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(i) any deduction in computing income,
taxable income, taxable income earned
in Canada or tax payable under the
Act, or
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(ii) any balance of undeducted outlays,
expenses or other amounts.
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7. (1) Subsection 14(1) of the Act is
replaced by the following:
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| Eligible
capital
property -
inclusion in
income from
business
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14. (1) Where, at the end of a taxation year,
the total of all amounts each of which is an
amount determined, in respect of a business of
a taxpayer, for E in the definition ``cumulative
eligible capital'' in subsection (5) (in this
section referred to as an ``eligible capital
amount'') or for F in that definition exceeds
the total of all amounts determined for A to D
in that definition in respect of the business
(which excess is in this subsection referred to
as ``the excess''), there shall be included in
computing the taxpayer's income from the
business for the year the total of
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(a) the amount, if any, that is the lesser of
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(ii) the amount determined for F in the
definition ``cumulative eligible capital''
in subsection (5) at the end of the year in
respect of the business, and
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(b) the amount, if any, determined by the
formula
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2/3 x (A - B - C - D)
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B is the amount determined for F in the
definition ``cumulative eligible
capital'' in subsection (5) at the end of
the year in respect of the business,
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C is 1/2 of the amount determined for Q in
the definition ``cumulative eligible
capital'' in subsection (5) at the end of
the year in respect of the business, and
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D is the amount claimed by the taxpayer,
not exceeding the taxpayer's exempt
gains balance for the year in respect of
the business.
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| Election re
capital gain
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(1.01) Where, at any time in a taxation year,
a taxpayer disposes of an eligible capital
property (other than goodwill) in respect of a
business, the cost of the property to the
taxpayer can be determined, the proceeds of
the disposition (in this subsection referred to
as the ``actual proceeds'') exceed that cost, the
taxpayer's exempt gains balance in respect of
the business for the year is nil and the taxpayer
so elects under this subsection in the
taxpayer's return of income for the year,
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(a) for the purposes of subsection (5), the
proceeds of disposition of the property are
deemed to be equal to that cost;
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(b) the taxpayer is deemed to have disposed
at that time of a capital property that had at
that time an adjusted cost base to the
taxpayer equal to that cost, for proceeds of
disposition equal to the actual proceeds;
and
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(c) where the eligible capital property is at
that time a qualified farm property (within
the meaning assigned by subsection
110.6(1)) of the taxpayer, the capital
property deemed by paragraph (b) to have
been disposed of by the taxpayer is deemed
to have been at that time a qualified farm
property of the taxpayer.
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(2) The portion of subsection 14(1.1) of
the Act before the description of B in
paragraph (b) is replaced by the following:
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| Deemed
taxable capital
gain
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(1.1) For the purposes of section 110.6 and
paragraph 3(b) as it applies for the purposes of
that section, an amount included under
paragraph (1)(b) in computing a taxpayer's
income for a particular taxation year from a
business is deemed to be a taxable capital gain
of the taxpayer for the year from the
disposition in the year of qualified farm
property to the extent of the lesser of
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(a) the amount included under paragraph
(1)(b) in computing the taxpayer's income
for the particular year from the business,
and
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(b) the amount determined by the formula
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A - B
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A is the amount by which the total of
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(i) 3/4 of the total of all amounts each
of which is the taxpayer's proceeds
from a disposition in a preceding
taxation year that began after 1987 and
ended before February 28, 2000 of
eligible capital property in respect of
the business that, at the time of the
disposition, was a qualified farm
property (within the meaning assigned
by subsection 110.6(1)) of the
taxpayer,
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(ii) 2/3 of the total of all amounts each
of which is the taxpayer's proceeds
from a disposition in the particular
year or a preceding taxation year that
ended after February 27, 2000 and
before October 18, 2000 of eligible
capital property in respect of the
business that, at the time of the
disposition, was a qualified farm
property (within the meaning assigned
by subsection 110.6(1)) of the
taxpayer, and
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(iii) 1/2 of the total of all amounts each
of which is the taxpayer's proceeds
from a disposition in the particular
year or a preceding taxation year that
ended after October 17, 2000 of
eligible capital property in respect of
the business that, at the time of the
disposition, was a qualified farm
property (within the meaning assigned
by subsection 110.6(1)) of the taxpayer
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(iv) 3/4 of the total of all amounts each
of which is
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(A) an eligible capital expenditure
of the taxpayer in respect of the
business that was made or incurred
in respect of a qualified farm
property disposed of by the taxpayer
in a preceding taxation year that
began after 1987 and ended before
February 28, 2000, or
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(B) an outlay or expense of the
taxpayer that was not deductible in
computing the taxpayer's income
and that was made or incurred for
the purpose of making a disposition
referred to in clause (A),
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(v) 2/3 of the total of all amounts each
of which is
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(A) an eligible capital expenditure
of the taxpayer in respect of the
business that was made or incurred
in respect of a qualified farm
property disposed of by the taxpayer
in the particular year or a preceding
taxation year that ended after
February 27, 2000 and before
October 18, 2000, or
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(B) an outlay or expense of the
taxpayer that was not deductible in
computing the taxpayer's income
and that was made or incurred for
the purpose of making a disposition
referred to in clause (A), and
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(vi) 1/2 of the total of all amounts each
of which is
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(A) an eligible capital expenditure
of the taxpayer in respect of the
business that was made or incurred
in respect of a qualified farm
property disposed of by the taxpayer
in the particular year or a preceding
taxation year that ended after
October 17, 2000, or
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(B) an outlay or expense of the
taxpayer that was not deductible in
computing the taxpayer's income
and that was made or incurred for
the purpose of making a disposition
referred to in clause (A), and
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(3) The portion of subsection 14(3) of the
Act before paragraph (c) is replaced by the
following:
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| Acquisition of
eligible
capital
property
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(3) Notwithstanding any other provision of
this Act, where at any particular time a person
or partnership (in this subsection referred to as
the ``taxpayer'') has, directly or indirectly, in
any manner whatever, acquired an eligible
capital property in respect of a business from
a person or partnership with which the
taxpayer did not deal at arm's length (in this
subsection referred to as the ``transferor'') and
the property was an eligible capital property of
the transferor (other than property acquired by
the taxpayer as a consequence of the death of
the transferor), the eligible capital
expenditure of the taxpayer in respect of the
business is, in respect of that acquisition,
deemed to be equal to 4/3 of the amount, if
any, by which
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(a) the amount determined for E in the
definition ``cumulative eligible capital'' in
subsection (5) in respect of the disposition
of the property by the transferor
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exceeds the total of
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(b) the total of all amounts that can
reasonably be considered to have been
claimed as deductions under section 110.6
for taxation years that ended before
February 28, 2000 by any person with
whom the taxpayer was not dealing at arm's
length in respect of the disposition of the
property by the transferor, or any other
disposition of the property before the
particular time,
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(b.1) 9/8 of the total of all amounts that can
reasonably be considered to have been
claimed as deductions under section 110.6
for taxation years that ended after February
27, 2000 and before October 18, 2000 by
any person with whom the taxpayer was not
dealing at arm's length in respect of the
disposition of the property by the transferor,
or any other disposition of the property
before the particular time, and
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(b.2) 3/2 of the total of all amounts that can
reasonably be considered to have been
claimed as deductions under section 110.6
for taxation years that end after October 17,
2000 by any person with whom the taxpayer
was not dealing at arm's length in respect of
the disposition of the property by the
transferor, or any other disposition of the
property before the particular time,
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except that, where the taxpayer disposes of the
property after the particular time, the amount
of the eligible capital expenditure deemed by
this subsection to be made by the taxpayer in
respect of the property shall be determined at
any time after the disposition as if the total of
the amounts determined under paragraphs (b),
(b.1) and (b.2) in respect of the disposition
were the lesser of
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(4) The description of B in the definition
``cumulative eligible capital'' in subsection
14(5) of the Act is replaced by the following:
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(a) 3/2 of all amounts included under
paragraph (1)(b) in computing the
taxpayer's income from the business
for taxation years that ended before
that time and after October 17, 2000,
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(b) 9/8 of all amounts included under
paragraph (1)(b) in computing the
taxpayer's income from the business
for taxation years that ended
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(i) before that time, and
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(ii) after February 27, 2000 and
before October 18, 2000,
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(c) all amounts included under
paragraph (1)(b) in computing the
taxpayer's income from the business
for taxation years that ended
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(i) before the earlier of that time and
February 28, 2000, and
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(ii) after the taxpayer's adjustment
time,
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(d) all amounts each of which is the
amount that would have been included
under subparagraph (1)(a)(v) (as that
subparagraph applied for taxation
years that ended before February 28,
2000) in computing the taxpayer's
income from the business, if the
amount determined for D in that
subparagraph for the year were nil, for
taxation years that ended
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(i) before the earlier of that time and
February 28, 2000, and
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(ii) after February 22, 1994, and
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(e) all taxable capital gains included,
because of the application of
subparagraph (1)(a)(v) (as that
subparagraph applied for taxation
years that ended before February 28,
2000) to the taxpayer in respect of the
business, in computing the taxpayer's
income for taxation years that began
before February 23, 1994,
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(5) The description of R in the definition
``cumulative eligible capital'' in subsection
14(5) of the Act is replaced by the following:
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R is the total of all amounts included, in
computing the taxpayer's income from
the business for taxation years that
ended before that time and after the
taxpayer's adjustment time, under
subparagraph (1)(a)(iv) in respect of
taxation years that ended before
February 28, 2000 and under paragraph
(1)(a) in respect of taxation years that
end after February 27, 2000;
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(6) The description of B in the definition
``exempt gains balance'' in subsection 14(5)
of the Act is replaced by the following:
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B is the total of all amounts each of which
is the amount determined for D in
subparagraph (1)(a)(v) in respect of the
business for a preceding taxation year
that ended before February 28, 2000 or
the amount determined for D in
paragraph (1)(b) for a preceding
taxation year that ended after February
27, 2000.
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(7) Section 14 of the Act is amended by
adding the following after subsection (13):
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| Ceasing to use
property in
Canadian
business
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(14) If at a particular time a non-resident
taxpayer 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 was
immediately before the particular time
eligible capital property of the taxpayer (other
than a property that was disposed of by the
taxpayer at the particular time), the taxpayer
is deemed to have disposed of the property
immediately before the particular time for
proceeds of disposition equal to the amount
determined by the formula
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A - B
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where
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A is the fair market value of the property
immediately before the particular time,
and
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B is
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(a) where at a previous time before the
particular time the taxpayer ceased to use
the property in connection with a
business or part of a business carried on
by the taxpayer outside Canada and
began to use it in connection with a
business or part of a business carried on
by the taxpayer in Canada, the amount, if
any, by which the fair market value of the
property at the previous time exceeded
its cost to the taxpayer at the previous
time, and
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(b) in any other case, nil.
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| Beginning to
use property
in Canadian
business
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(15) If at a particular time a non-resident
taxpayer ceases to use, in connection with a
business or part of a business carried on by the
taxpayer outside Canada immediately before
the particular time, and begins to use, in
connection with a business or part of a
business carried on by the taxpayer in Canada,
a property that is an eligible capital property
of the taxpayer, the taxpayer is deemed to have
disposed of the property immediately before
the particular time and to have reacquired the
property at the particular time for
consideration equal to the lesser of the cost to
the taxpayer of the property immediately
before the particular time and its fair market
value immediately before the particular time.
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(8) Subsections (1) to (6) apply to taxation
years that end after February 27, 2000
except that, for taxation years that ended
after February 27, 2000 and before October
18, 2000, the reference to the fraction ``2/3''
in the formula in paragraph 14(1)(b) of the
Act, as enacted by subsection (1), shall be
read as a reference to the fraction ``8/9''.
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(9) Subsection (7) applies after June 27,
1999 in respect of an authorized foreign
bank, and after August 8, 2000 in any other
case.
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8. (1) Section 17 of the Act is amended by
adding the following after subsection (11):
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Determina-
tion of
whether
persons
related
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(11.1) For the purposes of this section, in
determining whether persons are related to
each other at any time, any rights referred to
in subparagraph 251(5)(b)(i) that exist at that
time are deemed not to exist at that time to the
extent that the exercise of those rights is
prohibited at that time under a law of the
country under the law of which the
corporation was formed or last continued and
is governed, that restricts the foreign
ownership or control of the corporation.
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| Back-to-back
loans
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(11.2) For the purposes of subsection (2)
and paragraph (3)(b), where a non-resident
person, or a partnership each member of
which is non-resident, (in this subsection
referred to as the ``intermediate lender'')
makes a loan to a non-resident person, or a
partnership each member of which is
non-resident, (in this subsection referred to as
the ``intended borrower'') because the
intermediate lender received a loan from
another non-resident person, or a partnership
each member of which is non-resident, (in this
subsection referred to as the ``initial lender'')
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(a) the loan made by the intermediate
lender to the intended borrower is deemed
to have been made by the initial lender to
the intended borrower (to the extent of the
lesser of the amount of the loan made by the
initial lender to the intermediate lender and
the amount of the loan made by the
intermediate lender to the intended
borrower) under the same terms and
conditions and at the same time as it was
made by the intermediate lender; and
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(b) the loan made by the initial lender to the
intermediate lender and the loan made by
the intermediate lender to the intended
borrower are deemed not to have been made
to the extent of the amount of the loan
deemed to have been made under paragraph
(a).
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Determina-
tion of
whether
persons
related
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(11.3) For the purpose of applying
paragraph (3)(b) in respect of a corporation
resident in Canada described in paragraph
(2)(b), in determining whether persons
described in subparagraph (3)(b)(i) are related
to each other at any time, any rights referred
to in paragraph 251(5)(b) that otherwise exist
at that time are deemed not to exist at that time
where, if the rights were exercised
immediately before that time,
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(a) all of those persons would at that time be
controlled foreign affiliates of the
corporation resident in Canada; and
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(b) because of subsection (8), subsection (1)
would not apply to the corporation resident
in Canada in respect of the amount that
would, but for this subsection, have been
deemed to have been owing at that time to
the corporation resident in Canada by the
non-resident person described in
subparagraph (3)(b)(i).
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(2) The definition ``exempt loan or
transfer'' in subsection 17(15) of the Act is
replaced by the following:
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``exempt loan
or transfer''
« prêt ou
transfert de
biens exclu »
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``exempt loan or transfer'' means
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