(2) Section 126 of the Act is amended by adding the following after subsection (1):
Authorized foreign bank	(1.1) In applying subsections 20(12) and (12.1) and this section in respect of an authorized foreign bank,
	(a) the bank is deemed, for the purposes of subsections (1), (4) to (5), (6) and (7), to be resident in Canada in respect of its Canadian banking business;
	(b) the references in subsection 20(12) and paragraph (1)(a) to ``country other than Canada'' shall be read as a reference to ``country that is neither Canada nor a country in which the taxpayer is resident at any time in the taxation year'';
	(c) the reference in subparagraph (1)(b)(i) to ``from sources in that country'' shall be read as a reference to ``in respect of its Canadian banking business from sources in that country'';
	(d) subparagraph (1)(b)(ii) shall be read as follows:
	``(ii) the lesser of
	(A) the taxpayer's taxable income earned in Canada for the year, and
	(B) the total of the taxpayer's income for the year from its Canadian banking business and the amount determined in respect of the taxpayer under subparagraph 115(1)(a)(vii) for the year.'';
	(e) in computing the non-business income tax paid by the bank for a taxation year to the government of a country other than Canada, there shall be included only taxes that relate to amounts that are included in computing the bank's taxable income earned in Canada from its Canadian banking business; and
	(f) the definition ``tax-exempt income'' in subsection (7) shall be read as follows:
	`` ``tax-exempt income'' means income of a taxpayer from a source in a particular country in respect of which
	(a) the taxpayer is, because of a comprehensive agreement or convention for the elimination of double taxation on income, which has the force of law in the particular country and to which a country in which the taxpayer is resident is a party, entitled to an exemption from all income or profits taxes, imposed in the particular country, to which the agreement or convention applies, and
	(b) no income or profits tax to which the agreement or convention does not apply is imposed in the particular country;''.
	(3) Clause 126(2.1)(a)(ii)(A) of the Act is replaced by the following:
	(A) the amount, if any, by which
	(I) if the taxpayer is resident in Canada throughout the year, the taxpayer's income for the year computed without reference to paragraph 20(1)(ww), and
	(II) if the taxpayer is non-resident at any time in the year, the amount determined under paragraph 114(a) in respect of the taxpayer for the year
	exceeds
	(III) the total of all amounts each of which is an amount deducted under section 110.6 or paragraph 111(1)(b), or deductible under any of paragraphs 110(1)(d) to (d.3), (f) and (j) and sections 112 and 113, in computing the taxpayer's taxable income for the year, and
	(4) The portion of subsection 126(2.2) of the Act before paragraph (b) is replaced by the following:
Non-resident' s foreign tax deduction	(2.2) If at any time in a taxation year a taxpayer who is not at that time resident in Canada disposes of a property that was deemed by subsection 48(2), as it read in its application before 1993, or by paragraph 128.1(4)(e), as it read in its application before October 2, 1996, to be taxable Canadian property of the taxpayer, the taxpayer may deduct from the tax for the year otherwise payable under this Part by the taxpayer an amount equal to the lesser of
	(a) the amount of any non-business-income tax paid by the taxpayer for the year to the government of a country other than Canada that can reasonably be regarded as having been paid by the taxpayer in respect of any gain or profit from the disposition of the property, and
	(5) Subparagraph 126(2.2)(b)(ii) of the Act is replaced by the following:
	(ii) if the taxpayer is non-resident throughout the year, the taxpayer's taxable income earned in Canada for the year determined without reference to paragraphs 115(1)(d) to (f), and
	(iii) if the taxpayer is resident in Canada at any time in the year, the amount that would have been the taxpayer's taxable income earned in Canada for the year if the part of the year throughout which the taxpayer was non-resident were the whole taxation year.
	(6) Section 126 of the Act is amended by adding the following after subsection (2.2):
Former resident - deduction	(2.21) If at any particular time in a particular taxation year a non-resident individual disposes of a property that the individual last acquired because of the application, at any time (in this subsection referred to as the ``acquisition time'') after October 1, 1996, of paragraph 128.1(4)(c), there may be deducted from the individual's tax otherwise payable under this Part for the year (in this subsection referred to as the ``emigration year'') that includes the time immediately before the acquisition time an amount not exceeding the lesser of
	(a) the total of all amounts each of which is the amount of any business-income tax or non-business-income tax paid by the individual for the particular year
	(i) where the property is real property situated in a country other than Canada,
	(A) to the government of that country, or
	(B) to the government of a country with which Canada has a tax treaty at the particular time and in which the individual is resident at the particular time, or
	(ii) where the property is not real property, to the government of a country with which Canada has a tax treaty at the particular time and in which the individual is resident at the particular time,
	that can reasonably be regarded as having been paid in respect of that portion of any gain or profit from the disposition of the property that accrued while the individual was resident in Canada and before the time the individual last ceased to be resident in Canada, and
	(b) the amount, if any, by which
	(i) the amount of tax under this Part that was, after taking into account the application of this subsection in respect of dispositions that occurred before the particular time, otherwise payable by the individual for the emigration year
	exceeds
	(ii) the amount of such tax that would have been payable if the property had not been deemed by subsection 128.1(4) to have been disposed of in the emigration year.
Former resident - trust beneficiary	(2.22) If at any particular time in a particular taxation year a non-resident individual disposes of a property that the individual last acquired at any time (in this subsection referred to as the ``acquisition time'') on a distribution after October 1, 1996 to which paragraphs 107(2)(a) to (c) do not apply only because of subsection 107(5), the trust may deduct from its tax otherwise payable under this Part for the year (in this subsection referred to as the ``distribution year'') that includes the acquisition time an amount not exceeding the lesser of
	(a) the total of all amounts each of which is the amount of any business-income tax or non-business-income tax paid by the individual for the particular year
	(i) where the property is real property situated in a country other than Canada,
	(A) to the government of that country, or
	(B) to the government of a country with which Canada has a tax treaty at the particular time and in which the individual is resident at the particular time, or
	(ii) where the property is not real property, to the government of a country with which Canada has a tax treaty at the particular time and in which the individual is resident at the particular time,
	that can reasonably be regarded as having been paid in respect of that portion of any gain or profit from the disposition of the property that accrued before the distribution and after the latest of the times, before the distribution, at which
	(iii) the trust became resident in Canada,
	(iv) the individual became a beneficiary under the trust, or
	(v) the trust acquired the property, and
	(b) the amount, if any, by which
	(i) the amount of tax under this Part that was, after taking into account the application of this subsection in respect of dispositions that occurred before the particular time, otherwise payable by the trust for the distribution year
	exceeds
	(ii) the amount of such tax that would have been payable by the trust for the distribution year if the property had not been distributed to the individual.
Where foreign credit available	(2.23) For the purposes of subsections (2.21) and (2.22), in computing, in respect of the disposition of a property by an individual in a taxation year, the total amount of taxes paid by the individual for the year to one or more governments of countries other than Canada, there shall be deducted any tax credit (or other reduction in the amount of a tax) to which the individual was entitled for the year, under the law of any of those countries or under a tax treaty between Canada and any of those countries, because of taxes paid or payable by the individual under this Act in respect of the disposition or a previous disposition of the property.
	(7) Paragraphs 126(2.3)(b) and (c) of the Act are replaced by the following:
	(b) no amount may be claimed under paragraph (2)(a) in computing a taxpayer's tax payable under this Part for a particular taxation year in respect of the taxpayer's unused foreign tax credit in respect of a country for a taxation year until the taxpayer's unused foreign tax credits in respect of that country for taxation years preceding the taxation year that may be claimed for the particular taxation year have been claimed; and
	(c) an amount in respect of a taxpayer's unused foreign tax credit in respect of a country for a taxation year may be claimed under paragraph (2)(a) in computing the taxpayer's tax payable under this Part for a particular taxation year only to the extent that it exceeds the aggregate of all amounts each of which is the amount that may reasonably be considered to have been claimed in respect of that unused foreign tax credit in computing the taxpayer's tax payable under this Part for a taxation year preceding the particular taxation year.
	(8) Subparagraphs 126(3)(a)(i) and (ii) of the Act are replaced by the following:
	(i) for the year, if the individual is resident in Canada throughout the year, and
	(ii) for the part of the year throughout which the individual was resident in Canada, if the individual is non-resident at any time in the year,
	(9) Paragraph 126(3)(b) of the Act is replaced by the following:
	(b) the amount, if any, by which
	(i) if the taxpayer is resident in Canada throughout the year, the taxpayer's income for the year computed without reference to paragraph 20(1)(ww), and
	(ii) if the taxpayer is non-resident at any time in the year, the amount determined under paragraph 114(a) in respect of the taxpayer for the year
	exceeds
	(iii) the total of all amounts each of which is an amount deducted under section 110.6 or paragraph 111(1)(b), or deductible under any of paragraphs 110(1)(d) to (d.3), (f) and (j), in computing the taxpayer's taxable income for the year, and
	(10) Subsections 126(4) and (4.1) of the Act are replaced by the following:
Portion of foreign tax not included	(4) For the purposes of this Act, an income or profits tax paid by a person resident in Canada to the government of a country other than Canada does not include a tax, or that portion of a tax, imposed by that government that would not be imposed if the person were not entitled under section 113 or this section to a deduction in respect of the tax or that portion of the tax.
No economic profit	(4.1) If a taxpayer acquires a property, other than a capital property, at any time after February 23, 1998 and it is reasonable to expect at that time that the taxpayer will not realize an economic profit in respect of the property for the period that begins at that time and ends when the taxpayer next disposes of the property, the total amount of all income or profits taxes (referred to as the ``foreign tax'' for the purpose of subsection 20(12.1)) in respect of the property for the period, and in respect of related transactions, paid by the taxpayer for any year to the government of any country other than Canada, is not included in computing the taxpayer's business-income tax or non-business-income tax for any taxation year.
	(11) Paragraph 126(4.4)(a) of the Act is replaced by the following:
	(a) a disposition or acquisition of property deemed to be made by subsection 10(12) or (13), 14(14) or (15) or 45(1), section 70 or 128.1, paragraph 132.2(1)(f), subsection 138(11.3), 142.5(2) or 142.6(1.1) or (1.2), paragraph 142.6(1)(b) or subsection 149(10) is not a disposition or acquisition, as the case may be; and
	(12) Subsection 126(5) of the Act is replaced by the following:
Foreign oil and gas levies	(5) A taxpayer who is resident in Canada throughout a taxation year and carries on a foreign oil and gas business in a taxing country in the year is deemed for the purposes of this section to have paid in the year as an income or profits tax to the government of the taxing country an amount equal to the lesser of
	(a) the amount, if any, by which
	(i) 40% of the taxpayer's income from the business in the taxing country for the year
	exceeds
	(ii) the total of all amounts that would, but for this subsection, be income or profits taxes paid in the year in respect of the business to the government of the taxing country, and
	(b) the taxpayer's production tax amount for the business in the taxing country for the year.
	(13) Subsection 126(6) of the Act is replaced by the following:
Rules of construction	(6) For the purposes of this section,
	(a) the government of a country other than Canada includes the government of a state, province or other political subdivision of that country;
	(b) where a taxpayer's income for a taxation year is in whole or in part from sources in more than one country other than Canada, subsections (1) and (2) shall be read as providing for separate deductions in respect of each of the countries other than Canada; and
	(c) if any income from a source in a particular country would be tax-exempt income but for the fact that a portion of the income is subject to an income or profits tax imposed by the government of a country other than Canada, the portion is deemed to be income from a separate source in the particular country.
	(14) The definitions ``qualifying incomes'' and ``qualifying losses'' in subsection 126(7) of the Act are replaced by the following:
``qualifying incomes'' « revenus admissibles »	``qualifying incomes'' of a taxpayer from sources in a country means incomes from sources in the country, determined in accordance with subsection (9);
``qualifying losses'' « pertes admissibles »	``qualifying losses'' of a taxpayer from sources in a country means losses from sources in the country, determined in accordance with subsection (9);
	(15) The definitions ``tax for the year otherwise payable under this Part'' and ``unused foreign tax credit'' in subsection 126(7) of the Act are replaced by the following:
``tax for the year otherwise payable under this Part'' « impôt payable par ailleurs pour l'année en vertu de la présente partie »	``tax for the year otherwise payable under this Part'' by a taxpayer means
	(a) in paragraph (1)(b) and subsection (3), the amount determined by the formula