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Bill C-59

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Royal Assent

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	PART II
	INCOME TAX APPLICATION RULES
	*56. (1) Subparagraph 20(1)(b)(i) of the Income Tax Application Rules* is replaced by the following:**
	(i) for the purposes of the amended Act (other than, where paragraph 13(7)(e) of that Act applies in determining the capital cost to that other taxpayer of the property, for the purposes of paragraphs 8(1)(j) and (p) and sections 13 and 20 of that Act), that other taxpayer shall be deemed to have acquired the property at a capital cost equal to the proceeds deemed to have been received for the property by the person from whom that other taxpayer acquired the property, and
	(2) Subsection 20(1) of the Rules is amended by striking out the word ``and'' at the end of paragraph (a), by adding the word ``and'' at the end of paragraph (b) and by adding the following after paragraph (b):
	(c) where the taxpayer is deemed by subsection 110.6(19) of the amended Act to have reacquired the property,
	(i) for the purposes of that Act (other than, where paragraph 13(7)(e) of that Act applies in determining the capital cost to the taxpayer of the property, for the purposes of paragraphs 8(1)(j) and (p) and sections 13 and 20 of that Act), the taxpayer shall be deemed to have reacquired the property at a capital cost equal to the taxpayer's proceeds of disposition of the property determined under paragraph (a) in respect of the disposition that immediately preceded the reacquisition, and
	(ii) for the purposes of this subsection, the taxpayer's capital cost of the property after the reacquisition shall be deemed to be equal to the taxpayer's capital cost of the property before the reacquisition and the taxpayer shall be considered to have owned the property without interruption from December 31, 1971 until such time after February 22, 1994 as the taxpayer disposes of it.
	(3) Subsection (1) applies to acquisitions of property that occur after May 22, 1985.
	(4) Subsection (2) applies to the 1994 and subsequent taxation years.
	57. Section 26 of the Rules is amended by adding the following after subsection (28):
Effect of election under subsection 110.6(19)	(29) Where subsection 110.6(19) of the amended Act applies to a particular property, for the purposes of determining the cost and the adjusted cost base to a taxpayer of any property at any time after February 22, 1994, the particular property shall be deemed not to have been owned by any taxpayer on December 31, 1971.