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(B) the amount that, but for this
subsection and subsections (12),
12(10.2) and 107(4), would be its
income that became payable in the
year to the taxpayer, spouse or
common-law partner referred to in
subparagraph (4)(a)(iii), clause
(4)(a)(iv)(A), (B) or (C) or paragraph
(4)(a.4), as the case may be, and
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(C) the amount that would be the
trust's income for the year if that
income were computed without
reference to this subsection and
subsection (12) and as if the year began
immediately after the end of the day.
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(19) Subsection 104(13) of the Act is
replaced by the following:
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| Income of
beneficiary
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(13) There shall be included in computing
the income for a particular taxation year of a
beneficiary under a trust such of the following
amounts as are applicable:
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(a) in the case of a trust (other than a trust
referred to in paragraph (a) of the definition
``trust'' in subsection 108(1)), such part of
the amount that, but for subsections (6) and
(12), would be the trust's income for the
trust's taxation year that ended in the
particular year as became payable in the
trust's year to the beneficiary; and
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(b) in the case of a trust governed by an
employee benefit plan to which the
beneficiary has contributed as an employer,
such part of the amount that, but for
subsections (6) and (12), would be the
trust's income for the trust's taxation year
that ended in the particular year as was paid
in the trust's year to the beneficiary.
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(20) Paragraphs 104(15)(a) and (b) of the
Act are replaced by the following:
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(a) where the trust is an alter ego trust, a
joint spousal or common-law partner trust,
a post-1971 spousal or common-law partner
trust or a trust described in the definition
``pre-1972 spousal trust'' in subsection
108(1) at the end of the year and a
beneficiary, referred to in paragraph (4)(a)
or in that definition, is alive at the end of the
year, an amount equal to
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(i) if the preferred beneficiary is a
beneficiary so referred to, the trust's
accumulating income for the year, and
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(ii) in any other case, nil;
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(b) where paragraph (a) does not apply and
the preferred beneficiary's interest in the
trust is not solely contingent on the death of
another beneficiary who has a capital
interest in the trust and who does not have
an income interest in the trust, the trust's
accumulating income for the year; and
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(21) The portion of subsection 104(19) of
the Act after paragraph (b) is replaced by
the following:
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is, if so designated by the trust in respect of the
beneficiary in its return of income for the year,
deemed, for the purposes of paragraphs
82(1)(b) and 107(1)(c) and (d) and section
112, not to have been received by the trust, and
for the purposes of this Act (other than Part
XIII), to be a taxable dividend on the share
received by the beneficiary in the particular
year from the corporation.
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(22) The portion of subsection 104(21.2)
of the Act before paragraph (a) is replaced
by the following:
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| Beneficiaries'
taxable capital
gain
|
(21.2) Where, for the purposes of
subsection (21), a personal trust or a trust
referred to in subsection 7(2) designates an
amount in respect of a beneficiary in respect
of its net taxable capital gains for a taxation
year (in this subsection referred to as the
``designation year''),
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(23) Section 104 of the Act is amended by
adding the following after subsection
(21.3):
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| Deemed gains
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(21.4) Where an amount is designated in
respect of a beneficiary by a trust for a
particular taxation year of the trust that
includes February 28, 2000 or October 17,
2000 and that amount is, because of
subsection (21), deemed to be a taxable capital
gain of the beneficiary from the disposition of
capital property for the taxation year of the
beneficiary in which the particular taxation
year of the trust ends (in this subsection
referred to as the ``allocated gain''),
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(a) the beneficiary is deemed to have
realized capital gains (in this subsection
referred to as the ``deemed gains'') from the
disposition of capital property in the
beneficiary's taxation year in which the
particular taxation year ends equal to the
amount, if any, by which
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(i) the amount determined when the
amount of the allocated gain is divided by
the fraction in paragraph 38(a) that
applies to the trust for the particular
taxation year
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(ii) the amount claimed by the
beneficiary not exceeding the
beneficiary's exempt capital gains
balance for the year in respect of the trust;
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(b) notwithstanding subsection (21) and
except as a consequence of the application
of paragraph (a), the amount of the
allocated gain shall not be included in
computing the beneficiary's income for the
beneficiary's taxation year in which the
particular taxation year ends;
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(c) the trust shall disclose to the beneficiary
in prescribed form the portion of the
deemed gains that are in respect of capital
gains realized on dispositions of property
that occurred before February 28, 2000,
after February 27, 2000 and before October
18, 2000, and after October 17, 2000 and, if
it does not do so, the deemed gains are
deemed to be in respect of capital gains
realized on dispositions of property that
occurred before February 28, 2000;
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(d) where a trust so elects under this
paragraph in its return of income for the
year,
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(i) the portion of the deemed gains that
are in respect of capital gains from
dispositions of property that occurred
before February 28, 2000 is deemed to be
that proportion of the deemed gains that
the number of days that are in the
particular year and before February 28,
2000 is of the number of days that are in
the particular year,
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(ii) the portion of the deemed gains that
are in respect of capital gains from
dispositions of property that occurred in
the year and in the period that began at
the beginning of February 28, 2000 and
ended at the end of October 17, 2000, is
deemed to be that proportion of the
deemed gains that the number of days
that are in the year and in that period is of
the number of days that are in the
particular year, and
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(iii) the portion of the deemed gains that
are in respect of capital gains from
dispositions of property that occurred in
the year and in the period that begins at
the beginning of October 18, 2000 and
ends at the end of the particular year, is
deemed to be that proportion of the
deemed gains that the number of days
that are in the year and in that period is of
the number of days that are in the
particular year; and
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(e) no amount may be claimed by the
beneficiary under subsection 39.1(3) in
respect of the allocated gain.
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| Deemed gains
|
(21.5) Where no amount is designated by a
trust under subsection (21) in respect of its net
taxable capital gains for a taxation year that
includes February 28, 2000 or October 17,
2000, the trust has net capital gains or net
capital losses from the disposition of property
in the year and the trust so elects under this
subsection in its return of income for the year,
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(a) the portion of the net capital gains or net
capital losses that are in respect of capital
gains and losses from dispositions of
property that occurred before February 28,
2000 is deemed to be that proportion of the
net capital gains or net capital losses, as the
case may be, that the number of days that
are in the year and before February 28, 2000
is of the number of days that are in the year,
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(b) the portion of the net capital gains or net
capital losses that are in respect of capital
gains and losses from dispositions of
property that occurred in the year and in the
period that began at the beginning of
February 28, 2000 and ended at the end of
October 17, 2000, is deemed to be that
proportion of the net capital gains or net
capital losses, as the case may be, that the
number of days that are in the year and in
that period is of the number of days that are
in the year, and
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(c) the portion of the net capital gains or net
capital losses that are in respect of capital
gains and losses from dispositions of
property that occurred in the year and in the
period that began at the beginning of
October 18, 2000 and ended at the end of the
year, is deemed to be that proportion of the
net capital gains or net capital losses, as the
case may be, that the number of days that
are in the year and in that period is of the
number of days that are in the year,
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and, for the purpose of this subsection,
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(d) the net capital gains of a trust from
dispositions of property in a year is the
amount, if any, by which the trust's capital
gains from dispositions of property in the
year exceeds the trust's capital losses from
dispositions of property in the year, and
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(e) the net capital losses of a trust from
dispositions of property in a year is the
amount, if any, by which the trust's capital
losses from dispositions of property in the
year exceeds the trust's capital gains from
dispositions of property in the year.
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| Deemed
gains -
subsection
(21.4) applies
|
(21.6) Where a taxpayer is deemed by
subsection (21.4) to have realized capital
gains from the disposition of capital property
in a taxation year of the taxpayer in respect of
dispositions of property by a trust of which the
taxpayer is a beneficiary,
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(a) if the deemed gains are in respect of
capital gains of the trust from dispositions
of property before February 28, 2000 and
the taxation year of the taxpayer includes
February 27, 2000, the deemed gains are
deemed to be a capital gain of the taxpayer
from the disposition by the taxpayer of
capital property in the taxpayer's taxation
year and before February 28, 2000;
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(b) if the deemed gains are in respect of
capital gains of the trust from dispositions
of property before February 28, 2000 and
the taxation year of the taxpayer began after
February 27, 2000 and ended before
October 18, 2000, 9/8 of the deemed gains
is deemed to be a capital gain of the
taxpayer from the disposition by the
taxpayer of capital property in the
taxpayer's taxation year;
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(c) if the deemed gains are in respect of
capital gains of the trust from dispositions
of property before February 28, 2000 and
the taxation year of the taxpayer began after
February 27, 2000 and ended after October
17, 2000, 9/8 of the deemed gains is deemed
to be a capital gain of the taxpayer from the
disposition by the taxpayer of capital
property in the taxpayer's taxation year and
before October 18, 2000;
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(d) if the deemed gains are in respect of
capital gains of the trust from dispositions
of property before February 28, 2000 and
the taxation year of the taxpayer began after
October 17, 2000, 3/2 of the deemed gains
is deemed to be a capital gain of the
taxpayer from the disposition by the
taxpayer of capital property in the
taxpayer's taxation year;
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(e) if the deemed gains are in respect of
capital gains of the trust from dispositions
of property after February 27, 2000 and
before October 18, 2000, and the taxation
year of the taxpayer began after October 17,
2000, 4/3 of the deemed gains is deemed to
be a capital gain of the taxpayer from the
disposition by the taxpayer of capital
property in the taxpayer's taxation year;
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(f) if the deemed gains are in respect of
capital gains of the trust from dispositions
of property after February 27, 2000 and
before October 18, 2000 and the taxation
year of the taxpayer includes February 28,
2000 and October 17, 2000, the deemed
gains are deemed to be a capital gain of the
taxpayer from the disposition by the
taxpayer of capital property in the
taxpayer's taxation year and in the period
that began after February 27, 2000 and
ended before October 18, 2000;
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(g) if the deemed gains are in respect of
capital gains of the trust from dispositions
of property after February 27, 2000 and
before October 17, 2000 and the taxation
year of the taxpayer began after February
27, 2000 and ended before October 17,
2000, the deemed gains are deemed to be a
capital gain of the taxpayer from the
disposition by the taxpayer of capital
property in the taxpayer's taxation year;
and
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(h) in any other case, the deemed gains are
deemed to be a capital gain of the taxpayer
from the disposition of capital property by
the taxpayer in the taxpayer's taxation year
and after October 17, 2000.
|
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| Deemed
gains -
subsection
(21.4) does
not apply
|
(21.7) Where an amount is designated
under subsection (21) in respect of a
beneficiary by a trust for a particular taxation
year of the trust that ends in a taxation year of
the beneficiary that includes February 28,
2000 or October 17, 2000 and subsection
(21.4) does not apply in respect of the
designated amount,
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(a) notwithstanding subsection (21) and
except as a consequence of the application
of paragraph (b), the designated amount
shall not be included in computing the
beneficiary's income;
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(b) the beneficiary is deemed to have a
capital gain from the disposition by the
beneficiary of capital property on the day
on which the particular taxation year ends
equal to the amount, if any, by which
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(i) the amount determined by dividing
the designated amount by the fraction in
paragraph 38(a) that applies to the trust
for the particular taxation year
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(ii) the amount claimed by the
beneficiary, which amount may not be
greater than the beneficiary's exempt
capital gains balance for the year in
respect of the trust; and
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(c) no amount may be claimed under
subsection 39.1(3) by the beneficiary in
respect of the designated amount.
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(24) Subsection (1) applies to the 1998
and subsequent taxation years except that,
in connection with transfers of property
that occur before December 24, 1998,
subsection 104(1) of the Act, as enacted by
subsection (1), shall be read as follows:
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104. (1) In this Act, a reference to a trust or
estate (in this subdivision referred to as a
``trust'') shall, unless the context otherwise
requires, be read to include a reference to the
trustee, executor, administrator, liquidator of
the succession, heir or other legal
representative having ownership or control of
the trust property.
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(25) Subsection (2) applies
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(a) to days after December 23, 1998 that
are determined in respect of a trust under
subsection 104(4) of the Act, as enacted
by this section; and
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(b) for the purpose of determining the
cost amount to a trust after December 23,
1998 of property, to days after 1992 that
are determined in respect of the trust
under subsection 104(4) of the Act, as
enacted by this section.
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(26) Subsections (3), (6) and (17) to (19)
apply to the 2000 and subsequent taxation
years except that, with regard to a trust
created by a taxpayer at a particular time in
2000 for the benefit of another individual,
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(a) subparagraph 104(4)(a)(iii) of the Act,
as enacted by subsection (3), shall be read
without reference to the words ``or
common-law partner'' and ``or
common-law partner's''; and
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(b) subparagraph 104(4)(a)(iv) of the Act,
as enacted by subsection (3), shall be read
without reference to clause (C),
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unless, because of an election made under
section 144 of the Modernization of Benefits
and Obligations Act, sections 130 to 142 of
that Act applied at the particular time to the
taxpayer and the other individual.
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(27) Paragraphs 104(4)(a.2) and (a.3) of
the Act, as enacted by subsection (4), apply
to days after December 17, 1999 that are
determined in respect of the trust under
subsection 104(4) of the Act, as enacted by
this section.
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(28) Paragraph 104(4)(a.4) of the Act, as
enacted by subsection (4), and subsection
(5) apply to the 2000 and subsequent
taxation years, and, where a trust elects in
writing and files the election with the
Minister of National Revenue on or before
March 31, 2001 (or at any later time that is
acceptable to the Minister), both of those
provisions apply after December 23, 1998.
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(29) Subsections (7) and (8) apply to days
after December 23, 1998 that are
determined under subsection 104(4) of the
Act, as enacted by this section, except that
in applying paragraph 104(5.2)(a) of the
Act, as enacted by subsection (8), to days
that are in taxation years that begin before
2001 and that are determined under
subsection 104(4) of the Act, that paragraph
shall be read without the references to
paragraph 59(3.2)(c.1) of the Act and the
definition ``cumulative foreign resource
expense'' in subsection 66.21(1) of the Act.
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(30) Subsection (9) applies to taxation
years that begin after 2000.
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(31) Subsections (10) and (11) apply to
transfers made after December 23, 1998.
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(32) Subsection (12) applies to transfers
made after February 11, 1991 except that,
for transfers made before December 24,
1998, the portion of subsection 104(5.8) of
the Act before paragraph (a), as enacted by
subsection (12), shall be read as follows:
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(5.8) Where capital property (other than
excluded property), land included in
inventory, Canadian resource property or
foreign resource property is transferred at a
particular time by a trust (in this subsection
referred to as the ``transferor trust'') to another
trust (in this subsection referred to as the
``transferee trust'') in circumstances in which
paragraph (e) of the definition ``disposition''
in section 54 or subsection 107(2) applies and
the transferee trust is not described in
paragraph (g) of the definition ``trust'' in
subsection 108(1),
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(33) Subsection (13) applies to transfers
made after December 17, 1999.
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(34) Subsections (14) and (15) apply to
transfers made after 1999.
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(35) Subsection (16) applies to the 1998
and subsequent taxation years.
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(36) Subsection (20) applies to the 2000
and subsequent taxation years.
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(37) Subsection (21) applies to taxation
years that end after 2000.
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(38) Subsection (22) applies to taxation
years, of trusts, that begin after February
22, 1994.
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(39) Subsection (23) applies to taxation
years that end after February 27, 2000.
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|
79. (1) Subsection 106(1.1) of the Act is
replaced by the following:
|
|
| Cost of
income
interest in a
trust
|
(1.1) The cost to a taxpayer of an income
interest of the taxpayer in a trust is deemed to
be nil unless
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(a) any part of the interest was acquired by
the taxpayer from a person who was the
beneficiary in respect of the interest
immediately before that acquisition; or
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(b) the cost of any part of the interest would
otherwise be determined not to be nil under
paragraph 128.1(1)(c) or (4)(c).
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(2) Paragraph 106(2)(a) of the Act is
replaced by the following:
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(a) except where subsection (3) applies to
the disposition, there shall be included in
computing the taxpayer's income for the
year the amount, if any, by which
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(i) the proceeds of disposition
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