by subsection (1),
and in paragraphs 38(b) and (c) of the
Act, as enacted by subsection (4), shall be
read as references to the fraction that
applies to the taxpayer for that year, and
for this purpose,
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(i) where the amount of the taxpayer's
net capital gains from dispositions of
property in the period that began at the
beginning of the year and ended at the
end of February 27, 2000 (in this
paragraph referred to as the ``first
period'') exceeds the amount of the
taxpayer's net capital losses from
dispositions of property in the period
that begins at the beginning of
February 28, 2000 and ends at the end
of the year (in this paragraph referred
to as the ``second period''), the fraction
that applies to the taxpayer for the year
is 3/4,
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(ii) where the amount of the taxpayer's
net capital losses from dispositions of
property in the first period exceeds the
amount of the taxpayer's net capital
gains from dispositions of property in
the second period, the fraction that
applies to the taxpayer for the year is
3/4,
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