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Bill C-28

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    (e ) to affect the application of section 80,

the taxpayer is deemed to be in the same position in relation to the control of the corporation as if the right were immediate and absolute and as if the taxpayer had exercised the right at that time for the purpose of determining whether control of a corporation has been acquired for the purposes of subsections 10(10) and 13(24), section 37, subsections 55(2), 66(11), (11.4) and (11.5), 66.5(3), 66.7(10) and (11), section 80, paragraph 80.04(4)(h), subparagraph 88(1)(c)(vi), paragraph 88(1)(c.3), sections 111 and 127 and subsections 181.1(7), 190.1(6) and 249(4), and in determining for the purpose of section 251.1 whether a corporation is controlled by any person or group of persons .

Corporations without share capital

(8.1) For the purposes of subsections (7) and (8),

    (a) a corporation incorporated without share capital is deemed to have a capital stock of a single class;

    (b) each member, policyholder and other participant in the corporation is deemed to be a shareholder of the corporation; and

    (c) the membership, policy or other interest in the corporation of each of those participants is deemed to be the number of shares of the corporation's capital stock that the Minister considers reasonable in the circumstances, having regard to the total number of participants in the corporation and the nature of their participation.

(6) Subsection (1) applies to taxation years that begin after 1988.

(7) Subsection (2) and subsection 256(8.1) of the Act, as enacted by subsection (5), apply after April 26, 1995 except that, before November 18, 1996, the reference in subsection 256(7) of the Act, as amended by subsection (2), to ``sections 18.1 and 37'' shall be read as ``section 37''.

(8) Subsection 256(8) of the Act, as enacted by subsection (5), applies after February 21, 1994 except that,

    (a) in its application after February 21, 1994 and before June 24, 1994, subsection 256(8) of the Act, as enacted by subsection (5), shall be read as follows:

(8) Where at any time a taxpayer acquires a right referred to in paragraph 251(5)(b) in respect of shares and it can reasonably be concluded that one of the main purposes of the acquisition is

    (a) to avoid any limitation on the deductibility of any non-capital loss, net capital loss, farm loss or any expense or other amount referred to in subsection 66(11), 66.5(3) or 66.7(10) or (11),

    (b) to avoid the application of subsection 13(24), paragraph 37(1)(h), subsection 66(11.4) or (11.5), paragraph 88(1)(c.3) or subsection 111(4), (5.1), (5.2) or (5.3),

    (c) to avoid the application of paragraph (j) or (k) of the definition ``investment tax credit'' in subsection 127(9), or

    (d) to affect the application of section 80,

the taxpayer is deemed to have acquired the shares at that time for the purpose of determining whether control of the corporation has been acquired for the purposes of subsection 13(24), section 37, subsections 66(11), (11.4) and (11.5), 66.5(3) and 66.7(10) and (11), section 80, paragraph 80.04(4)(h), subparagraph 88(1)(c)(vi), paragraph 88(1)(c.3), sections 111 and 127 and subsection 249(4).

    and

    (b) in its application after June 23, 1994 and before April 27, 1995, subsection 256(8) of the Act, as enacted by subsection (5), shall be read as follows:

(8) Where at any time a taxpayer acquires a right referred to in paragraph 251(5)(b) in respect of shares and it can reasonably be concluded that one of the main purposes of the acquisition is

    (a) to avoid any limitation on the deductibility of any non-capital loss, net capital loss, farm loss or any expense or other amount referred to in subsection 66(11), 66.5(3) or 66.7(10) or (11),

    (b) to avoid the application of subsection 13(24), paragraph 37(1)(h), subsection 55(2), 66(11.4) or (11.5), paragraph 88(1)(c.3) or subsection 111(4), (5.1), (5.2) or (5.3),

    (c) to avoid the application of paragraph (j) or (k) of the definition ``investment tax credit'' in subsection 127(9), or

    (d) to affect the application of section 80,

the taxpayer is deemed to have acquired the shares at that time for the purpose of determining whether control of the corporation has been acquired for the purposes of subsection 13(24), sections 37 and 55, subsections 66(11), (11.4) and (11.5), 66.5(3) and 66.7(10) and (11), section 80, paragraph 80.04(4)(h) subparagraph 88(1)(c)(vi), paragraph 88(1)(c.3), sections 111 and 127 and subsection 249(4).

(9) Subsection (3) applies to the 1994 and subsequent taxation years.

(10) Paragraph 256(7)(b) of the Act, as enacted by subsection (4), applies

    (a) to mergers that occur after April 26, 1995, other than a merger that occurs pursuant to a written agreement made before that day where the corporate entity formed by the merger so elects before the end of the sixth month after the month in which this Act is assented to; and

    (b) to a merger that occurred after 1992 and before April 26, 1995 where the corporate entity formed by the merger so elects before the end of the sixth month after the month in which this Act is assented to.

(11) Paragraph 256(7)(c) of the Act, as enacted by subsection (4), applies to exchanges that occur after April 26, 1995, other than an exchange that occurs pursuant to a written agreement made before that day.

(12) Paragraphs 256(7)(d) and (e) of the Act, as enacted by subsection (4), apply after April 26, 1995 except that, with respect to acquisitions of shares that occur before June 20, 1996 or pursuant to a written agreement made before June 20, 1996, subparagraph 256(7)(e)(ii) of the Act, as enacted by subsection (4), shall be read as follows:

      (ii) all or substantially all of the fair market value of the shares of the acquiring corporation's capital stock is attributable to the shares acquired by it at that time,

Exception to coming-
into-force

247. (1) Subsections 73(4), 74(5), subsection 18(13) of the Act, as enacted by subsection 79(2) and subsections 89(1), (2) and (6), 94(1) and (2), 95(1), 116(3) to (5), 120(1) and 124(1) and (2) do not apply to the disposition of property by a person or partnership (in this subsection and subsection (2) referred to as the ``transferor'') that occurred before 1996

    (a) to a person who was obliged on April 26, 1995 to acquire the property pursuant to the terms of an agreement in writing made on or before that day; or

    (b) in a transaction, or as part of a series of transactions, the arrangements for which, evidenced in writing, were substantially advanced before April 27, 1995, other than a transaction or series a main purpose of which can reasonably be considered to have been to enable an unrelated person to obtain the benefit of

      (i) any deduction in computing income, taxable income, taxable income earned in Canada or tax payable under the Act, or

      (ii) any balance of undeducted outlays, expenses or other amounts.

Election

(2) Notwithstanding subsection (1), subsection 18(13) of the Act, as enacted by subsection 79(2), and the other subsections of this Act referred to in subsection (1) apply to a disposition in respect of which the transferor has filed with the Minister of National Revenue before the end of the third month after the month in which this Act is assented to an election in writing to have those subsections apply.

Interpreta-
tion

(3) For the purpose of subsection (1),

    (a) a person shall be considered not to be obliged to acquire property where the person can be excused from the obligation if there is a change to the Act or if there is an adverse assessment under the Act;

    (b) an ``unrelated person'' means any person who was not, or a partnership any member of which was not, related (otherwise than because of paragraph 251(5)(b) of the Act) to the transferor at the time of the disposition; and

    (c) a person is deemed to be related to a partnership of which that person is a majority interest partner.

PART II

R.S., c. 2 (5th Supp.); 1994, cc. 7, 21; 1995, cc. 3, 21; 1997, c. 25

INCOME TAX APPLICATION RULES

248. (1) The portion of paragraph 20(1)(c) of the Income Tax Application Rules before subparagraph (ii) is replaced by the following:

    (c) where the disposition occurred because of an election under subsection 110.6(19) of the amended Act,

      (i) for the purposes of that Act (other than paragraphs 8(1)(j) and (p) and sections 13 and 20 of that Act), the taxpayer is deemed to have reacquired the property at a capital cost equal to

        (A) where the amount designated in respect of the property in the election did not exceed 110% of the fair market value of the property at the end of February 22, 1994, the taxpayer's proceeds of disposition determined under paragraph (a) in respect of the disposition of the property that immediately preceded the reacquisition minus the amount, if any, by which the amount designated in respect of the property in the election exceeded that fair market value, and

        (B) in any other case, the amount otherwise determined under subsection 110.6(19) of that Act to be the cost to the taxpayer of the property immediately after the reacquisition referred to in that subsection minus the amount by which the fair market value of the property on valuation day exceeded the capital cost of the property at the time it was last acquired before 1972, and

(2) Subsection (1) applies to the 1994 and subsequent taxation years.

249. (1) Clause 26(5)(c)(ii)(A) of the Rules is replaced by the following:

        (A) a capital loss or an amount that would, but for paragraph 40(2)(e) and subsection 85(4) of the amended Act (as that Act read in its application to property disposed of on or before April 26, 1995) and paragraphs 40(2)(e.1) and (e.2) and subsection 40(3.3) of the amended Act , be a capital loss from the disposition to a corporation after 1971 of the property by a person who owned the property before it became vested in the subsequent owner, or

(2) The portion of subsection 26(25) of the Rules before paragraph (a) is replaced by the following:

Bond conversion

(25) Where, after May 6, 1974, there has been an exchange to which section 51.1 of the amended Act applies on which a taxpayer has acquired a bond of a debtor (in this subsection referred to as the ``new bond'') in exchange for another bond of the same debtor (in this subsection referred to as the ``old bond'') owned by the taxpayer on December 31, 1971 and thereafter without interruption until immediately before the exchange, notwithstanding any other provision of this Act or of the amended Act, for the purposes of subsection 88(2.1) of the amended Act and of determining the cost to the taxpayer and the adjusted cost base to the taxpayer of the new bond,

(3) Section 26 of the Rules is amended by adding the following after subsection (29):

Additions to taxable Canadian property

(30) Subsections (1.1) to (29) do not apply to a disposition by a non-resident person of a taxable Canadian property that would not be a taxable Canadian property immediately before the disposition if section 115 of the amended Act were read as it applied to dispositions that occurred on April 26, 1995.

(4) Subsections (1) and (3) apply to dispositions that occur after April 26, 1995.

(5) Subsection (2) applies to exchanges that occur after October 1994.

PART III

R.S., c. B-3; R.S., cc. 27, 31 (1st Supp.), cc. 3, 27 (2nd Supp.); 1990, c. 17; 1991, c. 46; 1992, cc. 1, 27; 1993, cc. 28, 34; 1994, c. 26; 1995, c. 1; 1996, cc. 6, 23; 1997, c. 12

BANKRUPTCY AND INSOLVENCY ACT

1992, c. 27, s. 33; 1996, c. 23, s. 168

250. (1) Subsection 67(3) of the Bankruptcy and Insolvency Act is replaced by the following:

Exceptions

(3) Subsection (2) does not apply in respect of amounts deemed to be held in trust under subsection 227(4) or (4.1) of the Income Tax Act, subsection 23(3) or (4) of the Canada Pension Plan or subsection 86(2) or (2.1) of the Employment Insurance Act (each of which is in this subsection referred to as a ``federal provision'') nor in respect of amounts deemed to be held in trust under any law of a province that creates a deemed trust the sole purpose of which is to ensure remittance to Her Majesty in right of the province of amounts deducted or withheld under a law of the province where

    (a) that law of the province imposes a tax similar in nature to the tax imposed under the Income Tax Act and the amounts deducted or withheld under that law of the province are of the same nature as the amounts referred to in subsection 227(4) or (4.1) of the Income Tax Act, or

    (b) the province is a ``province providing a comprehensive pension plan'' as defined in subsection 3(1) of the Canada Pension Plan, that law of the province establishes a ``provincial pension plan'' as defined in that subsection and the amounts deducted or withheld under that law of the province are of the same nature as amounts referred to in subsection 23(3) or (4) of the Canada Pension Plan,

and for the purpose of this subsection, any provision of a law of a province that creates a deemed trust is, notwithstanding any Act of Canada or of a province or any other law, deemed to have the same effect and scope against any creditor, however secured, as the corresponding federal provision.

(2) Subsection (1) is deemed to have come into force on June 15, 1994 except that, in the application after June 14, 1994 and before June 30, 1996 of subsection 67(3) of the Act, as enacted by subsection (1), the reference to ``subsections 86(2) or (2.1) of the Employment Insurance Act'' shall be read as a reference to ``subsections 57(2) or (3) of the Unemployment Insurance Act''.

PART IV

R.S., c. C-8; R.S., cc. 6, 41 (1st Supp.), cc. 5, 13, 27, 30 (2nd Supp.), cc. 18, 38 (3rd Supp.), cc. 1, 46, 51 (4th Supp.); 1990, c. 8; 1991, cc. 14, 44, 49; 1992, cc. 1, 2, 27, 48; 1993, cc. 24, 27, 28; 1994, cc. 13, 21; 1995, c. 33; 1996, cc. 11, 16, 23

CANADA PENSION PLAN

251. (1) Section 5 of the Canada Pension Plan is renumbered as subsection 5(1) and is amended by adding the following:

Delegation

(2) The Minister may authorize an officer or a class of officers to exercise powers or perform duties of the Minister under this Part.

(2) Any power or duty of the Minister of National Revenue delegated to an officer or a class of officers by a regulation made under subsection 40(2) of the Act before the day on which this Act is assented to continues to be delegated to that officer or that class of officers until an authorization by the Minister made under subsection 5(2) of the Act, as enacted by subsection (1), changes the delegation of that power or duty.

1994, c. 21, s. 123

252. (1) Subsection 23(3) of the Act is replaced by the following:

Where amount deducted not remitted

(3) Where an employer has deducted an amount from the remuneration of an employee as or on account of any contribution required to be made by the employee but has not remitted the amount to the Receiver General, the employer is deemed, notwithstanding any security interest (as defined in subsection 224(1.3) of the Income Tax Act) in the amount so deducted , to hold the amount separate and apart from the property of the employer and from property held by any secured creditor (as defined in subsection 224(1.3) of the Income Tax Act) of that employer that but for the security interest would be property of the employer , in trust for Her Majesty and for payment to Her Majesty in the manner and at the time provided under this Act.

Extension of trust

(4) Notwithstanding the Bankruptcy and Insolvency Act (except sections 81.1 and 81.2 of that Act), any other enactment of Canada, any enactment of a province or any other law, where at any time an amount deemed by subsection (3) to be held by an employer in trust for Her Majesty is not paid to Her Majesty in the manner and at the time provided under this Act, property of the employer and property held by any secured creditor (as defined in subsection 224(1.3) of the Income Tax Act) of that employer that but for a security interest (as defined in subsection 224(1.3) of the Income Tax Act) would be property of the employer, equal in value to the amount so deemed to be held in trust is deemed

    (a) to be held, from the time the amount was deducted by the employer, separate and apart from the property of the employer, in trust for Her Majesty whether or not the property is subject to such a security interest, and

    (b) to form no part of the estate or property of the employer from the time the amount was so deducted, whether or not the property has in fact been kept separate and apart from the estate or property of the employer and whether or not the property is subject to such a security interest

and is property beneficially owned by Her Majesty notwithstanding any security interest in such property or in the proceeds thereof, and the proceeds of such property shall be paid to the Receiver General in priority to all such security interests.

Meaning of ``security interest''

(4.1) For the purposes of subsections (3) and (4), a security interest does not include a prescribed security interest.

(2) Subsection (1) is deemed to have come into force on June 15, 1994.

253. Section 24 of the Act is amended by adding the following after subsection (2):

Electronic records

(2.1) Every employer required by this section to keep records who does so electronically shall retain them in an electronically readable format for the retention period referred to in subsection (2).

Exemption

(2.2) The Minister may, on such terms and conditions as are acceptable to the Minister, exempt an employer or a class of employers from the requirement in subsection (2.1).

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