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69. (1) The Act is amended by adding the
following after section 132.1:
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| Mutual funds
- qualifying
exchange
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132.2 (1) Where a mutual fund corporation
or a mutual fund trust has at any time disposed
of a property to a mutual fund trust in a
qualifying exchange,
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(a) the transferee shall be deemed to have
acquired the property at the time (in this
subsection referred to as the ``acquisition
time'') that is immediately after the time
that is immediately after the transfer time,
and not to have acquired the property at the
transfer time;
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(b) subject to paragraph (o), the last taxation
years of the funds that began before the
transfer time shall be deemed to have ended
at the acquisition time, and their next
taxation years shall be deemed to have
begun immediately after those last taxation
years ended;
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(c) the transferor's proceeds of disposition
of the property and the transferee's cost of
the property shall be deemed to be the lesser
of
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(i) the fair market value of the property at
the transfer time, and
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(A) the cost amount to the transferor of
the property at the transfer time or,
where the property is depreciable
property, the lesser of its capital cost
and its cost amount to the transferor
immediately before the transfer time,
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(B) the amount that the funds have
agreed upon in respect of the property
in their election in respect of the
qualifying exchange, and
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(C) the fair market value at the transfer
time of the consideration (other than
units of the transferee) received by the
transferor for the disposition of the
property;
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(d) where the property is depreciable
property and its capital cost to the transferor
exceeds the transferor's proceeds of
disposition of the property under paragraph
(c), for the purposes of sections 13 and 20
and any regulations made for the purposes
of paragraph 20(1)(a),
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(i) the property's capital cost to the
transferee shall be deemed to be the
amount that was its capital cost to the
transferor, and
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(ii) the excess shall be deemed to have
been allowed to the transferee in respect
of the property under regulations made
for the purposes of paragraph 20(1)(a) in
computing income for taxation years
ending before the transfer time;
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(e) where two or more depreciable
properties of a prescribed class are disposed
of by the transferor to the transferee in the
same qualifying exchange, paragraph (c)
applies as if each property so disposed of
had been separately disposed of in the order
designated by the transferor at the time of
making the election in respect of the
qualifying exchange or, if the transferor
does not so designate any such order, in the
order designated by the Minister;
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(f) each property of a fund, other than
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(i) depreciable property of a prescribed
class to which paragraph (g) would, but
for this paragraph, apply, and
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(ii) property disposed of by the transferor
to the transferee at the transfer time
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shall be deemed to have been disposed of,
and to have been reacquired by the fund,
immediately before the acquisition time for
an amount equal to the lesser of
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(iii) the fair market value of the property
at the transfer time, and
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(A) its cost amount or, where the
property is depreciable property, the
lesser of its capital cost and its cost
amount to the disposing fund at the
transfer time, and
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(B) the amount that the fund
designates in respect of the property in
a notification to the Minister
accompanying the election in respect
of the qualifying exchange;
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(g) where the undepreciated capital cost to
a fund of depreciable property of a
prescribed class immediately before the
acquisition time exceeds the total of
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(i) the fair market value of all the
property of that class immediately before
the acquisition time, and
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(ii) the amount in respect of property of
that class otherwise allowed under
regulations made for the purposes of
paragraph 20(1)(a) or deductible under
subsection 20(16) in computing the
fund's income for the taxation year that
includes the transfer time,
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the excess shall be deducted in computing
the fund's income for the taxation year that
includes the transfer time and shall be
deemed to have been allowed in respect of
property of that class under regulations
made for the purposes of paragraph
20(1)(a);
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(h) the transferor's cost of any particular
property received by the transferor from the
transferee as consideration for the
disposition of the property shall be deemed
to be
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(i) nil, where the particular property is a
unit of the transferee, and
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(ii) the particular property's fair market
value at the transfer time, in any other
case;
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(i) the transferor's proceeds of disposition
of any units of the transferee received as
consideration for the disposition of the
property that were disposed of by the
transferor within 60 days after the transfer
time in exchange for shares of the transferor
shall be deemed to be nil;
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(j) where shares of the transferor have been
disposed of by a taxpayer to the transferor
in exchange for units of the transferee
within 60 days after the transfer time,
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(i) the taxpayer's proceeds of disposition
of the shares and the cost to the taxpayer
of the units shall be deemed to be equal
to the cost amount to the taxpayer of the
shares immediately before the transfer
time, and
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(ii) where all of the taxpayer's shares of
the transferor have been so disposed of,
for the purposes of applying section 39.1
in respect of the taxpayer after that
disposition, the transferee shall be
deemed to be the same entity as the
transferor;
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(k) where a share to which paragraph (j)
applies would, but for this paragraph, cease
to be a qualified investment (within the
meaning assigned by subsection 146(1) or
146.3(1) or section 204) as a consequence
of the qualifying exchange, the share shall
be deemed to be a qualified investment until
the earlier of the day that is 60 days after the
transfer time and the time at which it is
disposed of in accordance with paragraph
(j);
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(l) there shall be added to the amount
determined under the description of A in the
definition ``refundable capital gains tax on
hand'' in subsection 132(4) in respect of the
transferee for its taxation years that begin
after the transfer time the amount, if any, by
which
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(i) the transferor's refundable capital
gains tax on hand (within the meaning
assigned by subsection 131(6) or 132(4),
as the case may be) at the end of its
taxation year that includes the transfer
time
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(ii) the transferor's capital gains refund
(within the meaning assigned by
paragraph 131(2)(a) or 132(1)(a), as the
case may be) for that year;
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(m) no amount in respect of a non-capital
loss, net capital loss, restricted farm loss,
farm loss or limited partnership loss of a
fund for a taxation year that began before
the transfer time is deductible in computing
its taxable income for a taxation year that
begins after the transfer time;
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(n) where the transferor is a mutual fund
trust, for the purposes of subsections
132.1(1) and (3) to (5), the transferee shall
be deemed after the transfer time to be the
same mutual fund trust as, and a
continuation of, the transferor;
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(o) where the transferor is a mutual fund
corporation, for the purposes of Part I.3, the
transferor's taxation year that, but for this
paragraph, would have ended at the
acquisition time shall be deemed to have
ended immediately before the transfer time
(except that, for greater certainty, nothing
in this paragraph affects the computation of
any amount determined under this Part);
and
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(p) the transferor shall, notwithstanding
subsections 131(8) and 132(6), be deemed
to be neither a mutual fund corporation nor
a mutual fund trust for taxation years
beginning after the transfer time.
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| Definitions
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(2) In this section,
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``qualifying
exchange''
« échange
admissible »
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``qualifying exchange'' means a transfer at
any time (in this section referred to as the
``transfer time'') of all or substantially all of
the property of a mutual fund corporation or
mutual fund trust to a mutual fund trust (in
this section referred to as the ``transferor''
and ``transferee'', respectively, and as the
``funds'') where
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(a) all or substantially all of the shares
issued by the transferor and outstanding
immediately before the transfer time are
within 60 days after the transfer time
disposed of to the transferor,
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(b) no person disposing of shares in the
transferor to the transferor within that 60
day period receives any consideration for
those shares other than units of the
transferee, and
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(c) the funds jointly elect, by filing a
prescribed form with the Minister within
6 months after the transfer time, to have
this section apply with respect to the
transfer;
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``share''
« action »
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``share'' means a share of the capital stock of
a mutual fund corporation and a unit of a
mutual fund trust.
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(2) Subsection (1) applies after June 1994,
except that an election referred to in
paragraph (c) of the definition ``qualifying
exchange'' in subsection 132.2(2) of the Act,
as enacted by subsection (1), shall be
deemed to have been made in a timely
manner where it is made before the end of
the sixth month that ends after the month in
which this Act is assented to.
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70. (1) Subsection 165(1.2) of the Act is
replaced by the following:
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| Objections by
large
corporations
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(1.11) Where a corporation that was a large
corporation in a taxation year (within the
meaning assigned by subsection 225.1(8))
objects to an assessment under this Part for the
year, the notice of objection shall
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(a) reasonably describe each issue to be
decided;
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(b) specify in respect of each issue, the
relief sought, expressed as the amount of a
change in a balance (within the meaning
assigned by subsection 152(4.4)) or a
balance of undeducted outlays, expenses or
other amounts of the corporation; and
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(c) provide facts and reasons relied on by
the corporation in respect of each issue.
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| Late
compliance
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(1.12) Notwithstanding subsection (1.11),
where a notice of objection served by a
corporation to which that subsection applies
does not include the information required by
paragraph (1.11)(b) or (c) in respect of an issue
to be decided that is described in the notice,
the Minister may in writing request the
corporation to provide the information, and
those paragraphs shall be deemed to be
complied with in respect of the issue if, within
60 days after the request is made, the
corporation submits the information in writing
to a Chief of Appeals referred to in subsection
(2).
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| Limitation on
objections by
large
corporations
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(1.13) Notwithstanding subsections (1) and
(1.1), where under subsection (3) a particular
assessment was made for a taxation year
pursuant to a notice of objection served by a
corporation that was a large corporation in the
year (within the meaning assigned by
subsection 225.1(8)), except where the
objection was made to an earlier assessment
made under any of the provisions or
circumstances referred to in paragraph
(1.1)(a), the corporation may object to the
particular assessment in respect of an issue
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(a) only if the corporation complied with
subsection (1.11) in the notice with respect
to that issue; and
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(b) only with respect to the relief sought in
respect of that issue as specified by the
corporation in the notice.
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| Application of
subsection
(1.13)
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(1.14) Where a particular assessment is
made under subsection (3) pursuant to an
objection made by a taxpayer to an earlier
assessment, subsection (1.13) does not limit
the right of the taxpayer to object to the
particular assessment in respect of an issue
that was part of the particular assessment and
not part of the earlier assessment.
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| Limitation on
objections
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(1.2) Notwithstanding subsections (1) and
(1.1), no objection may be made by a taxpayer
to an assessment made under subsection
152(4.2), 169(3) or 220(3.1) nor, for greater
certainty, in respect of an issue for which the
right of objection has been waived in writing
by the taxpayer.
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(2) Subsections 165(1.11) to (1.14) of the
Act, as enacted by subsection (1), apply
after September 26, 1994 to notices of
objection filed at any time except a notice of
objection to an assessment for a taxation
year where an appeal under Division J of
the Act of the assessment has been instituted
on or before the day this Act is assented to.
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(3) Where a taxpayer submits, to a Chief
of Appeals referred to in subsection 165(2)
of the Act, in writing before March 1995 the
information required by subsection
165(1.11) of the Act, as enacted by
subsection (1), to be provided in a notice of
objection served by the taxpayer before
1995, the taxpayer shall be deemed to have
complied with subsection 165(1.11) of the
Act with respect to that notice.
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(4) Subsection 165(1.2) of the Act, as
enacted by subsection (1), applies after
September 26, 1994 to waivers signed at any
time.
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71. (1) Section 169 of the Act is amended
by adding the following after subsection (2):
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| Limitation on
appeals by
large
corporations
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(2.1) Notwithstanding subsections (1) and
(2), where a corporation that was a large
corporation in a taxation year (within the
meaning assigned by subsection 225.1(8))
served a notice of objection to an assessment
under this Part for the year, the corporation
may appeal to the Tax Court of Canada to have
the assessment vacated or varied only with
respect to
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(a) an issue in respect of which the
corporation has complied with subsection
165(1.11) in the notice, or
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(b) an issue described in subsection
165(1.14) where the corporation did not,
because of subsection 165(7), serve a notice
of objection to the assessment that gave rise
to the issue
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and, in the case of an issue described in
paragraph (a), the corporation may so appeal
only with respect to the relief sought in respect
of the issue as specified by the corporation in
the notice.
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| Waived issues
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(2.2) Notwithstanding subsections (1) and
(2), for greater certainty a taxpayer may not
appeal to the Tax Court of Canada to have an
assessment under this Part vacated or varied in
respect of an issue for which the right of
objection or appeal has been waived in writing
by the taxpayer.
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(2) Subsection 169(2.1) of the Act, as
enacted by subsection (1), applies to appeals
instituted after the day this Act is assented
to.
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(3) Subsection 169(2.2) of the Act, as
enacted by subsection (1), applies after the
day this Act is assented to to waivers signed
at any time.
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