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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:
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| Distribution to
non-resident
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(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.
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| Instalment
interest
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(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 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, except that
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(a) it does not apply to distributions made
before March 2000 in satisfaction of
rights described in subsection 52(6) of the
Act that were acquired before 2000; and
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(b) for distributions made from a trust
before the particular day on which this
Act receives royal assent, an election
under that subsection 107(2.1) 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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(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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(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 taxpayer is deemed to have acquired
the property at a cost equal to that fair
market value; and
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(c) the taxpayer is deemed to have disposed
of all or part, as the case may be, of the
taxpayer's capital interest in the trust, for
proceeds of disposition equal to the
adjusted cost base to the taxpayer of that
interest or part of the interest, as the case
may be, immediately before that time.
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81. (1) The portion of section 107.1 of the
Act before subparagraph (a)(i) is replaced
by the following:
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| Distribution
by employee
trust,
employee
benefit plan or
similar trust
|
107.1 Where at any time any property of an
employee trust, a trust governed by an
employee benefit plan or a trust described in
paragraph (a.1) of the definition ``trust'' in
subsection 108(1) has been distributed by the
trust to a taxpayer who was a beneficiary
under the trust in satisfaction of all or any part
of the taxpayer's interest in the trust, the
following rules apply:
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(a) in the case of an employee trust or a trust
described in paragraph (a.1) of the
definition ``trust'' in subsection 108(1),
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(2) Subsection (1) applies to the 1999 and
subsequent taxation years.
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82. (1) The Act is amended by adding the
following after section 107.3:
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| Qualifying
disposition
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107.4 (1) For the purpose of this section, a
``qualifying disposition'' of a property means
a disposition of the property by a person or
partnership (in this subsection referred to as
the ``contributor'') as a result of a transfer of
the property to a particular trust where
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(a) the disposition does not result in a
change in the beneficial ownership of the
property;
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(b) the proceeds of disposition would, if this
Act were read without reference to this
section and sections 69 and 73, not be
determined under any provision of this Act;
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(c) if the particular trust is non-resident, the
disposition is not
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(i) by a person resident in Canada or by
a partnership (other than a partnership
each member of which is non-resident),
or
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(ii) a transfer of taxable Canadian
property from a non-resident person who
was resident in Canada in any of the ten
calendar years preceding the transfer;
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(d) the contributor is not a partnership, if the
disposition is part of a series of transactions
or events that begin after December 17,
1999 that includes the cessation of the
partnership's existence and a subsequent
distribution from a personal trust to a
former member of the partnership in
circumstances to which subsection 107(2)
applies;
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(e) unless the contributor is a trust, there is
immediately after the disposition no
absolute or contingent right of a person or
partnership (other than the contributor or,
where the property was co-owned, each of
the joint contributors) as a beneficiary
(determined with reference to subsection
104(1.1)) under the particular trust;
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(f) the contributor is not an individual (other
than a trust described in any of paragraphs
(a) to (e.1) of the definition ``trust'' in
subsection 108(1)), if the particular trust is
described in any of paragraphs (a) to (e.1)
of the definition ``trust'' in subsection
108(1);
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(g) the disposition is not part of a series of
transactions or events
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(i) that begins after December 17, 1999
and that includes the subsequent
acquisition, for consideration given to a
personal trust, of a capital interest or an
income interest in the trust,
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(ii) that begins after December 17, 1999
and that includes the disposition of all or
part of a capital interest or an income
interest in a personal trust, other than a
disposition solely as a consequence of a
distribution from a trust to a person or
partnership in satisfaction of all or part of
that interest, or
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(iii) that begins after June 5, 2000 and
that includes the transfer to the particular
trust of particular property as
consideration for the acquisition of a
capital interest in the particular trust, if
the particular property can reasonably be
considered to have been received by the
particular trust in order to fund a
distribution (other than a distribution that
is proceeds of disposition of a capital
interest in the particular trust);
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(h) the disposition is not, and is not part of,
a transaction
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(i) that occurs after December 17, 1999,
and
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(ii) that includes the giving to the
contributor, for the disposition, of any
consideration (other than consideration
that is an interest of the contributor as a
beneficiary under the particular trust or
that is the assumption by the particular
trust of debt for which the property can,
at the time of the disposition, reasonably
be considered to be security);
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(i) subsection 73(1) does not apply to the
disposition and would not apply to the
disposition if
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(i) no election had been made under that
subsection, and
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(ii) section 73 were read without
reference to subsection 73(1.02); and
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(j) if the contributor is an amateur athlete
trust, a cemetery care trust, an employee
trust, an inter vivos trust deemed by
subsection 143(1) to exist in respect of a
congregation that is a constituent part of a
religious organization, a related segregated
fund trust (as defined by section 138.1), a
trust described in paragraph 149(1)(o.4) or
a trust governed by an eligible funeral
arrangement, an employees profit sharing
plan, a registered education savings plan or
a registered supplementary unemployment
benefit plan, the particular trust is the same
type of trust.
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| Application of
paragraph
(1)(a)
|
(2) For the purpose of paragraph (1)(a),
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(a) except where paragraph (b) applies,
where a trust (in this paragraph and
subsection (2.1) referred to as the
``transferor trust''), in a period that does not
exceed one day, disposes of one or more
properties in the period to one or more other
trusts, there is deemed to be no resulting
change in the beneficial ownership of those
properties if
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(i) the transferor trust receives no
consideration for the disposition, and
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(ii) as a consequence of the disposition,
the value of each beneficiary's beneficial
ownership at the beginning of the period
under the transferor trust in each
particular property of the transferor trust
(or group of two or more properties of the
transferor trust that are identical to each
other) is the same as the value of the
beneficiary's beneficial ownership at the
end of the period under the transferor
trust and the other trust or trusts in each
particular property (or in property that
was immediately before the disposition
included in the group of identical
properties referred to above); and
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(b) where a trust (in this paragraph referred
to as the ``transferor'') governed by a
registered retirement savings plan or by a
registered retirement income fund transfers
a property to a trust (in this paragraph
referred to as the ``transferee'') governed by
a registered retirement savings plan or by a
registered retirement income fund, the
transfer is deemed not to result in a change
in the beneficial ownership of the property
if the annuitant of the plan or fund that
governs the transferor is also the annuitant
of the plan or fund that governs the
transferee.
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| Fractional
interests
|
(2.1) For the purpose of applying paragraph
(2)(a) in respect of a transfer by a transferor
trust of property that includes a share and
money, the other trust or trusts referred to in
that paragraph may receive, in lieu of a
transfer of a fractional interest in a share that
would otherwise be required, a
disproportionate amount of money or interest
in the share (the value of which does not
exceed the lesser of $200 and the fair market
value of the fractional interest).
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| Tax
consequences
of qualifying
dispositions
|
(3) Where at a particular time there is a
qualifying disposition of a property by a
person or partnership (in this subsection
referred to as the ``transferor'') to a trust (in
this subsection referred to as the ``transferee
trust''),
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(a) the transferor's proceeds of disposition
of the property are deemed to be
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(i) where the transferor so elects in
writing and files the election with the
Minister on or before the transferor's
filing-due date for its taxation year that
includes the particular time, or at any
later time that is acceptable to the
Minister, the amount specified in the
election that is not less than the cost
amount to the transferor of the property
immediately before the particular time
and not more than the fair market value
of the property at the particular time, and
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(ii) in any other case, the cost amount to
the transferor of the property
immediately before the particular time;
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(b) except as otherwise provided under
paragraph (c), the transferee trust's cost of
the property is deemed to be the amount, if
any, by which
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(i) the proceeds determined under
paragraph (a) in respect of the qualifying
disposition
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(ii) the amount by which the transferor's
loss otherwise determined from the
qualifying disposition would be reduced
because of subsection 100(4), paragraph
107(1)(c) or (d) or any of subsections
112(3) to (4.2), if the proceeds
determined under paragraph (a) were
equal to the fair market value of the
property at the particular time;
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(c) notwithstanding subsection 206(4), for
the purposes of Part XI and regulations
made for the purposes of that Part, the
transferee trust's cost of the property is
deemed to be
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(i) the cost amount to the transferor
immediately before the particular time
where
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(A) the particular time is before 2000,
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(B) the transferor is a trust governed by
a registered retirement savings plan or
a registered retirement income fund,
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(C) the transferee trust is governed by
a registered retirement savings plan or
a registered retirement income fund,
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(D) the transferee trust files a written
election with the Minister on or before
the later of March 31, 2001 and its
filing-due date for its taxation year that
includes the particular time (or at such
later date that is acceptable to the
Minister) that this subparagraph apply,
and
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(E) it can reasonably be considered
that the election was not made for the
purpose of avoiding tax under Part XI,
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(ii) the fair market value of the property
at the particular time where
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(A) subparagraph (iii) does not apply,
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(B) the transferee trust files a written
election with the Minister on or before
the later of March 31, 2001 and its
filing-due date for its taxation year that
includes the particular time (or at such
later date that is acceptable to the
Minister) that this subparagraph apply,
and
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(C) it can reasonably be considered
that the election was not made for the
purpose of avoiding tax under Part XI,
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(iii) the fair market value of the property
at the particular time where
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(A) subparagraph (i) does not apply to
the qualifying disposition,
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(B) the particular time is before 2000,
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(C) the transferor is a trust governed by
a registered retirement savings plan or
a registered retirement income fund,
and
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(D) the transferee trust is governed by
a registered retirement savings plan or
a registered retirement income fund,
and
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(iv) the cost amount to the transferor of
the property immediately before the
particular time, in any other case;
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(d) if the property was depreciable property
of a prescribed class of the transferor and its
capital cost to the transferor exceeds the
cost at which the transferee trust is deemed
by this subsection to have acquired the
property, for the purposes of sections 13 and
20 and any regulations made for the purpose
of paragraph 20(1)(a),
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(i) the capital cost of the property to the
transferee trust is deemed to be the
amount that was the capital cost of the
property to the transferor, and
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(ii) the excess is deemed to have been
allowed to the transferee trust in respect
of the property under regulations made
for the purpose of paragraph 20(1)(a) in
computing income for taxation years that
ended before the particular time;
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