(b) that proportion of 90% that the number of days in the taxation year that are in 2003 is of the number of days in the taxation year,
	(c) that proportion of 75% that the number of days in the taxation year that are in 2004 is of the number of days in the taxation year,
	(d) that proportion of 65% that the number of days in the taxation year that are in 2005 is of the number of days in the taxation year, and
	(e) that proportion of 35% that the number of days in the taxation year that are in 2006 is of the number of days in the taxation year.
	(4) Subsection (1) applies to taxation years that begin after 2006.
	(5) Subsection (2) applies to taxation years that end after 2002.
	4. (1) Subparagraph 66(12.66)(b)(ii) of the Act is replaced by the following:
	(ii) would be described in paragraph (h) of the definition ``Canadian exploration expense'' in subsection 66.1(6) if the words ``paragraphs (a) to (d) and (f) to (g.1)'' were read as ``paragraphs (a), (d) and (f)'', or
	(2) Subparagraphs 66(12.66)(b)(i) and (ii) of the Act are replaced by the following:
	(i) are described in paragraph (a), (d), (f) or (g.1) of the definition ``Canadian exploration expense'' in subsection 66.1(6) or paragraph (a) or (b) of the definition ``Canadian development expense'' in subsection 66.2(5),
	(ii) would be described in paragraph (h) of the definition ``Canadian exploration expense'' in subsection 66.1(6) if the words ``paragraphs (a) to (d) and (f) to (g.1)'' were read as ``paragraphs (a), (d), (f) and (g.1)'', or
	(3) Paragraph (g) of the definition ``Canadian resource property'' in subsection 66(15) of the Act is replaced by the following:
	(g) any right to or interest in any property described in any of paragraphs (a) to (f), other than a right or an interest that the taxpayer has because the taxpayer is a beneficiary under a trust or a member of a partnership;
	(4) Subsection 66(17) of the Act is replaced by the following:
Non-arm's length partnerships	(17) For the purpose of paragraph (12.66)(d), a partnership and a corporation are, at all times in a calendar year,
	(a) deemed not to deal with each other at arm's length, if
	(i) an expense is deemed by subsection (12.61) to be incurred by the partnership,
	(ii) the expense would, if this Act were read without reference to paragraph (12.61)(b), be incurred in the calendar year by the corporation, and
	(iii) a share of the expense is included, because of paragraph (h) of the definition ``Canadian exploration expense'' in subsection 66.1(6), in the Canadian exploration expense of the corporation or of a member of the partnership with whom the corporation, at any time in that calendar year, does not deal at arm's length; and
	(b) deemed to deal with each other at arm's length, in any other case.
	(5) Subsection (1) applies after December 5, 1996.
	(6) Subsection (2) applies to expenses incurred after 2002 pursuant to a flow-through share agreement entered into after July 26, 2002.
	(7) Subsection (3) applies to rights and interests acquired after December 20, 2002.
	(8) Subsection (4) applies to expenses incurred after 1996, other than expenses incurred in January or February 1997 in respect of an agreement that was made in 1995.
	5. (1) Paragraph (g) of the definition ``Canadian exploration expense'' in subsection 66.1(6) of the Act is replaced by the following:
	(g) any expense incurred by the taxpayer after November 16, 1978 for the purpose of bringing a new mine in a mineral resource in Canada into production in reasonable commercial quantities and incurred before the new mine comes into production in such quantities, including an expense for clearing, removing overburden, stripping, sinking a mine shaft or constructing an adit or other underground entry,
	(2) The definition ``Canadian exploration expense'' in subsection 66.1(6) of the Act is amended by adding the following after paragraph (k.1):
	(k.2) any portion of any expense that may reasonably be considered to have resulted in revenue earned by a taxpayer if
	(i) the expense is otherwise described by subparagraph (f)(i), (iii) or (iv) and the revenue is earned before a new mine of the taxpayer in the mineral resource referred to in paragraph (f) comes into production in reasonable commercial quantities, or
	(ii) the expense is otherwise described by paragraph (g) and the revenue is earned before the new mine referred to in that paragraph comes into production in reasonable commercial quantities,
	(3) The description of L in the definition ``cumulative Canadian exploration expense'' in subsection 66.1(6) of the Act is replaced by the following:
	L is that portion of the total of all amounts each of which was deducted by the taxpayer under subsection 127(5) or (6) for a taxation year that ended before that time and that can reasonably be attributed to a qualified Canadian exploration expenditure, a pre-production mining expenditure or a flow-through mining expenditure (each expenditure within the meaning assigned by subsection 127(9)) made in a preceding taxation year, and
	(4) Subsection (1) applies to expenses incurred after May 9, 1985.
	(5) Subsection (2) applies to expenses incurred after June 9, 2003.
	(6) Subsection (3) applies to the 2003 and subsequent taxation years.
	6. (1) Paragraph (e) of the definition ``Canadian development expense'' in subsection 66.2(5) of the Act is replaced by the following:
	(e) notwithstanding paragraph 18(1)(m), the cost to the taxpayer of, including any payment for the preservation of a taxpayer's rights in respect of, any property described in paragraph (b), (e) or (f) of the definition ``Canadian resource property'' in subsection 66(15) or any right to or interest in such property (other than such a right or an interest that the taxpayer has by reason of being a beneficiary under a trust or a member of a partnership) but not including any payment made to any of the persons referred to in subparagraph 18(1)(m)(i) for the preservation of a taxpayer's rights in respect of a Canadian resource property nor a payment to which paragraph 18(1)(m) applied because of clause 18(1)(m)(ii)(B),
	(2) Paragraph (e) of the definition ``Canadian development expense'' in subsection 66.2(5) of the Act is replaced by the following:
	(e) the cost to the taxpayer of, including any payment for the preservation of a taxpayer's rights in respect of, any property described in paragraph (b), (e) or (f) of the definition ``Canadian resource property'' in subsection 66(15), or any right to or interest in such property (other than a right or an interest that the taxpayer has by reason of being a beneficiary under a trust or a member of a partnership),
	(3) The portion of the description of F in the definition ``cumulative Canadian development expense'' in subsection 66.2(5) of the Act before paragraph (a) is replaced by the following:
	F is the total of all amounts each of which is an amount in respect of property described in paragraph (b), (e) or (f) of the definition ``Canadian resource property'' in subsection 66(15) or any right to or interest in such a property, other than such a right or an interest that the taxpayer has by reason of being a beneficiary under a trust or a member of a partnership, (in this description referred to as ``the particular property'') disposed of by the taxpayer before that time equal to the amount, if any, by which
	(4) Subsections (1) and (3) apply after December 20, 2002.
	(5) Subsection (2) applies to taxation years that begin after 2006.
	7. (1) Paragraph (a) of the definition ``Canadian oil and gas property expense'' in subsection 66.4(5) of the Act is replaced by the following:
	(a) notwithstanding paragraph 18(1)(m), the cost to the taxpayer of, including any payment for the preservation of a taxpayer's rights in respect of, any property described in paragraph (a), (c) or (d) of the definition ``Canadian resource property'' in subsection 66(15) or any right to or interest in such property (other than such a right or an interest that the taxpayer has by reason of being a beneficiary under a trust or a member of a partnership) or an amount paid or payable to Her Majesty in right of the Province of Saskatchewan as a net royalty payment pursuant to a net royalty petroleum and natural gas lease that was in effect on March 31, 1977 to the extent that it can reasonably be regarded as a cost of acquiring the lease, but not including any payment made to any of the persons referred to in subparagraph 18(1)(m)(i) for the preservation of a taxpayer's rights in respect of a Canadian resource property nor a payment (other than a net royalty payment referred to in this paragraph) to which paragraph 18(1)(m) applied because of clause 18(1)(m)(ii)(B),
	(2) Paragraph (a) of the definition ``Canadian oil and gas property expense'' in subsection 66.4(5) of the Act is replaced by the following:
	(a) the cost to the taxpayer of, including any payment for the preservation of a taxpayer's rights in respect of, any property described in paragraph (a), (c) or (d) of the definition ``Canadian resource property'' in subsection 66(15), or any right to or interest in such property (other than a right or an interest that the taxpayer has by reason of being a beneficiary under a trust or a member of a partnership), or an amount paid to Her Majesty in right of the Province of Saskatchewan as a net royalty payment pursuant to a net royalty petroleum and natural gas lease that was in effect on March 31, 1977 to the extent that it can reasonably be regarded as a cost of acquiring the lease,
	(3) The portion of the description of F in the definition ``cumulative Canadian oil and gas property expense'' in subsection 66.4(5) of the Act before paragraph (a) is replaced by the following:
	F is the total of all amounts each of which is an amount in respect of property described in paragraph (a), (c) or (d) of the definition ``Canadian resource property'' in subsection 66(15) or any right to or interest in such a property, other than such a right or an interest that the taxpayer has by reason of being a beneficiary under a trust or a member of a partnership, (in this description referred to as ``the particular property'') disposed of by the taxpayer before that time equal to the amount, if any, by which
	(4) Subsections (1) and (3) apply after December 20, 2002.
	(5) Subsection (2) applies to taxation years that begin after 2006.
	8. (1) Subsection 69(6) of the Act is replaced by the following:
Disposition of petroleum, etc.	(6) An operator with respect to a natural accumulation of petroleum or natural gas in Canada, an oil or gas well in Canada or a mineral resource in Canada who at any time disposes of property, produced in the operation, that is petroleum, natural gas or related hydrocarbons, metal or minerals for no proceeds of disposition or for proceeds of disposition less than its fair market value at that time, is deemed to have received proceeds of disposition for the property equal to that fair market value if the disposition is to
	(a) Her Majesty in right of Canada or of a province;
	(b) an agent of Her Majesty in right of Canada or of a province; or
	(c) a corporation, a commission or an association that is controlled by Her Majesty in right of Canada or of a province or by an agent of Her Majesty in right of Canada or of a province.
	(2) Subsections 69(6) to (10) of the Act are repealed.
	(3) Subsection (1) applies to dispositions that occur after December 20, 2002.
	(4) Subsection (2) applies to taxation years that begin after 2006.
	9. (1) Section 80.2 of the Act is repealed.
	(2) Subsection (1) applies to taxation years that begin after 2006.
	10. (1) Subparagraph 96(1)(d)(i) of the Act is replaced by the following:
	(i) this Act were read without reference to section 34.1, subsection 59(1), paragraph 59(3.2)(c.1) and subsections 66.1(1), 66.2(1) and 66.4(1), and
	(2) Subsection (1) applies to taxation years that begin after 2006.
	11. (1) Subsection 104(29) of the Act is replaced by the following:
Amounts deemed payable to beneficiaries	(29) For the purposes of this section, an amount designated by a trust in its return of income for a taxation year throughout which it was resident in Canada is deemed to have become, in the proportions that the trust designates in that return of income, payable by the trust to particular beneficiaries under the trust in the year if
	(a) the designated amount does not exceed the amount determined by the formula
	(A - B) x C/D
	where
	A is the total of all amounts each of which is
	(i) an amount that is not deductible in computing the trust's income for the year, but that would be deductible in computing that income if this Act were read without reference to paragraph 18(1)(m),
	(ii) an amount that is required by paragraph 12(1)(o) or by subsection 69(6) or (7) to be included in computing that income, or
	(iii) an amount that is required to be included in computing that income because of an amount designated under this subsection by another trust,
	B is the total of all amounts each of which is
	(i) an amount that is deductible (otherwise than because of the membership of the trust in a partnership) under paragraph 20(1)(v.1) in computing the trust's income for the year, or
	(ii) an amount that is not included in computing that income, but that would be included in computing that income if this Act were read without reference to section 80.2,
	C is the total of all amounts each of which is a portion of the trust's income for the year computed without reference to the provisions of this Act (in this subsection referred to as the ``trust-purpose income of the trust for the year'') that
	(i) was payable in the year to a beneficiary under the trust, or
	(ii) was required by subsection 105(2) to be included in computing the income of a beneficiary under the trust, and
	D is the trust-purpose income of the trust for the year; and
	(b) the designated proportions are reasonable having regard to the portions of the trust-purpose income of the trust for the year that are included in computing the beneficiaries' incomes for the year.
	(2) Subsection 104(29) of the Act is repealed.
	(3) Subsection (1) applies to trust taxation years that end after December 20, 2002.
	(4) Subsection (2) applies to trust taxation years that begin after 2006.
	12. (1) Subparagraph (a)(iii) of the definition ``full rate taxable income'' in subsection 123.4(1) of the Act is replaced by the following:
	(iii) the corporation's taxable resource income for the year, and
	(2) Paragraph (a) of the definition ``full rate taxable income'' in subsection 123.4(1) of the Act is amended by adding the word ``and'' at the end of subparagraph (ii) and by repealing subparagraph (iii).
	(3) Subsection (1) applies to the 2003 and subsequent taxation years.
	(4) Subsection (2) applies to taxation years that begin after 2006.