Bill C-216

1st Session, 39th Parliament,

55 Elizabeth II, 2006

house of commons of canada

BILL C-216

An Act to amend the Income Tax Act (capital gains exemption on disposition of fishing property)

Her Majesty, by and with the advice and consent of the Senate and House of Commons of Canada, enacts as follows:

1. (1) Paragraph 14(1.01)(c) of the Income Tax Act is replaced by the following:

(c) where the eligible capital property is at that time a qualified farm property or a qualified fishing property (within the meaning assigned by subsection 110.6(1)) of the taxpayer, the capital property deemed by paragraph (b) to have been disposed of by the taxpayer is deemed to have been at that time a qualified farm property or a qualified fishing property of the taxpayer.

(2) The portion of subsection 14(1.1) of the Act before paragraph (a) is replaced by the following:

(1.1) For the purposes of section 110.6 and paragraph 3(b) as it applies for the purposes of that section, an amount included under paragraph (1)(b) in computing a taxpayer’s income for a particular taxation year from a business is deemed to be a taxable capital gain of the taxpayer for the year from the disposition in the year of qualified farm property or qualified fishing property to the extent of the lesser of

(3) The descriptions of A and B in paragraph 14(1.1)(b) of the Act are replaced by the following:

A      is the amount by which the total of

(i) 3/4 of the total of all amounts each of which is the taxpayer’s proceeds from a disposition in a preceding taxation year that began after 1987 and ended before February 28, 2000 of eligible capital property in respect of the business that, at the time of the disposition, was a qualified farm property or a qualified fishing property (within the meaning assigned by subsection 110.6(1)) of the taxpayer,

(ii) 2/3 of the total of all amounts each of which is the taxpayer’s proceeds from a disposition in the particular year or a preceding taxation year that ended after February 27, 2000 and before October 18, 2000 of eligible capital property in respect of the business that, at the time of the disposition, was a qualified farm property or a qualified fishing property (within the meaning assigned by subsection 110.6(1)) of the taxpayer, and

(iii) 1/2 of the total of all amounts each of which is the taxpayer’s proceeds from a disposition in the particular year or a preceding taxation year that ended after October 17, 2000 of eligible capital property in respect of the business that, at the time of the disposition, was a qualified farm property or a qualified fishing property (within the meaning assigned by subsection 110.6(1)) of the taxpayer

exceeds the total of

(iv) 3/4 of the total of all amounts each of which is

(A) an eligible capital expenditure of the taxpayer in respect of the business that was made or incurred in respect of a qualified farm property or a qualified fishing property disposed of by the taxpayer in a preceding taxation year that began after 1987 and ended before February 28, 2000, or

(B) an outlay or expense of the taxpayer that was not deductible in computing the taxpayer’s income and that was made or incurred for the purpose of making a disposition referred to in clause (A),

(v) 2/3 of the total of all amounts each of which is

(A) an eligible capital expenditure of the taxpayer in respect of the business that was made or incurred in respect of a qualified farm property or a qualified fishing property disposed of by the taxpayer in the particular year or a preceding taxation year that ended after February 27, 2000 and before October 18, 2000, or

(B) an outlay or expense of the taxpayer that was not deductible in computing the taxpayer’s income and that was made or incurred for the purpose of making a disposition referred to in clause (A), and

(vi) 1/2 of the total of all amounts each of which is

(A) an eligible capital expenditure of the taxpayer in respect of the business that was made or incurred in respect of a qualified farm property or a qualified fishing property disposed of by the taxpayer in the particular year or a preceding taxation year that ended after October 17, 2000, or

(B) an outlay or expense of the taxpayer that was not deductible in computing the taxpayer’s income and that was made or incurred for the purpose of making a disposition referred to in clause (A), and

B      is the total of all amounts each of which is

(i) that portion of an amount deemed by subparagraph (1)(a)(v) (as it applied in respect of the business to fiscal periods that began after 1987 and ended before February 23, 1994) to be a taxable capital gain of the taxpayer that can reasonably be attributed to a disposition of a qualified farm property or a qualified fishing property of the taxpayer, or

(ii) an amount deemed by this section to be a taxable capital gain of the taxpayer for a taxation year preceding the particular year from the disposition of a qualified farm property or a qualified fishing property of the taxpayer.

2. Subsection 80.03(8) of the Act is replaced by the following:

(8) Where, as a consequence of the disposition at any time by an individual of a property that is a qualified farm property, a qualified fishing property or a qualified small business corporation share of the individual (within the meanings assigned by subsection 110.6(1)), the individual is deemed by subsection (2) to have a capital gain at that time from the disposition of another property, for the purposes of sections 3, 74.3 and 111, as they apply for the purpose of section 110.6, the other property shall be deemed to be a qualified farm property, a qualified fishing property or a qualified small business corporation share of the individual, as the case may be.

3. (1) The portion of subparagraph 104(21.2)(b)(i) of the Act before the formula is replaced by the following

(i) from a disposition of capital property that is qualified farm property or qualified fishing property of the beneficiary equal to the amount determined by the formula

(2) The description of C in paragraph 104(21.2)(b) of the Act is replaced by the following:

C      is the amount, if any, that would be determined under paragraph 3(b) for the designation year in respect of the trust’s capital gains and capital losses if the only properties referred to in that paragraph were qualified farm properties or qualified fishing properties of the trust disposed of by it after 1984,

(3) The description of F in paragraph 104(21.2)(b) of the Act is replaced by the following:

F      is the amount, if any, that would be determined under paragraph 3(b) for the designation year in respect of the trust’s capital gains and capital losses if the only properties referred to in that paragraph were qualified small business corporation shares of the trust, other than qualified farm property or qualified fishing property, disposed of by it after June 17, 1987,

4. Subsection 108(1) of the Act is amended by adding the following in alphabetical order:

5. (1) Paragraph (b) of the description of A in the definition “annual gains limit” in subsection 110.6(1) of the Act is replaced by the following:

(b) the amount that would be determined in respect of the individual for the year under paragraph 3(b) in respect of capital gains and losses if the only properties referred to in that paragraph were qualified farm properties or qualified fishing properties disposed of by the individual after 1984 and qualified small business corporation shares disposed of by the individual after June 17, 1987, and

(2) The definitions “interest in a family farm partnership”, “qualified farm property” and “share of the capital stock of a family farm corporation” in subsection 110.6(1) of the Act are replaced by the following:

“interest in a family farm partnership or a family fishing partnership” of an individual (other than a trust that is not a personal trust) at any time means an interest owned by the individual at that time in a partnership where

(a) throughout any 24-month period ending before that time, more than 50% of the fair market value of the property of the partnership was attributable to

(i) property that was used by

(A) the partnership,

(B) the individual,

(C) where the individual is a personal trust, a beneficiary of the trust,

(D) a spouse, common-law partner, child or parent of the individual or of a beneficiary referred to in clause (C), or

(E) a corporation a share of the capital stock of which was a share of the capital stock of a family farm corporation or a family fishing corporation of the individual, a beneficiary referred to in clause (C) or a spouse, common-law partner, child or parent of the individual or of a beneficiary referred to in clause (C),

principally in the course of carrying on the business of farming or fishing in Canada in which the individual, a beneficiary referred to in clause (C) or a spouse, common-law partner, child or parent of the individual or of a beneficiary referred to in clause (C) was actively engaged on a regular and continuous basis,

(ii) shares of the capital stock or indebtedness of one or more corporations all or substantially all of the fair market value of the property of which was attributable to properties described in subparagraph (iii), or

(iii) properties described in either subparagraph (i) or (ii), and

(b) at that time, all or substantially all of the fair market value of the property of the partnership was attributable to

(i) property that was used principally in the course of carrying on the business of farming or fishing in Canada by the partnership or a person referred to in subparagraph (a)(i),

(ii) shares of the capital stock or indebtedness of one or more corporations described in subparagraph (a)(ii), or

(iii) properties described in subparagraph (i) or (ii);

“qualified farm property or qualified fishing property” of an individual (other than a trust that is not a personal trust) at any particular time means a property owned at that time by the individual, the spouse or common-law partner of the individual or a partnership, an interest in which is an interest in a family farm partnership or a family fishing partnership of the individual or the individual’s spouse or common-law partner that is

(a) real property that was used by

(i) the individual,

(ii) where the individual is a personal trust, a beneficiary referred to in paragraph 104(21.2)(b) of the trust,

(iii) a spouse, common-law partner, child or parent of a person referred to in subparagraph (i) or (ii),

(iv) a corporation, a share of the capital stock of which is a share of the capital stock of a family farm corporation or a family fishing corporation of an individual referred to in any of subparagraphs (i) to (iii), or

(v) a partnership, an interest in which is an interest in a family farm partnership or a family fishing partnership of an individual referred to in any of subparagraphs (i) to (iii),

in the course of carrying on the business of farming or fishing in Canada and, for the purpose of this paragraph, property will not be considered to have been used in the course of carrying on the business of farming or fishing in Canada unless

(vi) the property or property for which the property was substituted (in this subparagraph referred to as “the property”) was owned by a person who was the individual, a beneficiary referred to in subparagraph (ii) or a spouse, common-law partner, child or parent of the individual or of such a beneficiary, by a personal trust from which the individual acquired the property or by a partnership referred to in subparagraph (v) throughout the period of at least 24 months immediately preceding that time and

(A) in at least 2 years while the property was so owned the gross revenue of such a person, or of a personal trust from which the individual acquired the property, from the farming or fishing business carried on in Canada in which the property was principally used and in which such a person or, where the individual is a personal trust, a beneficiary of the trust was actively engaged on a regular and continuous basis exceeded the income of the person from all other sources for the year, or

(B) the property was used by a corporation referred to in subparagraph (iv) or a partnership referred to in subparagraph (v) principally in the course of carrying on the business of farming or fishing in Canada throughout a period of at least 24 months during which time the individual, a beneficiary referred to in subparagraph (ii) or a spouse, common-law partner, child or parent of the individual or of such a beneficiary was actively engaged on a regular and continuous basis in the farming or fishing business in which the property was used, or

(vii) where the property is a property last acquired by the individual or partnership before June 18, 1987, or after June 17, 1987 under an agreement in writing entered into before that date, the property or property for which the property was substituted (in this subparagraph referred to as “the property”) was used by the individual, a beneficiary referred to in subparagraph (ii) or a spouse, common-law partner, child or parent of the individual or of such a beneficiary, a corporation referred to in subparagraph (iv) or a partnership referred to in subparagraph (v) or by a personal trust from which the individual acquired the property principally in the course of carrying on the business of farming or fishing in Canada

(A) in the year the property was disposed of by the individual, or

(B) in at least 5 years during which the property was owned by the individual, a beneficiary referred to in subparagraph (ii) or a spouse, common-law partner, child or parent of the individual or of such a beneficiary, by a personal trust from which the individual acquired the property or by a partnership referred to in subparagraph (v),

(b) a share of the capital stock of a family farm corporation or a family fishing corporation of the individual or the individual’s spouse or common-law partner,

(c) an interest in a family farm partnership or a family fishing partnership of the individual or the individual’s spouse or common-law partner, or

(d) an eligible capital property used by a person or partnership referred to in any of subparagraphs (a)(i) to (v), or by a personal trust from which the individual acquired the property, in the course of carrying on the business of farming or fishing in Canada and, for the purpose of this paragraph, eligible capital property

(i) will not be considered to have been used in the course of carrying on the business of farming or fishing in Canada unless the conditions set out in subparagraph (a)(vi) or (vii), as the case may be, are met, and

(ii) shall be deemed to include capital property to which paragraph 70(5.1)(b) or 73(3)(d.1) applies;

“share of the capital stock of a family farm corporation or a family fishing corporation” of an individual (other than a trust that is not a personal trust) at any time means a share of the capital stock of a corporation owned by the individual at that time where

(a) throughout any 24-month period ending before that time, more than 50% of the fair market value of the property owned by the corporation was attributable to

(i) property that was used by

(A) the corporation,

(B) the individual,

(C) where the individual is a personal trust, a beneficiary of the trust,

(D) a spouse, common-law partner, child or parent of the individual or of a beneficiary referred to in clause (C), or

(E) a partnership, an interest in which was an interest in a family farm partnership or family fishing partnership of the individual, a beneficiary referred to in clause (C) or a spouse, common-law partner, child or parent of the individual or of such a beneficiary,

principally in the course of carrying on the business of farming or fishing in Canada in which the individual, a beneficiary referred to in clause C or a spouse, common-law partner, child or parent of the individual or of such a beneficiary, was actively engaged on a regular and continuous basis,

(ii) shares of the capital stock or indebtedness of one or more corporations all or substantially all of the fair market value of the property of which was attributable to property described in subparagraph (iii), or

(iii) properties described in either subparagraph (i) or (ii), and

(b) at that time, all or substantially all of the fair market value of the property owned by the corporation was attributable to

(i) property that was used principally in the course of carrying on the business of farming or fishing in Canada by the corporation or a person or partnership referred to in subparagraph (a)(i),

(ii) shares of the capital stock or indebtedness of one or more corporations all or substantially all of the fair market value of the property of which was attributable to property described in subparagraph (iii), or

(iii) properties described in either subparagraph (i) or (ii).

(3) The portion of subsection 110.6(2) of the Act before paragraph (a) is replaced by the following:

(2) In computing the taxable income for a taxation year of an individual (other than a trust) who was resident in Canada throughout the year and who disposed of qualified farm property or qualified fishing property in the year or a preceding taxation year ending after 1984, there may be deducted such amount as the individual may claim not exceeding the least of

(4) Paragraph 110.6(12)(b) of the Act is replaced by the following:

(b) the amount, if any, that would be determined in respect of the trust for that year under paragraph 3(b) in respect of capital gains and capital losses if the only properties referred to in that paragraph were qualified farm properties or qualified fishing properties disposed of by it after 1984 and qualified small business corporation shares disposed of by it after June 17, 1987, and