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(A) the amount of the distribution
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(B) the amount designated under
subsection 104(21) by the trust
(other than a designation to which
subsection 104(21.4) applies) in
respect of the net taxable capital
gains of the trust attributable to
those capital gains, and
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(ii) the amount determined by the
formula
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A x B
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A is the fraction or whole number
determined when 1 is subtracted from the
reciprocal of the fraction under paragraph
38(a) applicable to the trust for the year, and
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B is the amount referred to in
clause (i) (B), and
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(g) all amounts each of which is an
amount in respect of a distribution made
by a trust to the corporation in the period
in respect of a dividend (other than a
taxable dividend) paid on a share of the
capital stock of another corporation
resident in Canada to the trust during a
taxation year of the trust throughout
which the trust was resident in Canada
equal to the lesser of
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(i) the amount of the distribution, and
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(ii) the amount designated under
subsection 104(20) by the trust in
respect of the corporation in respect of
that dividend,
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(4) Subsection (1) applies to dispositions
made after December 8, 1997, other than a
disposition made under a written
agreement made before December 9, 1997.
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(5) Subsection (2) applies in respect of
taxation years that end after February 27,
2000.
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(6) Subsection (3) applies to elections in
respect of capital dividends that become
payable after 1997.
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68. (1) Section 91 of the Act is amended by
adding the following after subsection (6):
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| Shares
acquired from
a partnership
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(7) For the purpose of subsection (5), where
a taxpayer resident in Canada acquires a share
of the capital stock of a corporation that is
immediately after the acquisition a foreign
affiliate of the taxpayer from a partnership of
which the taxpayer, or a corporation resident
in Canada with which the taxpayer was not
dealing at arm's length at the time the share
was acquired, was a member (each such
person referred to in this subsection as the
``member'') at any time during any fiscal
period of the partnership that began before the
acquisition,
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(a) that portion of any amount required by
subsection 92(1) to be added to the adjusted
cost base to the partnership of the share of
the capital stock of the foreign affiliate
equal to the amount included in the income
of the member because of subsection 96(1)
in respect of the amount that was included
in the income of the partnership because of
subsection (1) or (3) in respect of the foreign
affiliate and added to that adjusted cost
base, and
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(b) that portion of any amount required by
subsection 92(1) to be deducted from the
adjusted cost base to the partnership of the
share of the capital stock of the foreign
affiliate equal to the amount by which the
income of the member from the partnership
under subsection 96(1) was reduced
because of the amount deducted in
computing the income of the partnership
under subsection (2), (4) or (5) and
deducted from that adjusted cost base
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is deemed to be an amount required by
subsection 92(1) to be added or deducted, as
the case may be, in computing the adjusted
cost base to the taxpayer of the share.
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(2) Subsection (1) applies to shares
acquired after November 1999.
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69. (1) Section 92 of the Act is amended by
adding the following after subsection (3):
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| Disposition of
a partnership
interest
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(4) Where a corporation resident in Canada
or a foreign affiliate of a corporation resident
in Canada has at any time disposed of all or a
portion of an interest in a partnership of which
it was a member, there shall be added, in
computing the proceeds of disposition of that
interest, the amount determined by the
formula
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(A - B) x (C/D)
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where
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A is the amount, if any, by which
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(a) the total of all amounts each of which
is an amount that was deductible under
paragraph 113(1)(d) by the member from
its income in computing its taxable
income for any taxation year of the
member that began before that time in
respect of any portion of a dividend
received by the partnership, or would
have been so deductible if the member
were a corporation resident in Canada,
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(b) the total of all amounts each of which
is the portion of any income or profits tax
paid by the partnership or the member of
the partnership to a government of a
country other than Canada that can
reasonably be considered as having been
paid in respect of the member's share of
the dividend described in paragraph (a);
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B is the total of
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(a) the total of all amounts each of which
was an amount added under this
subsection in computing the member's
proceeds of a disposition before that time
of another interest in the partnership, and
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(b) the total of all amounts each of which
was an amount deemed by subsection (5)
to be a gain of the member from a
disposition before that time of a share by
the partnership;
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C is the adjusted cost base, immediately
before that time, of the portion of the
member's interest in the partnership
disposed of by the member at that time;
and
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D is the adjusted cost base, immediately
before that time, of the member's interest
in the partnership immediately before that
time.
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| Deemed gain
from the
disposition of
a share
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(5) Where a partnership has, at any time in
a fiscal period of the partnership at the end of
which a corporation resident in Canada or a
foreign affiliate of a corporation resident in
Canada was a member, disposed of a share of
the capital stock of a corporation, the amount
determined under subsection (6) in respect of
such a member is deemed to be a gain of the
member from the disposition of the share by
the partnership for the member's taxation year
in which the fiscal period of the partnership
ends.
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| Formula
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(6) The amount determined for the purposes
of subsection (5) is the amount determined by
the formula
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A - B
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where
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A is the amount, if any, by which
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(a) the total of all amounts each of which
is an amount that was deductible under
paragraph 113(1)(d) by the member from
its income in computing its taxable
income for a taxation year in respect of
any portion of a dividend received by the
partnership on the share in a fiscal period
of the partnership that began before the
time referred to in subsection (5) and
ends in the member's taxation year, or
would have been so deductible if the
member were a corporation resident in
Canada,
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(b) the total of all amounts each of which
is the portion of any income or profits tax
paid by the partnership or the member to
a government of a country other than
Canada that can reasonably be
considered as having been paid in respect
of the member's share of the dividend
described in paragraph (a); and
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B is the total of all amounts each of which is
an amount that was added under
subsection (4) in computing the member's
proceeds of a disposition before the time
referred to in subsection (5) of an interest
in the partnership.
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(2) Subsection (1) applies to dispositions
that occur after November 1999.
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70. (1) Subparagraph 93(1)(b)(ii) of the
Act is replaced by the following:
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(ii) for the purposes of determining the
exempt surplus, exempt deficit, taxable
surplus, taxable deficit and underlying
foreign tax of the affiliate in respect of
the corporation resident in Canada
(within the meanings assigned by Part
LIX of the Income Tax Regulations), the
affiliate is deemed to have redeemed at
the time of the disposition shares of a
class of its capital stock.
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(2) Section 93 of the Act is amended by
adding the following after subsection (1.1):
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| Disposition of
shares of a
foreign
affiliate held
by a part-
nership
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(1.2) Where a particular corporation
resident in Canada or a foreign affiliate of the
particular corporation (each of which is
referred to in this subsection as the ``disposing
corporation'') would, but for this subsection,
have a taxable capital gain from a disposition
by a partnership, at any time, of shares of a
class of the capital stock of a foreign affiliate
of the particular corporation and the particular
corporation so elects in prescribed manner in
respect of the disposition,
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(i) the amount designated by the
particular corporation (which amount
shall not exceed the amount that is equal
to the proportion of the taxable capital
gain of the partnership that the number of
shares of that class of the capital stock of
the foreign affiliate, determined as the
amount, if any, by which the number of
those shares that were deemed to have
been owned by the disposing corporation
for the purposes of subsection 93.1(1)
immediately before the disposition
exceeds the number of those shares that
were deemed to have been owned for
those purposes by the disposing
corporation immediately after the
disposition, is of the number of those
shares of the foreign affiliate that were
owned by the partnership immediately
before the disposition), or
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(ii) where subsection (1.3) applies, the
amount prescribed for the purpose of that
subsection
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in respect of those shares is deemed to have
been a dividend received immediately
before that time on the number of those
shares of the foreign affiliate which shall be
determined as the amount, if any, by which
the number of those shares that the
disposing corporation was deemed to own
for the purpose of subsection 93.1(1)
immediately before the disposition exceeds
the number of those shares of the foreign
affiliate that the disposing corporation was
deemed to own for the purposes of
subsection 93.1 (1) immediately after the
disposition;
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(b) notwithstanding section 96, the
disposing corporation's taxable capital gain
from the disposition of those shares is
deemed to be the amount, if any, by which
the disposing corporation's taxable capital
gain from the disposition of the shares
otherwise determined exceeds the amount
designated by the particular corporation in
respect of the shares;
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(c) for the purpose of any regulation made
under this subsection, the disposing
corporation is deemed to have disposed of
the number of those shares of the foreign
affiliate which shall be determined as the
amount, if any, by which the number of
those shares that the disposing corporation
was deemed to own for the purposes of
subsection 93.1(1) immediately before the
disposition exceeds the number of those
shares that the disposing corporation was
deemed to own for those purposes
immediately after the disposition;
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(d) for the purposes of section 113 in respect
of the dividend referred to in paragraph (a),
the disposing corporation is deemed to have
owned the shares on which that dividend
was received; and
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(e) where the disposing corporation has a
taxable capital gain from the partnership
because of the application of subsection
40(3) to the partnership in respect of those
shares, for the purposes of this subsection,
the shares are deemed to have been
disposed of by the partnership.
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| Deemed
election
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(1.3) Where a foreign affiliate of a
particular corporation resident in Canada has
a gain from the disposition by a partnership at
any time of shares of a class of the capital
stock of a foreign affiliate of the particular
corporation that are excluded property, the
particular corporation is deemed to have made
an election under subsection (1.2) in respect of
the number of shares of the foreign affiliate
which shall be determined as the amount, if
any, by which the number of those shares that
the disposing corporation was deemed to own
for the purposes of subsection 93.1(1)
immediately before the disposition exceeds
the number of those shares that the disposing
corporation was deemed to own for those
purposes immediately after the disposition.
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(3) Subsection 93(2) of the Act is replaced
by the following:
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| Loss
limitation on
disposition of
share
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(2) Where
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(a) a corporation resident in Canada has a
loss from the disposition by it at any time of
a share of the capital stock of a foreign
affiliate of the corporation (in this
subsection referred to as the ``affiliate
share''), or
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(b) a foreign affiliate of a corporation
resident in Canada has a loss from the
disposition by it at any time of a share of the
capital stock of another foreign affiliate of
the corporation resident in Canada that is
not excluded property (in this subsection
referred to as the ``affiliate share''),
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the amount of the loss is deemed to be the
amount determined by the formula
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A - (B - C)
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where
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A is the amount of the loss determined
without reference to this subsection,
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B is the total of all amounts each of which is
an amount received before that time, in
respect of an exempt dividend on the
affiliate share or on a share for which the
affiliate share was substituted, by
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(a) the corporation resident in Canada,
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(b) a corporation related to the
corporation resident in Canada,
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(c) a foreign affiliate of the corporation
resident in Canada, or
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(d) a foreign affiliate of a corporation
related to the corporation resident in
Canada, and
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C is the total of
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(a) the total of all amounts each of which
is the amount by which a loss
(determined without reference to this
section), from another disposition at or
before that time by a corporation or
foreign affiliate described in the
description of B of the affiliate share or a
share for which the affiliate share was
substituted, was reduced under this
subsection in respect of the exempt
dividends referred to in the description of
B,
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(b) the total of all amounts each of which
is 4/3 of the amount by which an
allowable capital loss (determined
without reference to this section), of a
corporation or foreign affiliate described
in the description of B from a previous
disposition by a partnership of the
affiliate share or a share for which the
affiliate share was substituted, was
reduced under subsection (2.1) in respect
of the exempt dividends referred to in the
description of B,
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(c) the total of all amounts each of which
is the amount by which a loss
(determined without reference to this
section), from a disposition at or before
that time by a corporation or foreign
affiliate described in the description of B
of an interest in a partnership, was
reduced under subsection (2.2) in respect
of the exempt dividends referred to in the
description of B, and
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(d) the total of all amounts each of which
is 4/3 of the amount by which an
allowable capital loss (determined
without reference to this section), of a
corporation or foreign affiliate described
in the description of B from a disposition
at or before that time by a partnership of
an interest in another partnership, was
reduced under subsection (2.3) in respect
of the exempt dividends referred to in the
description of B.
|
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| Loss
limitation -
disposition of
share by
partnership
|
(2.1) Where
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(a) a corporation resident in Canada has an
allowable capital loss from a disposition at
any time by a partnership of a share of the
capital stock of a foreign affiliate of the
corporation (in this subsection referred to as
the ``affiliate share''), or
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(b) a foreign affiliate of a corporation
resident in Canada has an allowable capital
loss from a disposition at any time by a
partnership of a share of the capital stock of
another foreign affiliate of the corporation
resident in Canada that would not be
excluded property of the affiliate if the
affiliate owned the share immediately
before it was disposed of (in this subsection
referred to as the ``affiliate share''),
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the amount of the allowable capital loss is
deemed to be the amount determined by the
formula
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A - (B - C)
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where
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A is the amount of the allowable capital loss
determined without reference to this
subsection,
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B is 3/4 of the total of all amounts each of
which was received before that time, in
respect of an exempt dividend on the
affiliate share or on a share for which the
affiliate share was substituted, by
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(a) the corporation resident in Canada,
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(b) a corporation related to the
corporation resident in Canada,
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(c) a foreign affiliate of the corporation
resident in Canada, or
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(d) a foreign affiliate of a corporation
related to the corporation resident in
Canada, and
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