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(g) a trust all interests in which, at that
time, have vested indefeasibly, other than
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(i) an alter ego trust, a joint spousal or
common-law partner trust, a post-1971
spousal or common-law partner trust
or a trust to which paragraph
104(4)(a.4) applies,
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(ii) a trust that has elected under
subsection 104(5.3),
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(iii) a trust that has, in its return of
income under this Part for its first
taxation year that ends after 1992,
elected that this paragraph not apply,
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(iv) a trust that is at that time resident
in Canada where the total fair market
value at that time of all interests in the
trust held at that time by beneficiaries
under the trust who at that time are
non-resident is more than 20% of the
total fair market value at that time of
all interests in the trust held at that time
by beneficiaries under the trust,
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(v) a trust under the terms of which, at
that time, all or part of a person's
interest in the trust is to be terminated
with reference to a period of time
(including a period of time determined
with reference to the person's death),
otherwise than as a consequence of
terms of the trust under which an
interest in the trust is to be terminated
as a consequence of a distribution to
the person (or the person's estate) of
property of the trust if the fair market
value of the property to be distributed
is required to be commensurate with
the fair market value of that interest
immediately before the distribution, or
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(vi) a trust that, before that time and
after December 17, 1999, has made a
distribution to a beneficiary in respect
of the beneficiary's capital interest in
the trust, if the distribution can
reasonably be considered to have been
financed by a liability of the trust and
one of the purposes of incurring the
liability was to avoid taxes otherwise
payable under this Part as a
consequence of the death of any
individual.
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(8) Subsection 108(1) of the Act is
amended by adding the following in
alphabetical order:
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``eligible
offset''
« montant de
réduction
admissible »
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``eligible offset'' at any time of a taxpayer in
respect of all or part of the taxpayer's
capital interest in a trust is the portion of any
debt or obligation that is assumed by the
taxpayer and that can reasonably be
considered to be applicable to property
distributed at that time in satisfaction of the
interest or part of the interest, as the case
may be, if the distribution is conditional
upon the assumption by the taxpayer of the
portion of the debt or obligation;
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``exempt
property''
« bien
exonéré »
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``exempt property'' of a taxpayer at any time
means property any income or gain from the
disposition of which by the taxpayer at that
time would, because the taxpayer is
non-resident or because of a provision
contained in a tax treaty, not cause an
increase in the taxpayer's tax payable under
this Part;
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(9) Paragraph 108(2)(b) of the Act is
replaced by the following:
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(b) each of the following conditions was
satisfied:
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(i) throughout the taxation year that
includes the particular time (in this
paragraph referred to as the ``current
year''), the trust was resident in Canada,
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(ii) throughout the period or periods (in
this paragraph referred to as the
``relevant periods'') that are in the
current year and throughout which the
conditions in paragraph (a) are not
satisfied in respect of the trust, its only
undertaking was
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(A) the investing of its funds in
property (other than real property or an
interest in real property),
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(B) the acquiring, holding,
maintaining, improving, leasing or
managing of any real property or an
interest in real property, that is capital
property of the trust, or
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(C) any combination of the activities
described in clauses (A) and (B),
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(iii) throughout the relevant periods at
least 80% of its property consisted of any
combination of
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(B) any property that, under the terms
or conditions of which or under an
agreement, is convertible into, is
exchangeable for or confers a right to
acquire, shares,
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(D) bonds, debentures, mortgages,
hypothecary claims, notes and other
similar obligations,
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(E) marketable securities,
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(F) real property situated in Canada
and interests in real property situated
in Canada, and
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(G) rights to and interests in any rental
or royalty computed by reference to
the amount or value of production
from a natural accumulation of
petroleum or natural gas in Canada,
from an oil or gas well in Canada or
from a mineral resource in Canada,
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(A) not less than 95% of its income for
the current year (computed without
regard to subsections 49(2.1) and
104(6)) was derived from, or from the
disposition of, investments described
in subparagraph (iii), or
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(B) not less than 95% of its income for
each of the relevant periods (computed
without regard to subsections 49(2.1)
and 104(6) and as though each of those
periods were a taxation year) was
derived from, or from the disposition
of, investments described in
subparagraph (iii),
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(v) throughout the relevant periods, not
more than 10% of its property consisted
of bonds, securities or shares in the
capital stock of any one corporation or
debtor other than Her Majesty in right of
Canada or a province or a Canadian
municipality, and
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(vi) where the trust would not be a unit
trust at the particular time if this
paragraph were read without reference to
this subparagraph and subparagraph (iii)
were read without reference to clause (F),
the units of the trust are listed at any time
in the current year or in the following
taxation year on a prescribed stock
exchange in Canada, or
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(10) The portion of subsection 108(3) of
the Act before paragraph (a) is replaced by
the following:
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| Income of a
trust in certain
provisions
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(3) For the purposes of the definition
``income interest'' in subsection (1), the
income of a trust is its income computed
without reference to the provisions of this Act
and, for the purposes of the definition
``pre-1972 spousal trust'' in subsection (1) and
paragraphs 70(6)(b) and (6.1)(b), 73(1.01)(c)
and 104(4)(a), the income of a trust is its
income computed without reference to the
provisions of this Act, minus any dividends
included in that income
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(11) Subsection 108(4) of the Act is
replaced by the following:
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| Trust not
disqualified
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(4) For the purposes of the definition
``pre-1972 spousal trust'' in subsection (1),
subparagraphs 70(6)(b)(ii) and (6.1)(b)(ii) and
paragraphs 73(1.01)(c) and 104(4)(a), where
a trust was created by a taxpayer whether by
the taxpayer's will or otherwise, no person is
deemed to have received or otherwise
obtained or to be entitled to receive or
otherwise obtain the use of any income or
capital of the trust solely because of the
payment, or provision for payment, as the case
may be, by the trust of
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(a) any estate, legacy, succession or
inheritance duty payable, in consequence of
the death of the taxpayer, or a spouse or
common-law partner of the taxpayer who is
a beneficiary under the trust, in respect of
any property of, or interest in, the trust; or
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(b) any income or profits tax payable by the
trust in respect of any income of the trust.
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(12) Subsection 108(6) of the Act is
replaced by the following:
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| Variation of
trusts
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(6) Where at any time the terms of a trust are
varied
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(a) for the purposes of subsections 104(4),
(5) and (5.2) and subject to paragraph (b),
the trust is, at and after that time, deemed to
be the same trust as, and a continuation of,
the trust immediately before that time;
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(b) for greater certainty, paragraph (a) does
not affect the application of paragraph
104(4)(a.1); and
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(c) for the purposes of paragraph 53(2)(h),
subsection 107(1), paragraph (j) of the
definition ``excluded right or interest'' in
subsection 128.1(10) and the definition
``personal trust'' in subsection 248(1), no
interest of a beneficiary under the trust
before it was varied is considered to be
consideration for the interest of the
beneficiary in the trust as varied.
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| Interests
acquired for
consideration
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(7) For the purposes of paragraph 53(2)(h),
subsection 107(1), paragraph (j) of the
definition ``excluded right or interest'' in
subsection 128.1(10) and the definition
``personal trust'' in subsection 248(1),
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(a) an interest in a trust is deemed not to be
acquired for consideration solely because it
was acquired in satisfaction of any right as
a beneficiary under the trust to enforce
payment of an amount by the trust; and
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(b) where all the beneficial interests in a
particular inter vivos trust acquired by way
of the transfer, assignment or other
disposition of property to the particular
trust were acquired by
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(ii) two or more persons who would be
related to each other if
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(A) a trust and another person were
related to each other, where the other
person is a beneficiary under the trust
or is related to a beneficiary under the
trust, and
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(B) a trust and another trust were
related to each other, where a
beneficiary under the trust is a
beneficiary under the other trust or is
related to a beneficiary under the other
trust,
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any beneficial interest in the particular trust
acquired by such a person is deemed to have
been acquired for no consideration.
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(13) Subsection (1) and subsection 108(6)
of the Act, as enacted by subsection (12),
apply to the 2000 and subsequent taxation
years.
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(14) Subsection (2) and the definition
``eligible offset'' in subsection 108(1) of the
Act, as enacted by subsection (8), apply
after 1999.
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(15) Subsection (3) applies in respect of
interests created or materially altered after
January 1987 that were acquired after 10
p.m. Eastern Standard Time, February 6,
1987.
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(16) Subsection (4) applies to the 1993
and subsequent taxation years.
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(17) Subsection (5) applies to deaths that
occur after 1999 and, where a day before
the 2000 taxation year is determined under
paragraph 104(4)(a.4) of the Act, as enacted
by subsection 78(4), in respect of a trust, it
applies to deaths that occur after December
23, 1998.
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(18) Subsection (6) applies to the 1999
and subsequent taxation years.
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(19) Subsections (7) and (9) apply to the
1998 and subsequent taxation years, except
that
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(a) subsection (7) does not apply for the
purpose of applying subparagraph (g)(iv)
of the definition ``trust'' in subsection
108(1) of the Act, as enacted by
subsection (7), before December 24,
1998; and
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(b) where the trust so elects in writing and
files the election with the Minister of
National Revenue on or before the trust's
filing-due date for the taxation year of the
trust that includes the day on which this
Act receives royal assent (or any later day
that is acceptable to that Minister),
subparagraph (g)(v) of that definition, as
enacted by subsection (7), as it applies
before 2001, shall be read as follows:
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(v) a trust any interest in which may
become effective in the future, or
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(20) The definition ``exempt property'' in
subsection 108(1) of the Act, as enacted by
subsection (8), applies after 1992 except
that, before 1999, the words ``tax treaty'' in
that definition shall be read as ``convention
or agreement with another country that has
the force of law in Canada''.
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(21) Subsections (10) and (11) apply to the
2000 and subsequent taxation years, except
for the purpose of applying section 73 of the
Act to transfers that occur before 2000.
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(22) Subsection 108(7) of the Act, as
enacted by subsection (12), applies after
December 23, 1998.
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84. (1) The portion of paragraph
110(1)(d) of the Act before subparagraph (i)
is replaced by the following:
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| Employee
options
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(d) an amount equal to 1/2 of the amount of
the benefit deemed by subsection 7(1) to
have been received by the taxpayer in the
year in respect of a security that a particular
qualifying person has agreed after February
15, 1984 to sell or issue under an agreement,
or in respect of the transfer or other
disposition of rights under the agreement, if
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(2) Subparagraphs 110(1)(d)(ii) and (iii)
of the Act are replaced by the following:
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(ii) where rights under the agreement
were not acquired by the taxpayer as a
result of a disposition of rights to which
subsection 7(1.4) applied,
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(A) the amount payable by the
taxpayer to acquire the security under
the agreement is not less than the
amount by which
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(I) the fair market value of the
security at the time the agreement
was made
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(II) the amount, if any, paid by the
taxpayer to acquire the right to
acquire the security, and
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(B) at the time immediately after the
agreement was made, the taxpayer was
dealing at arm's length with
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(I) the particular qualifying person,
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(II) each other qualifying person
that, at the time, was an employer of
the taxpayer and was not dealing at
arm's length with the particular
qualifying person, and
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(III) the qualifying person of which
the taxpayer had, under the
agreement, a right to acquire a
security, and
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(iii) where rights under the agreement
were acquired by the taxpayer as a result
of one or more dispositions to which
subsection 7(1.4) applied,
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(A) the amount payable by the
taxpayer to acquire the security under
the agreement is not less than the
amount that was included, in respect of
the security, in the amount determined
under subparagraph 7(1.4)(c)(ii) with
respect to the most recent of those
dispositions,
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(B) at the time immediately after the
agreement the rights under which were
the subject of the first of those
dispositions (in this subparagraph
referred to as the ``original
agreement'') was made, the taxpayer
was dealing at arm's length with
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(I) the qualifying person that made
the original agreement,
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(II) each other qualifying person
that, at the time, was an employer of
the taxpayer and was not dealing at
arm's length with the qualifying
person that made the original
agreement, and
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(III) the qualifying person of which
the taxpayer had, under the original
agreement, a right to acquire a
security,
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(C) the amount that was included, in
respect of each particular security that
the taxpayer had a right to acquire
under the original agreement, in the
amount determined under
subparagraph 7(1.4)(c)(iv) with
respect to the first of those dispositions
was not less than the amount by which
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(I) the fair market value of the
particular security at the time the
original agreement was made
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(II) the amount, if any, paid by the
taxpayer to acquire the right to
acquire the security, and
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(D) for the purpose of determining if
the condition in paragraph 7(1.4)(c)
was satisfied with respect to each of
the particular dispositions following
the first of those dispositions,
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(I) the amount that was included, in
respect of each particular security
that could be acquired under the
agreement the rights under which
were the subject of the particular
disposition, in the amount
determined under subparagraph
7(1.4)(c)(iv) with respect to the
particular disposition
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(II) the amount that was included, in
respect of the particular security, in
the amount determined under
subparagraph 7(1.4)(c)(ii) with
respect to the last of those
dispositions preceding the
particular disposition;
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(3) Subsection 110(1) of the Act is
amended by adding the following after
paragraph (d):
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