;

Bill C-22

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	to a corporation resident in Canada (in this subsection referred to as the ``transferee'') that is a subsidiary wholly-owned corporation of the transferor that, immediately after that time, began to carry on that insurance business in Canada for consideration that includes shares of the capital stock of the transferee,
	(7) The definition ``designated insurance property'' in subsection 138(12) of the Act is replaced by the following:
``designated insurance property'' « bien d'assurance désigné »	``designated insurance property'' for a taxation year of an insurer (other than an insurer resident in Canada that at no time in the year carried on a life insurance business) that, at any time in the year, carried on an insurance business in Canada and in a country other than Canada, means property determined in accordance with prescribed rules except that, in its application to any taxation year, ``designated insurance property'' for the 1998 or a preceding taxation year means property that was, under this subsection as it read in its application to taxation years that ended in 1996, property used by it in the year in, or held by it in the year in the course of, carrying on an insurance business in Canada;
	(8) Subsections (1) to (3) and (7) apply to the 1997 and subsequent taxation years.
	(9) Subsections (4) to (6) apply to the 1999 and subsequent taxation years except that, where a taxpayer or a taxpayer's legal representative so elects in writing and files with the Minister of National Revenue before 2002 its election in respect of one or more of paragraph 138(11.5)(b) of the Act, as enacted by subsection (4), paragraph 138(11.91)(e) of the Act, as enacted by subsection (5), or paragraph 138(11.94)(b) of the Act, as enacted by subsection (6), each of the subsections in respect of which the election was made applies to the taxpayer's 1997 and subsequent taxation years.
	134. (1) Section 138.1 of the Act is amended by adding the following after subsection (3):
Deemed gains and losses	(3.1) Where an amount is deemed under subsection (3) to be a capital gain or capital loss of a policyholder or other beneficiary (in this subsection referred to as the ``taxpayer'') of a related segregated fund trust, in respect of capital gains or losses realized in a taxation year of the related segregated fund trust that includes February 28, 2000 or October 17, 2000, and the related segregated fund trust so elects under this subsection in its return of income for the year,
	(a) the portion of the gains and losses that are in respect of capital gains or losses from dispositions of property that occurred before February 28, 2000 is deemed to be that proportion of the gains or losses 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;
	(b) the portion of the gains and losses that is in respect of capital gains or losses from dispositions of property that occurred in the year and in the period that begins at the beginning of February 28, 2000 and ends at the end of October 17, 2000, is deemed to be that proportion of the gains or losses 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
	(c) the portion of the gains and losses that is in respect of capital gains or losses 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 year, is deemed to be that proportion of the gains or losses 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.
Deemed gains and losses - taxpayer	(3.2) Where a capital gain or a capital loss is deemed by subsection (3) to be a capital gain or a capital loss of a taxpayer and not that of a related segregated fund trust,
	(a) if the capital gain or capital loss was in respect of capital gains or capital losses from dispositions of property by the related segregated fund trust that occurred before February 28, 2000 and that taxation year of the taxpayer includes February 27, 2000, the capital gain or the capital loss is deemed to be a capital gain or a capital loss, as the case may be, of the taxpayer from the disposition by the taxpayer of capital property in the taxpayer's taxation year and before February 28, 2000;
	(b) if the capital gain or capital loss was in respect of capital gains or capital losses from dispositions of property by the related segregated fund trust that occurred 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 capital gain or the capital loss is deemed to be a capital gain or a capital loss, as the case may be, of the taxpayer from the disposition by the taxpayer of capital property in the taxpayer's taxation year;
	(c) if the capital gain or capital loss was in respect of capital gains or capital losses from dispositions of property by the related segregated fund trust that occurred 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 capital gain or the capital loss is deemed to be a capital gain or a capital loss, as the case may be, of the taxpayer from the disposition by the taxpayer of capital property in the taxpayer's taxation year and before October 18, 2000;
	(d) if the capital gain or capital loss was in respect of capital gains or capital losses from dispositions of property by the related segregated fund trust that occurred before February 28, 2000 and the taxation year of the taxpayer began after October 17, 2000 , 3/2 of the capital gain or the capital loss is deemed to be a capital gain or a capital loss, as the case may be, of the taxpayer from the disposition by the taxpayer of capital property in the taxpayer's taxation year;
	(e) if the capital gain or capital loss was in respect of capital gains or capital losses from dispositions of property by the related segregated fund that occurred 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 capital gain or capital loss is deemed to be a capital gain or a capital loss, as the case may be, of the taxpayer from the disposition by the taxpayer of capital property in the taxpayer's taxation year;
	(f) if the capital gain or capital loss was in respect of capital gains or capital losses from dispositions of property by the related segregated fund trust that occurred 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 capital gain or the capital loss is deemed to be a capital gain or a capital loss, as the case may be, 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;
	(g) if the capital gain or capital loss was in respect of capital gains or capital losses from dispositions of property by the related segregated fund trust that occurred 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 capital gain or the capital loss is deemed to be a capital gain or a capital loss, as the case may be, of the taxpayer from the disposition by the taxpayer of capital property in the taxpayer's taxation year; and
	(h) in any other case, the capital gain or the capital loss is deemed to be a capital gain or a capital loss, as the case may be, of the taxpayer from the disposition of capital property by the taxpayer in the taxpayer's taxation year and after October 17, 2000 .
	(2) Subsection (1) applies to taxation years that end after February 27, 2000.
	135. (1) The portion of subsection 141(5) of the Act before paragraph (a) is replaced by the following:
Exclusion from taxable Canadian property	(5) For the purpose of paragraph (d) of the definition ``taxable Canadian property'' in subsection 248(1), a share of the capital stock of a corporation is deemed to be listed at any time on a stock exchange prescribed for the purpose of that definition where
	(2) Subsection (1) applies after December 15, 1998.
	136. (1) The portion of subsection 142.2(1) of the Act before the definition ``financial institution'' is replaced by the following:
Definitions	142.2 (1) In this section and sections 142.3 to 142.7,
	(2) Subsection (1) applies after June 27, 1999.
	137. (1) Subsection 142.6(2) of the Act is replaced by the following:
Ceasing to use property in Canadian business	(1.1) If at a particular time in a taxation year a taxpayer that is a non-resident financial institution (other than a life insurance corporation) ceases to use, in connection with a business or part of a business carried on by the taxpayer in Canada immediately before the particular time, a property that is a mark-to-market property of the taxpayer for the year or a specified debt obligation, but that is not a property that was disposed of by the taxpayer at the particular time,
	(a) the taxpayer is deemed
	(i) to have disposed of the property immediately before the time that was immediately before the particular time for proceeds equal to its fair market value at the time of disposition and to have received those proceeds at the time of disposition in the course of carrying on the business or the part of the business, as the case may be, and
	(ii) to have reacquired the property at the particular time at a cost equal to those proceeds; and
	(b) in determining the consequences of the disposition in subparagraph (a)(i), subsection 142.4(11) does not apply to any payment received by the taxpayer after the particular time.
Beginning to use property in a Canadian business	(1.2) If at a particular time a taxpayer that is a non-resident financial institution (other than a life insurance corporation) begins to use, in connection with a business or part of a business carried on by the taxpayer in Canada, a property that is a mark-to-market property of the taxpayer for the year that includes the particular time or a specified debt obligation, but that is not a property that was acquired by the taxpayer at the particular time, the taxpayer is deemed
	(a) to have disposed of the property immediately before the time that was immediately before the particular time for proceeds equal to its fair market value at the time of disposition; and
	(b) to have reacquired the property at the particular time at a cost equal to those proceeds.
Specified debt obligation marked to market	(1.3) In applying subsection (1.1) to a taxpayer in respect of a property in a taxation year,
	(a) the definition ``mark-to-market property'' in subsection 142.2(1) shall be applied as if the year ended immediately before the particular time referred to in subsection (1.1); and
	(b) if the taxpayer does not have financial statements for the period ending immediately before the particular time referred to in subsection (1.1), references in the definition to financial statements for the year shall be read as references to the financial statements that it is reasonable to expect would have been prepared if the year had ended immediately before the particular time.
Deemed disposition not applicable	(2) For the purposes of this Act, the determination of when a taxpayer acquired a share shall be made without regard to a disposition or acquisition that occurred because of subsection 142.5(2) or subsection (1), (1.1) or (1.2).
	(2) Subsection (1) applies after June 27, 1999 in respect of an authorized foreign bank, and after August 8, 2000 in any other case.
	138. (1) The Act is amended by adding the following after section 142.6:
	Conversion of Foreign Bank Affiliate to Branch
Definitions	142.7 (1) The definitions in this subsection apply in this section.
``Canadian affiliate'' « filiale canadienne »	``Canadian affiliate'' of an entrant bank at any particular time means a Canadian corporation that was, immediately before the particular time, affiliated with the entrant bank and that was, at all times during the period that began on February 11, 1999 and ended immediately before the particular time,
	(a) affiliated with either
	(i) the entrant bank, or
	(ii) a foreign bank (within the meaning assigned by section 2 of the Bank Act) that is affiliated with the entrant bank at the particular time; and
	(b) either
	(i) a bank,
	(ii) a corporation authorized under the Trust and Loan Companies Act to carry on the business of offering to the public its services as trustee, or
	(iii) a corporation of which the principal activity in Canada consists of any of the activities referred to in subparagraphs 518(3)(a)(i) to (v) of the Bank Act and in which the entrant bank or a non-resident person affiliated with the entrant bank holds shares under the authority, directly or indirectly, of an order issued by the Minister of Finance or the Governor in Council under subsection 521(1) of that Act.
``eligible property'' « bien admissible »	``eligible property'' of a Canadian affiliate at any time means a property described in any of paragraphs 85(1.1)(a) to (g.1) that is, immediately before that time, used or held by it in carrying on its business in Canada.
``entrant bank'' « banque entrante »	``entrant bank'' means a non-resident corporation that is, or has applied to the Superintendent of Financial Institutions to become, an authorized foreign bank.
``qualifying foreign merger'' « fusion étrangère déterminée »	``qualifying foreign merger'' means a merger or combination of two or more corporations that would be a ``foreign merger'' within the meaning assigned by subsection 87(8.1) if that subsection were read without reference to the words ``and otherwise than as a result of the distribution of property to one corporation on the winding-up of another corporation.
Qualifying foreign merger	(2) Where an entrant bank was formed as the result of a qualifying foreign merger, after February 11, 1999, of two or more corporations (referred to in this subsection as ``predecessors''), and at the time immediately before the merger, there were one or more Canadian corporations (referred to in this subsection as ``predecessor affiliates''), each of which at that time would have been a Canadian affiliate of a predecessor if the predecessor were an entrant bank at that time,
	(a) for the purpose of the definition ``Canadian affiliate'' in subsection (1),
	(i) each predecessor affiliate is deemed to have been affiliated with the entrant bank throughout the period that began on February 11, 1999 and ended at the time of the merger,
	(ii) the expression ``entrant bank'' in subparagraph (b)(iii) of the definition is deemed to include a predecessor, and
	(iii) if two or more of the predecessor affiliates are amalgamated or merged at any time after February 11, 1999 to form a new corporation, the new corporation is deemed to have been affiliated with the entrant bank throughout the period that began on February 11, 1999 and ended at the time of the amalgamation or merger of the predecessor affiliates; and
	(b) if at least one of the predecessors complied with the terms of subsection (11)(a), the entrant bank is deemed to have complied with those terms.
Branch-establi shment rollover	(3) If a Canadian affiliate of an entrant bank transfers an eligible property to the entrant bank, the entrant bank begins immediately after the transfer to use or hold the transferred property in its Canadian banking business and the Canadian affiliate and the entrant bank jointly elect, in accordance with subsection (11), to have this subsection apply in respect of the transfer, subsections 85(1) (other than paragraph (e.2)), (1.1), (1.4) and (5) apply, with any modifications that the circumstances require, in respect of the transfer, except that the portion of subsection 85(1) before paragraph (a) shall be read as follows:
	``85. (1) Where a taxpayer that is a Canadian affiliate of an entrant bank (within the meanings assigned by subsection 142.7(1)) has, in a taxation year, disposed of any of the taxpayer's property to the entrant bank (referred to in this subsection as the ``corporation''), if the taxpayer and the corporation have jointly elected under subsection 142.7(3), the following rules apply:''.
Deemed fair market value	(4) If a Canadian affiliate of an entrant bank and the entrant bank make an election under subsection (3) in respect of a transfer of property by the Canadian affiliate to the entrant bank, for the purposes of subsections 15(1), 52(2), 69(1), (4) and (5), 246(1) and 247(2) in respect of the transfer, the fair market value of the property is deemed to be the amount agreed by the Canadian affiliate and the entrant bank in their election.
Specified debt obligations	(5) If a Canadian affiliate of an entrant bank transfers a specified debt obligation to the entrant bank in a transaction in respect of which an election is made under subsection (3), the Canadian affiliate is a financial institution in its taxation year in which the transfer is made, and the amount that the Canadian affiliate and the entrant bank agree on in their election in respect of the obligation is equal to the tax basis of the obligation within the meaning assigned by subsection 142.4(1), the entrant bank is deemed, in respect of the obligation, for the purposes of sections 142.2 to 142.4 and 142.6, to be the same corporation as, and a continuation of, the Canadian affiliate.
Mark-to-mark et property	(6) If a Canadian affiliate of an entrant bank described in paragraph (11)(a) transfers at any time within the period described in paragraph (11)(c) to the entrant bank a property that is, for the Canadian affiliate's taxation year in which the property is transferred, a mark-to-market property of the Canadian affiliate,
	(a) for the purposes of subsections 112(5) to (5.21) and (5.4), the definition ``mark-to-market property'' in subsection 142.2(1) and subsection 142.5(9), the entrant bank is deemed, in respect of the property, to be the same corporation as and a continuation of, the Canadian affiliate; and
	(b) for the purpose of applying subsection 142.5(2) in respect of the property, the Canadian affiliate's taxation year in which the property is transferred is deemed to have ended immediately before the time the property was transferred.
Reserves	(7) If
	(a), at a particular time,
	(i) a Canadian affiliate of an entrant bank transfers to the entrant bank property that is a loan or lending asset, or a right to receive an unpaid amount in respect of a disposition before the particular time of property by the affiliate, or
	(ii) the entrant bank assumes an obligation of the Canadian affiliate that is an instrument or commitment described in paragraph 20(1)(l.1) or an obligation in respect of goods, services, lands or chattels described in subparagraph 20(1)(m)(i), (ii) or (iii),
	(b) the property is transferred or the obligation is assumed for an amount equal to its fair market value at the particular time,
	(c) the entrant bank begins immediately after the particular time to use or hold the property or owe the obligation in its Canadian banking business, and
	(d) the Canadian affiliate and the entrant bank jointly elect in accordance with subsection (11) to have this subsection apply in respect of the transfer or assumption,
	then
	(e) in applying paragraphs 20(1)(l), (l.1), (m), (n) and (p) in respect of the obligation or property, the taxation year of the affiliate that would, but for this paragraph, include the particular time is deemed to end immediately before the particular time, and
	(f) in computing the income of the Canadian affiliate and the entrant bank for taxation years that end on or after the particular time,

Bill C-22

Conversion of Foreign Bank Affiliate to Branch