(16) The definition ``post-1971 spousal or common-law partner trust'' in subsection 248(1) of the Act, as enacted by subsection (5), applies to trusts created after 1971.

(17) The definition ``qualified donee'' in subsection 248(1) of the Act, as enacted by subsection (5), applies after 1998.

(18) Subsections 248(25.1), (25.2) and (25.4) of the Act, as enacted by subsection (6), apply to transfers that occur after December 23, 1998.

(19) Subsection 248(25.3) of the Act, as enacted by subsection (6), applies to the 1999 and subsequent taxation years.

(20) Subsection (7) applies after October 1999.

189. (1) The portion of paragraph 249.1(1)(b) of the Act after subparagraph (iii) is replaced by the following:

    after the end of the calendar year in which the period began unless, in the case of a business, the business is not carried on in Canada, is a prescribed business or is carried on by a prescribed person or partnership,

(2) Subsection (1) applies to fiscal periods that begin after 1994.

190. (1) Subsection 250(5) of the Act is replaced by the following:

Deemed non-resident

(5) Notwithstanding any other provision of this Act (other than paragraph 126(1.1)(a)), a person is deemed not to be resident in Canada at a time if, at that time, the person would, but for this subsection and any tax treaty, be resident in Canada for the purposes of this Act but is, under a tax treaty with another country, resident in the other country and not resident in Canada.

(2) Section 250 of the Act is amended by adding the following after subsection (6):

Residence of inter vivos trusts

(6.1) For the purposes of provisions of this Act that apply to a trust for a taxation year only where the trust has been resident in Canada throughout the year, where a particular trust ceases at any time to exist and the particular trust was resident in Canada immediately before that time, the particular trust is deemed to be resident in Canada throughout the period that begins at that time and ends at the end of the year.

(3) Subsection (1) applies after June 27, 1999, except that if on February 24, 1998 an individual who would, but for a tax treaty (within the meaning assigned by subsection 248(1) of the Act), be resident in Canada for the purposes of the Act is, under the tax treaty, resident in another country, subsection (1) does not apply to the individual until the first time after June 27, 1999 at which the individual becomes, under a tax treaty, resident in a country other than Canada.

(4) Subsection (2) applies to the 1990 and subsequent taxation years.

191. (1) The Act is amended by adding the following after section 250:

Non-resident person's taxation year and income

250.1 For greater certainty, unless the context requires otherwise

    (a) a taxation year of a non-resident person shall be determined, except as otherwise permitted by the Minister, in the same manner as the taxation year of a person resident in Canada; and

    (b) a person for whom income for a taxation year is determined in accordance with this Act includes a non-resident person.

(2) Subsection (1) applies after December 17, 1999.

192. (1) Subsection 251(1) of the Act is amended by striking out the word ``and'' at the end of paragraph (a) and by replacing paragraph (b) with the following:

    (b) a taxpayer and a personal trust (other than a trust described in any of paragraphs (a) to (e.1) of the definition ``trust'' in subsection 108(1)) are deemed not to deal with each other at arm's length if the taxpayer, or any person not dealing at arm's length with the taxpayer, would be beneficially interested in the trust if subsection 248(25) were read without reference to subclauses 248(25)(b)(iii)(A)(II) to (IV); and

    (c) where paragraph (b) does not apply, it is a question of fact whether persons not related to each other are at a particular time dealing with each other at arm's length.

(2) Subsection (1) applies after December 23, 1998 except that paragraph 251(1)(b) of the Act, as enacted by subsection (1), shall, for the purpose of applying the definition ``taxable Canadian property'' in subsection 248(1) of the Act, not apply in respect of property acquired before December 24, 1998.

193. (1) The Act is amended by adding the following after section 253:

Investments in limited partnerships

253.1 For the purposes of subparagraph 108(2)(b)(ii), paragraphs 130.1(6)(b), 131(8)(b), 132(6)(b) and 149(1)(o.2), the definition ``private holding corporation'' in subsection 191(1) and regulations made for the purposes of paragraphs 149(1)(o.3) and (o.4), where a trust or corporation holds an interest as a member of a partnership and, by operation of any law governing the arrangement in respect of the partnership, the liability of the member as a member of the partnership is limited, the member shall not, solely because of its acquisition and holding of that interest, be considered to carry on any business or other activity of the partnership.

(2) Subsection (1) applies after 1992, except that for taxation years that end after December 16, 1999 and before 2003, section 253.1 of the Act, as enacted by subsection (1), shall be read as follows:

253.1 For the purposes of subparagraph 108(2)(b)(ii), paragraphs 130.1(6)(b), 131(8)(b), 132(6)(b) and 149(1)(o.2), the definition ``private holding corporation'' in subsection 191(1) and regulations made for the purposes of paragraphs 149(1)(o.3) and (o.4), where a trust or corporation is a member of a partnership and, by operation of any law governing the arrangement in respect of the partnership, the liability of the member as a member of the partnership is limited, the member is deemed

      (a) to undertake an investing of its funds because of its acquisition and holding of its interest as a member of the partnership; and

      (b) not to carry on any business or other activity of the partnership.

194. (1) Section 256 of the Act is amended by adding the following after subsection (6):

Simultaneous control

(6.1) For the purposes of this Act and for greater certainty,

    (a) where a corporation (in this paragraph referred to as the ``subsidiary'') would be controlled by another corporation (in this paragraph referred to as the ``parent'') if the parent were not controlled by any person or group of persons, the subsidiary is controlled by

      (i) the parent, and

      (ii) any person or group of persons by whom the parent is controlled; and

    (b) where a corporation (in this paragraph referred to as the ``subject corporation'') would be controlled by a group of persons (in this paragraph referred to as the ``first-tier group'') if no corporation that is a member of the first-tier group were controlled by any person or group of persons, the subject corporation is controlled by

      (i) the first-tier group, and

      (ii) any group of one or more persons comprised of, in respect of every member of the first-tier group, either the member, or a person or group of persons by whom the member is controlled.

Application to control in fact

(6.2) In its application to subsection (5.1), subsection (6.1) shall be read as if the references in subsection (6.1) to ``controlled'' were references to ``controlled, directly or indirectly in any manner whatever,''.

(2) Subsection (1) applies to taxation years that begin after November 1999.

195. (1) Subparagraph 258(3)(b)(ii) of the Act is replaced by the following:

      (ii) was issued before 8:00 p.m. Eastern Daylight Saving Time, June 18, 1987 and is not deemed by subsection 112(2.22) to have been issued after that time

(2) Subsection (1) applies in respect of dividends received after 1998.

PART 2

HARMONIZATION WITH THE CIVIL CODE OF QUEBEC

R.S., c. 1 (5th Supp.)

Income Tax Act

196. (1) Subsection 13(7.3) of the Income Tax Act is replaced by the following:

Control of corporations by one trustee

(7.3) For the purposes of paragraph (7)(e), where at a particular time one corporation would, but for this subsection, be related to another corporation by reason of both corporations being controlled by the same executor, liquidator of a succession or trustee and it is established that

    (a) the executor, liquidator or trustee did not acquire control of the corporations as a result of one or more estates or trusts created by the same individual or by two or more individuals not dealing with each other at arm's length, and

    (b) the estate or trust under which the executor, liquidator or trustee acquired control of each of the corporations arose only on the death of the individual creating the estate or trust,

the two corporations are deemed not to be related to each other at the particular time.

(2) Paragraph (g) of the definition ``proceeds of disposition'' in subsection 13(21) of the English version of the Act is replaced by the following:

      (g) an amount by which the liability of a taxpayer to a mortgagee or hypothecary creditor is reduced as a result of the sale of mortgaged or hypothecated property under a provision of the mortgage or hypothec, plus any amount received by the taxpayer out of the proceeds of the sale, and

(3) Paragraph 13(21.2)(c) of the English version of the Act is replaced by the following:

    (c) on the 30th day after the particular time, a person or partnership (in this subsection referred to as the ``subsequent owner'') who is the transferor or a person affiliated with the transferor owns or has a right to acquire the transferred property (other than a right, as security only, derived from a mortgage, hypothec, agreement for sale or similar obligation),

(4) Clause 13(21.2)(e)(iii)(A) of the English version of the Act is replaced by the following:

        (A) at which a 30-day period begins throughout which neither the transferor nor a person affiliated with the transferor owns or has a right to acquire the transferred property (other than a right, as security only, derived from a mortgage, hypothec, agreement for sale or similar obligation),

197. (1) Subparagraph (f)(iii) of the definition ``eligible capital expenditure'' in subsection 14(5) of the Act is replaced by the following:

        (iii) a share, bond, debenture, mortgage, hypothecary claim, note, bill or other similar property, or

(2) Paragraph 14(13)(a) of the English version of the Act is replaced by the following:

    (a) a right to acquire a property (other than a right, as security only, derived from a mortgage, hypothec, agreement for sale or similar obligation) is deemed to be a property that is identical to the property; and

198. The portion of the definition ``qualifying debt obligation'' in subsection 15.1(3) of the Act before paragraph (a) is replaced by the following:

``qualifying debt obligation''
« créance admissible »

``qualifying debt obligation'' of a corporation at a particular time means an obligation that is a bond, debenture, bill, note, mortgage, hypothecary claim or similar obligation issued after February 25, 1992 and before 1995,

199. The portion of the definition ``qualifying debt obligation'' in subsection 15.2(3) of the Act before paragraph (a) is replaced by the following:

``qualifying debt obligation''
« créance admissible »

``qualifying debt obligation'' of an issuer at a particular time means an obligation that is a bill, note, mortgage, hypothecary claim or similar obligation issued after February 25, 1992 and before 1995,

200. The portion of subsection 16(3) of the Act before paragraph (a) is replaced by the following:

Obligation issued at discount

(3) Where, in the case of a bond, debenture, bill, note, mortgage, hypothecary claim or similar obligation (other than an obligation that is a prescribed debt obligation for the purpose of subsection 12(9)) issued after June 18, 1971 by a person exempt, because of section 149, from Part I tax on part or on all of the person's income, a non-resident person not carrying on business in Canada or a government, municipality or municipal or other public body performing a function of government,

201. (1) Paragraph 18(13)(e) of the Act is replaced by the following:

    (e) the particular property is a share, or a loan, bond, debenture, mortgage, hypothecary claim, note, agreement for sale or any other indebtedness;

(2) Subsection 18(16) of the English version of the Act is replaced by the following:

Deemed identical property

(16) For the purposes of subsections (13), (14) and (15), a right to acquire a property (other than a right, as security only, derived from a mortgage, hypothec, agreement for sale or similar obligation) is deemed to be a property that is identical to the property.

202. Subsection 18.1(12) of the English version of the Act is replaced by the following:

Identical property

(12) For the purposes of subsections (8) and (10), a right to acquire a particular right to receive production (other than a right, as security only, derived from a mortgage, hypothec, agreement of sale or similar obligation) is deemed to be a right to receive production that is identical to the particular right.

203. (1) The portion of paragraph 20(1)(f) of the Act before subparagraph (i) is replaced by the following:

    (f) an amount paid in the year in satisfaction of the principal amount of any bond, debenture, bill, note, mortgage, hypothecary claim or similar obligation issued by the taxpayer after June 18, 1971 on which interest was stipulated to be payable, to the extent that the amount so paid does not exceed,

(2) The portion of subsection 20(5) of the Act before paragraph (b) is replaced by the following:

Sale of agreement for sale, mortgage or hypothecary claim included in proceeds of disposition

(5) Where depreciable property, other than a timber resource property, of a taxpayer has, in a taxation year, been disposed of to a person with whom the taxpayer was dealing at arm's length, and the proceeds of disposition include an agreement for the sale of, or a mortgage or hypothecary claim on, land that the taxpayer has, in a subsequent taxation year, sold to a person with whom the taxpayer was dealing at arm's length, there may be deducted in computing the income of the taxpayer for the subsequent year an amount equal to the lesser of

    (a) the amount, if any, by which the principal amount of the agreement for sale, mortgage or hypothecary claim outstanding at the time of the sale exceeds the consideration paid by the purchaser to the taxpayer for the agreement for sale, mortgage or hypothecary claim, and

(3) Subsection 20(5.1) of the Act is replaced by the following:

Sale of agreement for sale, mortgage or hypothecary claim included in proceeds of disposition

(5.1) Where a timber resource property of a taxpayer has, in a taxation year, been disposed of to a person with whom the taxpayer was dealing at arm's length, and the proceeds of disposition include an agreement for sale of, or a mortgage or hypothecary claim on, land that the taxpayer has, in a subsequent taxation year, sold to a person with whom the taxpayer was dealing at arm's length, there may be deducted in computing the income of the taxpayer for the subsequent year the amount, if any, by which the principal amount of the agreement for sale, mortgage or hypothecary claim outstanding at the time of the sale exceeds the consideration paid by the purchaser to the taxpayer for the agreement for sale, mortgage or hypothecary claim.

204. Subsection 39(6) of the Act is replaced by the following:

Definition of ``Canadian security''

(6) For the purposes of this section, ``Canadian security'' means a security (other than a prescribed security) that is a share of the capital stock of a corporation resident in Canada, a unit of a mutual fund trust or a bond, debenture, bill, note, mortgage, hypothecary claim or similar obligation issued by a person resident in Canada.

205. Paragraph 40(3.5)(a) of the English version of the Act is replaced by the following:

    (a) a right to acquire a property (other than a right, as security only, derived from a mortgage, hypothec, agreement for sale or similar obligation) is deemed to be a property that is identical to the property;

206. Paragraph 53(1)(g) of the Act is replaced by the following: