Bill C-10

2nd Session, 39th Parliament,

56 Elizabeth II, 2007

house of commons of canada

BILL C-10

An Act to amend the Income Tax Act, including amendments in relation to foreign investment entities and non-resident trusts, and to provide for the bijural expression of the provisions of that Act

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

SHORT TITLE

1. This Act may be cited as the Income Tax Amendments Act, 2006.

PART 1

AMENDMENTS TO THE INCOME TAX ACT (FOREIGN INVESTMENT ENTITIES AND NON-RESIDENT TRUSTS) AND ANOTHER ACT AS A CONSEQUENCE

Income Tax Act

2. (1) Paragraph 12(1)(k) of the Income Tax Act is replaced by the following:

(k) any amount required by subdivision i to be included in computing the taxpayer’s income for the year;

(2) Subsection (1) applies to taxation years that begin after 2006, except that that subsection also applies to a taxation year of a taxpayer that begins before 2007 if sections 94.1 to 94.4 of the Act, as enacted by subsection 18(1), apply to that taxation year of the taxpayer.

3. (1) The portion of subsection 12.2(11) of the Act before the definition “anniversary day” is replaced by the following:

(11) The definitions in this subsection apply in this section and in paragraph 94.2(11)(c), and in paragraph 56(1)(d.1) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952.

(2) Subsection (1) applies after 2006, except that that subsection also applies to a taxation year of a taxpayer that begins before 2007 if sections 94.1 to 94.4 of the Act, as enacted by subsection 18(1), apply to that taxation year of the taxpayer.

4. (1) The definition “controlled foreign affiliate” in subsection 17(15) of the Act is replaced by the following:

“controlled foreign affiliate” has the meaning that would be assigned by the definition “controlled foreign affiliate” in subsection 95(1) if this Act were read without reference to paragraph 94.1(2)(h) and if paragraphs (d) and (e) of that definition were read as follows:

“(d) one or more persons resident in Canada with whom the taxpayer does not deal at arm’s length, or

(e) the taxpayer and one or more persons resident in Canada with whom the taxpayer does not deal at arm’s length.”

(2) Subsection (1) applies after 2006, except that that subsection also applies to a taxation year of a taxpayer that begins before 2007 if sections 94.1 to 94.4 of the Act, as enacted by subsection 18(1), apply to that taxation year of the taxpayer.

5. (1) Paragraph 39(1)(a) of the Act is amended by adding the following after subparagraph (ii.2):

(ii.3) a property in respect of which

(A) subsection 94.2(3) applies to the taxpayer for the year, and

(B) subsection 94.2(20) does not apply to the taxpayer for the year,

(2) Subsection (1) applies to dispositions that occur after 2006, except that that subsection also applies to dispositions of a taxpayer that occur in a taxation year of the taxpayer that begins before 2007 if sections 94.1 to 94.4 of the Act, as enacted by subsection 18(1), apply to that taxation year of the taxpayer.

6. (1) Paragraph 51(1)(a) of the French version of the Act is replaced by the following:

(2) Paragraph 51(1)(c) of the English version of the Act is replaced by the following:

(c) except for the purposes of subsections 20(21) and 44.1(6) and (7) and paragraph 94(2)(m), the exchange is deemed not to be a disposition of the convertible property,

(3) Subsection 51(4) of the Act is replaced by the following:

(4) Subsections (1) and (2) do not apply to

(a) any exchange to which subsection 85(1) or (2) or section 86 applies; and

(b) any exchange of property if that property was, immediately before the exchange, a specified participating interest.

(4) Subsections (1) and (2) apply to taxation years of a taxpayer that begin after 1999, except that, for any taxation year of the taxpayer that begins before 2007 in respect of which paragraph 94(2)(m) of the Act, as enacted by subsection 17(1), does not apply to the taxpayer,

(a) paragraph 51(1)(a) of French version of the Act, as amended by subsection (1), shall be read without reference to the expression “et de l’alinéa 94(2)m)”; and

(b) paragraph 51(1)(c) of English version of the Act, as amended by subsection (2), shall be read without reference to the expression “and paragraph 94(2)(m)”.

(5) Subsection (3) applies to exchanges that occur in taxation years that begin after 2006, except that that subsection also applies in respect of a taxpayer to exchanges that occur in a taxation year of the taxpayer that begins before 2007 if sections 94.1 to 94.4 of the Act, as enacted by subsection 18(1), apply to that taxation year of the taxpayer.

7. (1) Subsection 52(1) of the Act is replaced by the following:

52. (1) In applying this subdivision, an amount shall be added in computing the cost at any time to a taxpayer of a property if

(a) the taxpayer acquired the property after 1971;

(b) the amount was not at or before that time otherwise added to the cost, or included in computing the adjusted cost base, to the taxpayer of the property;

(c) the property is not an annuity contract, a right as a beneficiary under a trust to enforce payment of an amount by the trust to the taxpayer, property acquired in circumstances to which subsection (2) or (3) applies, or property acquired from a trust in satisfaction of all or part of the taxpayer’s capital interest in the trust; and

(d) an amount in respect of the property’s value was

(i) included, otherwise than under section 7 or subsection 94.2(4), in computing

(A) the taxpayer’s taxable income or taxable income earned in Canada, as the case may be, for a taxation year during which the taxpayer was non-resident, or

(B) the taxpayer’s income for a taxation year throughout which the taxpayer was resident in Canada, or

(ii) for the purpose of computing the tax payable under Part XIII by the taxpayer, included in an amount that was paid or credited to the taxpayer.

(2) Subsection (1) applies to taxation years that begin after 2006, except that that subsection also applies to a taxation year of a taxpayer that begins before 2007 if sections 94.1 to 94.4 of the Act, as enacted by subsection 18(1), apply to that taxation year of the taxpayer.

8. (1) Paragraph 53(1)(d.1) of the Act is replaced by the following:

(d.1) any amount required by paragraph 94(5)(a) (as that paragraph read in its application to taxation years that include December 31, 2000) to be added in computing the adjusted cost base to the taxpayer of the property;

(2) Paragraph 53(1)(m) of the Act is replaced by the following:

(m) where the property is, at or before that time, an offshore investment fund property (as defined in subsection 94.1(1) as it applied to taxation years of the taxpayer that began before 2007 or, if this paragraph applies to the taxpayer for a taxation year preceding the taxpayer’s first taxation year beginning after 2006, as it applied to taxation years of the taxpayer that began before the taxpayer’s first taxation year to which this paragraph applied) or a participating interest in a foreign investment entity,

(i) if the taxpayer is, at that time, resident in Canada, any amount in respect of the property included, for a taxation year that began before that time, in computing the taxpayer’s income,

(A) under subsection 94.1(1) (as that subsection read in its application to the property in respect of the taxpayer for taxation years of the taxpayer that began before 2007 or, if this clause applies to the taxpayer for a taxation year preceding the taxpayer’s first taxation year beginning after 2006, as it applied to taxation years of the taxpayer that began before the taxpayer’s first taxation year to which this clause applied), or

(B) under subsection 94.1(4), or

(ii) if the taxpayer (referred to in this subparagraph as the “controlled foreign affiliate”) is, at that time, a controlled foreign affiliate of a particular taxpayer resident in Canada, for the purposes of computing any gain or loss of the controlled foreign affiliate from the disposition of the property that is to be included in computing the foreign accrual property income of the controlled foreign affiliate in respect of the particular taxpayer, any amount included in computing the controlled foreign affiliate’s foreign accrual property income in respect of the particular taxpayer for a taxation year that began before that time,

(A) because of subsection 94.1(1) and the description of C in the definition “foreign accrual property income” in subsection 95(1) (as those subsections read in their application to the controlled foreign affiliate in respect of the property for taxation years of the controlled foreign affiliate that began before 2007 or, if this clause applies to the controlled foreign affiliate for a taxation year preceding the controlled foreign affiliate’s first taxation year beginning after 2006, as those subsections read in their application to taxation years of the controlled foreign affiliate that began before the controlled foreign affiliate’s first taxation year to which this clause applied), or

(B) because of subsection 94.1(4) and paragraph 95(2)(g.3);

(m.1) where the property is, at or before that time, a participating interest in a foreign investment entity,

(i) if the taxpayer is, at that time, resident in Canada, any amount required by subsection 94.3(5) to be added, at or before that time, in computing the adjusted cost base to the taxpayer of the property, or

(ii) if the taxpayer (referred to in this subparagraph as the “controlled foreign affiliate”) is, at that time, a controlled foreign affiliate of a particular taxpayer resident in Canada, for the purposes of computing any gain or loss of the controlled foreign affiliate from the disposition of the property that is to be included in computing the foreign accrual property income of the controlled foreign affiliate in respect of the particular taxpayer, any amount required by subsection 94.3(5) to be added, at or before that time, in computing the adjusted cost base to the controlled foreign affiliate of the property in respect of any amount included, because of subsection 94.3(4) and paragraph 95(2)(g.3), in computing the controlled foreign affiliate’s foreign accrual property income in respect of the particular taxpayer for a taxation year that began before that time;

(3) Paragraph 53(2)(b.1) of the Act is replaced by the following:

(b.1) any amount required by paragraph 94(5)(b) (as that paragraph read in its application to taxation years that include December 31, 2000) to be deducted in computing the adjusted cost base to the taxpayer of the property;

(4) Subsection 53(2) of the Act is amended by striking out the word “and” at the end of paragraph (u), by adding the word “and” at the end of paragraph (v) and by adding the following after paragraph (v):

(w) where the property is, at or before that time, a participating interest in a foreign investment entity,

(i) if the taxpayer is, at that time, resident in Canada, any amount required by paragraph 94.3(5)(b) or 94.4(2)(b) to be deducted, at or before that time, in computing the adjusted cost base to the taxpayer of the property, or

(ii) if the taxpayer (referred to in this subparagraph as the “controlled foreign affiliate”) is, at that time, a controlled foreign affiliate of a particular taxpayer resident in Canada, for the purposes of computing any gain or loss of the controlled foreign affiliate from the disposition of the property that is to be included in computing the controlled foreign affiliate’s foreign accrual property income in respect of the particular taxpayer, any amount required by paragraph 94.3(5)(b) or 94.4(2)(b) to be deducted, at or before that time, in computing the adjusted cost base to the controlled foreign affiliate of the property in respect of an amount deducted, because of subsection 94.3(4) or 94.4(2) and paragraph 95(2)(g.3), in computing the foreign accrual property income of the controlled foreign affiliate in respect of the particular taxpayer.

(5) Subsections (1) to (4) apply to taxation years that begin after 2006. Subsections (1) and (3) also apply to

(a) taxation years of a taxpayer that begin after 2000 if a trust, in which the taxpayer had a capital interest at any time in 2001, makes a valid election under paragraph 17(2)(a) of this Act;

(b) taxation years of a taxpayer that begin after 2001 if a trust, in which the taxpayer had a capital interest at any time in 2002, makes a valid election under paragraph 17(2)(a) or (b) of this Act;

(c) taxation years of a taxpayer that begin after 2002 if a trust, in which the taxpayer had a capital interest at any time in 2003, makes a valid election under any of paragraphs 17(2)(a) to (c) of this Act;

(d) taxation years of a taxpayer that begin after 2003 if a trust, in which the taxpayer had a capital interest at any time in 2004, makes a valid election under any of paragraphs 17(2)(a) to (d) of this Act;

(e) taxation years of a taxpayer that begin after 2004 if a trust, in which the taxpayer had a capital interest at any time in 2005, makes a valid election under any of paragraphs 17(2)(a) to (e) of this Act; and

(f) taxation years of a taxpayer that begin after 2005 if a trust, in which the taxpayer had a capital interest at any time in 2006, makes a valid election under any of paragraphs 17(2)(a) to (f) of this Act.

Subsections (2) and (4) also apply to a taxation year of a taxpayer that begins before 2007 if sections 94.1 to 94.4 of the Act, as enacted by subsection 18(1), apply to that taxation year of the taxpayer.

9. (1) Subsection 70(3.1) of the Act is replaced by the following:

(3.1) In this section, “rights or things” in respect of an individual do not include

(a) an interest in a life insurance policy (other than an annuity contract the payment for which was deductible in computing the individual’s income under paragraph 60(l) or was made in circumstances in which subsection 146(21) applied);

(b) eligible capital property;

(c) land included in the inventory of a business;

(d) a Canadian resource property;

(e) a foreign resource property; or

(f) property in respect of which subsection 94.2(3) applies (and subsection 94.2(20) does not apply) to the individual for the individ- ual’s taxation year in which the individual dies.

(2) Subsection 70(5.2) of the Act is replaced by the following:

(5.2) If in a taxation year a taxpayer dies,

(a) the taxpayer is deemed

(i) to have disposed, at the time that is immediately before the taxpayer’s death, of each

(A) Canadian resource property of the taxpayer,

(B) foreign resource property of the taxpayer,

(C) property that was land included in the inventory of a business of the taxpayer, and

(D) property in respect of which subsection 94.2(3) applies (and subsection 94.2(20) does not apply) to the taxpayer for the taxation year, and

(ii) subject to paragraph (c), to have received at that time proceeds of disposition for each such property equal to its fair market value at that time;

(b) any person who, as a consequence of the taxpayer’s death, acquires a property that is deemed by paragraph (a) to have been disposed of by the taxpayer is, subject to paragraph (c), deemed to have acquired the property at the time of the death at a cost equal to its fair market value at the time that is immediately before the death; and

(c) where the taxpayer was resident in Canada at the time that is immediately before the taxpayer’s death, a particular property described in clause (a)(i)(A), (B) or (C) is, on or after the death and as a consequence of the death, transferred or distributed to a spouse or common-law partner of the taxpayer described in paragraph (6)(a) or a trust described in paragraph (6)(b), and it can be shown within the period that ends 36 months after the death (or, where written application has been made to the Minister by the taxpayer’s legal representative within that period, within any longer period that the Minister considers reasonable in the circumstances) that the particular property has, within that period, vested indefeasibly in the spouse, common-law partner or trust, as the case may be,

(i) the taxpayer is deemed to have received, at the time that is immediately before the taxpayer’s death, proceeds of disposition of the particular property equal to

(A) where the particular property is Canadian resource property of the taxpayer or foreign resource property of the taxpayer, the amount specified by the taxpayer’s legal representative in the taxpayer’s return of income filed under paragraph 150(1)(b), not exceeding its fair market value at that time, and

(B) where the particular property was land included in the inventory of a business of the taxpayer, its cost amount to the taxpayer at that time, and

(ii) the spouse, common-law partner or trust, as the case may be, is deemed to have acquired at the time of the death the particular property at a cost equal to the amount determined under subparagraph (i) in respect of the disposition of it under paragraph (a).

(3) Subsections (1) and (2) apply to taxation years that begin after 2006, except that those subsections also apply to a taxation year of a taxpayer that begins before 2007 if sections 94.1 to 94.4 of the Act, as enacted by subsection 18(1), apply to that taxation year of the taxpayer.

10. (1) The portion of subsection 73(1) of the Act before paragraph (a) is replaced by the following:

73. (1) For the purposes of this Part, where at any time any particular capital property (other than a specified participating interest) of an individual (other than a trust) has been transferred in circumstances to which subsection (1.01) applies and both the individual and the transferee are resident in Canada at that time, unless the individual elects in the individual’s return of income under this Part for the taxation year in which the particular property was transferred that the provisions of this subsection not apply, the particular property is deemed

(2) Subsection (1) applies to transfers that occur in taxation years that begin after 2006, except that that subsection also applies in respect of a taxpayer to transfers that occur in a taxation year of the taxpayer that begins before 2007 if sections 94.1 to 94.4 of the Act, as enacted by subsection 18(1), apply to that taxation year of the taxpayer.

11. (1) Subsection 75(3) of the Act is amended by striking out the word “or” at the end of paragraph (c.1) and by adding the following after paragraph (c.1):

(c.2) by a trust that is non-resident, for the purpose of computing its income for the year, because a contributor (as defined by subsection 94(1)) to the trust is an individual (other than a trust) who is, at the end of the year, resident in Canada and has, at the end of the year, been resident in Canada for a period of, or for periods the total of which is, not more than 60 months; or

(2) Subsection (1) applies to trust taxation years that begin after 2000 except that, for trust taxation years that begin in 2001, 2002, 2003, 2004, 2005 or 2006, paragraph 75(3)(c.2) of the Act, as enacted by subsection (1), shall be read as follows:

(c.2) by a trust that is non-resident, for the purpose of computing its income for the year, because a contributor (as defined by subsection 94(1) as it reads in its application to taxation years that begin after 2006) to the trust is an individual (other than a trust) who is, at the end of the year, resident in Canada and has, at the end of the year, been resident in Canada for a period of, or for periods the total of which is, not more than 60 months; or

12. (1) Subsection 85(1.11) of the Act is replaced by the following:

(1.11) Notwithstanding subsection (1.1), the following property is not an eligible property of a taxpayer in respect of a disposition of the property in a taxation year by the taxpayer to a corporation:

(a) a foreign resource property, or an interest in a partnership that derives all or part of its value from one or more foreign resource properties, if

(i) the taxpayer and the corporation do not deal with each other at arm’s length, and

(ii) it is reasonable to conclude that one of the purposes of the disposition, or a series of transactions or events of which the disposition is a part, is to increase the extent to which any person may claim a deduction under section 126; and

(b) a specified participating interest.

(2) Subsection (1) applies to taxation years that begin after 2006, except that that subsection also applies to a taxation year of a taxpayer that begins before 2007 if sections 94.1 to 94.4 of the Act, as enacted by subsection 18(1), apply to that taxation year of the taxpayer.

13. (1) Subsection 85.1(4) of the Act is replaced by the following:

(4) Subsection (3) does not apply in respect of a disposition at any time by a taxpayer of property that is

(a) a share of the capital stock of a foreign affiliate, all or substantially all of the property of which at that time was excluded property (within the meaning assigned by subsection 95(1)), to another foreign affiliate of the taxpayer where the disposition is part of a series of transactions or events for the purpose of disposing of the share to a person who, immediately after the series of transactions or events, was a person (other than a foreign affiliate of the taxpayer) with whom the taxpayer was dealing at arm’s length; or

(b) a specified participating interest.

(2) Subsection 85.1(6) of the Act is amended by striking out the word “or” at the end of paragraph (d), by adding the word “or” at the end of paragraph (e) and by adding the following after paragraph (e):

(f) the exchanged foreign shares were, immediately before the exchange, specified participating interests.

(3) Subsections (1) and (2) apply to dispositions and exchanges that occur in taxation years that begin after 2006, except that those subsections also apply to dispositions or exchanges in respect of a taxpayer that occur in a taxation year of the taxpayer that begins before 2007 if sections 94.1 to 94.4 of the Act, as enacted by subsection 18(1), apply to that taxation year of the taxpayer.

14. (1) Subsection 86(3) of the Act is replaced by the following:

(3) Subsections (1) and (2) do not apply

(a) to any disposition to which subsection 85(1) or (2) applies; and

(b) to any disposition of property that was, immediately before the disposition, a specified participating interest.

(2) Subsection (1) applies to dispositions that occur in taxation years that begin after 2006, except that that subsection also applies in respect of a taxpayer to dispositions that occur in a taxation year of the taxpayer that begins before 2007 if sections 94.1 to 94.4 of the Act, as enacted by subsection 18(1), apply to that taxation year of the taxpayer.

15. (1) Subsection 87(2) of the Act is amended by adding the following after paragraph (j.94):

(j.95) for the purposes of sections 94 to 94.4, the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;

(2) Subsection (1) applies to taxation years that begin after 2000.

16. (1) Subsection 91(1) of the Act is replaced by the following:

91. (1) In computing the income for a particular taxation year of a taxpayer resident in Canada, there shall be included, in respect of each share owned by the taxpayer of the capital stock of a controlled foreign affiliate of the taxpayer, as income from the share, the percentage of the foreign accrual property income of any controlled foreign affiliate of the taxpayer, for each taxation year of the affiliate that ends in the particular taxation year, equal to that share’s participating percentage in respect of the affiliate determined

(a) at the end of each such taxation year of the affiliate; and

(b) without regard to each share in respect of which subsection 94.2(9) applies to the taxpayer for the particular taxation year.

(2) Subparagraph 91(4)(a)(ii) of the Act is replaced by the following:

(ii) the taxpayer’s relevant tax factor for the year, and

(3) Subsection (1) applies to taxation years that begin after 2006, except that that subsection also applies to a taxation year of a taxpayer that begins before 2007 if sections 94.1 to 94.4 of the Act, as enacted by subsection 18(1), apply to that taxation year of the taxpayer.

(4) Subsection (2) applies to the 2002 and subsequent taxation years.

17. (1) Section 94 of the Act is replaced by the following:

Treatment of Trusts with Canadian Contributors

94. (1) The definitions in this subsection apply in this section.

“arm’s length transfer”, at any time by an entity (referred to in this definition as the “transferor”) means a transfer or loan (which transfer or loan is referred to in this definition as the “transfer”) of property (other than a restricted property) that is made at that time (referred to in this definition as the “transfer time”) by the transferor to a particular entity (referred to in this definition as the “recipient”) where

(a) it is reasonable to conclude that none of the reasons (determined by reference to all the circumstances including the terms of a trust, an intention, the laws of a country or the existence of an agreement, a memorandum, a letter of wishes or any other arrangement) for the transfer is the acquisition at any time by any entity of an interest as a beneficiary under a non-resident trust; and

(b) the transfer

(i) is a payment of interest, of a dividend, of rent, of a royalty or of any other return on investment, or any substitute for such a return on investment, in respect of a particular property held by the recipient, if

(A) the transfer is not a transfer described in paragraph (2)(g), or the transfer is a transfer described in paragraph (2)(g) that is an acquisition by the recipient of

(I) a unit of a mutual fund trust or of a trust that would be a mutual fund trust if section 4801 of the Income Tax Regulations were read without reference to paragraph 4801(b),

(II) a share of the capital stock of a mutual fund corporation, or

(III) a particular share of the capital stock of a corporation (other than a closely-held corporation) which par- ticular share is identical to a share that is, at the transfer time, of a class that is listed on a prescribed stock exchange, and

(B) the fair market value of the property, at the transfer time, is not more than the amount that the transferor would have transferred at the transfer time in respect of the particular property to the recipient if the transferor dealt at arm’s length with the recipient,

(ii) is a payment made by a corporation on a reduction of the paid-up capital in respect of shares of a class of its capital stock held by the recipient, if

(A) the transfer is not a transfer described in paragraph (2)(g), and

(B) the amount of the payment is not more than the lesser of the amount of the reduction and the consideration for which the shares were issued,

(iii) is a refund in whole or in part of a gift that the recipient made to the transferor, if the recipient is a trust and the transferor is at the transfer time a specified charity in respect of the recipient,

(iv) is a transfer

(A) in exchange for which, the recipient transfers or loans property (other than a restricted property) to the transferor, or becomes obligated to transfer or loan property (other than a restricted property) to the transferor, and

(B) for which it is reasonable to conclude

(I) having regard only to the transfer and the exchange, that the transferor would have been willing to make the transfer if the transferor dealt at arm’s length with the recipient, and

(II) that the terms and conditions, and circumstances, under which the transfer was made would have been acceptable to the transferor if the transferor dealt at arm’s length with the recipient,

(v) is made in satisfaction of an obligation that arose because of a transfer to which subparagraph (iv) applied, if

(A) the transfer is not a transfer described in paragraph (2)(g),

(B) the transferor would have been willing to make the transfer if the transferor dealt at arm’s length with the recipient, and

(C) the terms and conditions, and circumstances, under which the transfer was made would have been acceptable to the transferor if the transferor dealt at arm’s length with the recipient,

(vi) is a payment of an amount owing by the transferor under a written agreement the terms and conditions of which, when entered into, were terms and conditions that, having regard only to the amount owing and the agreement, persons dealing at arm’s length with each other would have entered into, if the transfer is not a transfer described in paragraph (2)(g),

(vii) is a payment made before 2002 to a trust, to a corporation controlled by the trust or to a partnership of which the trust is a majority interest partner in repayment of or otherwise in respect of a particular loan made by the trust, corporation or partnership to the transferor, or

(viii) is a payment made after 2001 to a trust, to a corporation controlled by the trust or to a partnership of which the trust is a majority interest partner, in repayment of or otherwise in respect of a particular loan made by the trust, corporation or partnership to the transferor and either

(A) they would have been willing to enter into the particular loan if they dealt at arm’s length with each other and the payment is not a transfer described in paragraph (2)(g), or

(B) the payment is made before 2005 in accordance with fixed repayment terms agreed to before June 23, 2000.

“beneficiary”, under a trust, includes

(a) an entity that is beneficially interested in the trust; and

(b) an entity that would be beneficially interested in the trust if

(i) each reference in subsection 248(25) to “person” were read as a reference to “entity (as defined by subsection 94(1))”, and

(ii) the reference in subparagraph 248(25)(b)(ii) to

(A) “any arrangement in respect of the particular trust” were read as a reference to “any arrangement (including, for greater certainty, the terms or conditions of a share, or any arrangement in respect of a share, of the capital stock of a corporation that is beneficially interested in the particular trust) in respect of the particular trust”, and

(B) “the particular person or partnership might” were read as a reference to “the particular person or partnership becomes (or could become on the exercise of any discretion by any entity), directly or indirectly, entitled to any amount derived, directly or indirectly, from the income or capital of the particular trust or might”.

“closely-held corporation”, at any time, means a corporation, other than a corporation in respect of which

(a) there is at least one class of shares of its capital stock that includes shares prescribed for the purpose of paragraph 110(1)(d);

(b) it is reasonable to conclude that at that time, in respect of each class of shares described by paragraph (a), shares of the class are held by at least 150 entities each of whom holds shares, of the class, that have a total fair market value of at least $500; and

(c) it is reasonable to conclude that at that time in no case does a particular entity (or the particular entity together with any other entity with whom the particular entity does not deal at arm’s length) hold shares of the capital stock of the corporation

(i) that would give the particular entity (or the particular entity together with those other entities) 10% or more of the votes that could be cast under any circumstance at an annual meeting of shareholders of the corporation if the meeting were held at that time, or

(ii) that have a fair market value of 10% or more of the fair market value of all of the issued and outstanding shares of the corporation.

“connected contributor”, to a trust at a particular time, means an entity (including an entity that has ceased to exist) that is a contributor to the trust at the particular time, other than an entity

(a) that is an individual (other than a trust) who was, at or before the particular time, resident in Canada for a period of, or periods the total of which is, not more than 60 months (but not including an individual who, before the particular time, was never non-resident); or

(b) all of whose contributions to the trust made at or before the particular time were made at a non-resident time of the entity.

“contribution”, to a trust by a particular entity, means

(a) a transfer or loan (other than an arm’s length transfer) of property to the trust by the particular entity;

(b) if a particular transfer or loan (other than an arm’s length transfer) of property is made by the particular entity as part of a series of transactions or events that includes another transfer or loan (other than an arm’s length transfer) of property to the trust by another entity, that other transfer or loan to the extent that it can reasonably be considered to have been made in respect of the particular transfer or loan; and

(c) if the particular entity becomes obligated to make a particular transfer or loan (other than a transfer or loan that would, if it were made, be an arm’s length transfer) of property as part of a series of transactions or events that includes another transfer or loan (other than an arm’s length transfer) of property to the trust by another entity, that other transfer or loan to the extent that it can reasonably be considered to have been made in respect of the obligation.

“contributor”, to a trust at any time, means an entity (including an entity that has ceased to exist) that, at or before that time, has made a contribution to the trust.

“eligible trust”, at any particular time, means a trust, other than a trust

(a) created or maintained for charitable purposes;

(b) governed by an employee benefit plan;

(c) described in paragraph (a.1) of the definition “trust” in subsection 108(1);

(d) governed by a salary deferral arrangement;

(e) operated for the purpose of administering or providing superannuation, pension, retirement or employee benefits;

(f) where the amount of income or capital that any entity may receive directly from the trust at any time as a beneficiary under the trust depends on the exercise by any entity of, or the failure by any entity to exercise, a discretionary power; or

(g) that has elected in writing filed with the Minister, on or before the trust’s filing-due date for the particular taxation year of the trust that includes the particular time (or for an earlier taxation year that ended before the particular time), that the definition “exempt foreign trust” in this subsection not apply to it for the particular taxation year (or for the earlier taxation year) and for all of its subsequent taxation years.

“entity” includes an association, a corporation, a fund, a natural person, a joint venture, an organization, a partnership, a syndicate and a trust.

“excluded property”, at any time, means a particular property held, loaned or transferred, as the case may be, at that time by a particular entity if at that time:

(a) the particular property is at that time

(i) a share of the capital stock of the corporation,

(ii) a specified fixed interest in the trust, or

(iii) an interest, as a member of the partnership, under which, by operation of any law governing the arrangement in respect of the partnership, the liability of the member as a member of the partnership is limited;

(b) there are at least 150 persons each of whom holds at that time property that at that time

(i) is identical to the particular property, and

(ii) has a total fair market value of at least $500;

(c) the total of all amounts each of which is the fair market value, at that time, of the particular property (or of identical property that is held, at that time, by the particular entity or an entity with whom the particular entity does not deal at arm’s length) does not exceed 10% of the total of all amounts each of which is the fair market value, at that time, of the particular property or of identical property held by any entity;

(d) property that is identical to the particular property can normally be acquired by and sold by members of the public in the open market; and

(e) the particular property, or identical property, is listed on a prescribed stock exchange.

“exempt amount”, in respect of a particular taxation year of a trust, means an amount that is

(a) paid or credited (in this definition within the meaning assigned by Part XIII) by the trust before 2004;

(b) paid or credited by the trust and referred to in paragraph 104(7.01)(b) in respect of the trust for the particular taxation year; or

(c) paid in the particular taxation year (or within 60 days after the end of the particular taxation year) by the trust directly to a beneficiary (determined without reference to subsection 248(25)) under the trust, if

(i) the beneficiary is a natural person none of whose interests as a beneficiary under the trust was ever acquired for consideration,

(ii) the amount is described in subparagraph 212(1)(c)(i) and is not included in computing an exempt amount in respect of any other taxation year of the trust,

(iii) the trust was created before October 30, 2003, and

(iv) no contribution has been made to the trust on or after July 18, 2005.

“exempt foreign trust”, at a particular time, means

(a) a non-resident trust, if

(i) each beneficiary under the trust at the particular time is

(A) an individual who, at the time that the trust was created, was, because of mental or physical infirmity, dependent on an individual who is a contributor to the trust or on an individual related to such a contributor (which beneficiary is referred to in this paragraph as an “infirm beneficiary”), or

(B) a person who is entitled, only after the particular time, to receive or otherwise obtain the use of any of the trust’s income or capital,

(ii) at the particular time there is at least one infirm beneficiary who suffers from a mental or physical infirmity that causes the beneficiary to be dependent on a person,

(iii) each infirm beneficiary is, at all times that the infirm beneficiary is a beneficiary under the trust during the trust’s taxation year that includes the particular time, non-resident, and

(iv) each contribution to the trust made at or before the particular time can reasonably be considered to have been, at the time that the contribution was made, made to provide for the maintenance of an infirm beneficiary during the expected period of the beneficiary’s infirmity;

(b) a non-resident trust, if

(i) the trust was created as a consequence of the breakdown of a marriage or common-law partnership of two particular individuals to provide for the maintenance of a beneficiary under the trust who was, during that marriage or common-law partnership, a child of both of those particular individuals (which beneficiary is referred to in this paragraph as a “child beneficiary”),

(ii) each beneficiary under the trust at the particular time is

(A) a child beneficiary under 21 years of age,

(B) a child beneficiary under 31 years of age who is enrolled at any time in the trust’s taxation year that includes the particular time at an educational institution that is described in clause (v)(A) or (B), or

(C) a person who is entitled, only after the particular time, to receive or otherwise obtain the use of any of the trust’s income or capital,

(iii) each child beneficiary is, at all times that the child beneficiary is a beneficiary under the trust during the trust’s taxation year that includes the particular time, non-resident,

(iv) each contributor to the trust at the particular time was one of those particular individuals or a person related to one of those particular individuals, and

(v) each contribution to the trust, at the time that the contribution was made, was made to provide for the maintenance of a child beneficiary, while the child was either under 21 years of age, or was under 31 years of age and enrolled at an educational institution located outside Canada that is

(A) a university, college or other educational institution that provides courses at a post-secondary school level, or

(B) an educational institution that provides courses designed to furnish a person with skills for, or improve a person’s skills in, an occupation;

(c) a non-resident trust, if

(i) at the particular time, the trust is an agency of the United Nations,

(ii) at the particular time, the trust owns and administers a university described in paragraph (f) of the definition “total charitable gifts” in subsection 118.1(1), or

(iii) at any time in the trust’s taxation year that includes the particular time or at any time in the preceding calendar year, Her Majesty in right of Canada has made a gift to the trust;

(d) a non-resident trust

(i) that, throughout the particular period that began at the time it was created and ends at the particular time, would be non-resident if this Act were read without reference to subsection (1) as that subsection read in its application to taxation years that include December 31, 2000,

(ii) that was created exclusively for charitable purposes and has been operated, throughout the particular period, exclusively for charitable purposes,

(iii) if the particular time is more than 24 months after the day on which the trust was created, in respect of which, there is at the particular time a group of at least 20 persons (other than trusts) each of whom at the particular time

(A) is a contributor to the trust,

(B) exists, and

(C) deals with each of the others in the group at arm’s length,

(iv) the income of which (determined in accordance with the laws described in subparagraph (v)) for each of its taxation years that ends at or before the particular time would, if the income were not distributed and the laws described in subparagraph (v) did not apply, be subject to an income or profits tax in the country in which it was resident in each of those taxation years, and

(v) that was, for each of its taxation years that ends at or before the particular time, exempt under the laws of the country in which it was resident from the payment of income or profits tax to the government of that country in recognition of the charitable purposes for which the trust is operated;

(e) a non-resident trust that, throughout the trust’s taxation year that includes the par- ticular time, is a trust governed by an employees profit sharing plan, a retirement compensation arrangement or a foreign retirement arrangement;

(f) a non-resident trust, if

(i) throughout the particular period that began when it was created and ends at the particular time it has been operated exclusively for the purpose of administering or providing employee benefits,

(ii) throughout the trust’s taxation year that includes the particular time

(A) the trust is a trust governed by an employee benefit plan or is a trust described in paragraph (a.1) of the definition “trust” in subsection 108(1),

(B) the trust is maintained for the benefit of natural persons the majority of whom are non-resident, and

(C) where the particular time is after 2006, the trust holds no restricted property,

(iii) where the particular time is on or after November 9, 2006, and before 2007, throughout the trust’s taxation year that includes the particular time the trust holds no restricted property other than property that was held by the trust as restricted property on November 8, 2006, and

(iv) throughout the trust’s taxation year that includes the particular time, no benefits are provided under the trust, other than benefits in respect of qualifying services;

(g) a non-resident trust (other than a prescribed trust or a trust described in paragraph (a.1) of the definition “trust” in subsection 108(1)) that, throughout the particular period that began when it was created and ends at the particular time,

(i) has been resident in a particular country (other than Canada) the laws of which have, throughout the particular period,

(A) imposed an income or profits tax, and

(B) exempted the trust from the payment of income tax and profits tax to the government of that particular country in recognition of the purposes for which the trust is operated, and

(ii) has been operated exclusively for the purpose of administering or providing superannuation or pension benefits that are primarily in respect of services rendered, in the particular country, by natural persons who were at the time those services were rendered non-resident;

(h) a non-resident trust that is, at the particular time, an eligible trust under which

(i) the only beneficiaries that may for any reason receive, at or after the particular time and directly from the trust, any of the income or capital of the trust are entities that are, at the particular time, qualifying investors in respect of the trust, and

(ii) either

(A) the following conditions are met, namely

(I) there are at least 150 qualifying investors in respect of the trust each of whose specified fixed interests in the trust have at the particular time a fair market value of at least $500, and

(II) if the total fair market value at the particular time of the interests, of any class of specified fixed interests in the trust, held by a resident contributor to the trust or by any other entity with whom the resident contributor does not deal at arm’s length is more than 10% of the total fair market value of interests of that class, it is reasonable to conclude (determined by reference to all the circumstances including the terms of the trust, an intention, the laws of a country or the existence of an agreement, a memorandum, a letter of wishes or any other arrangement) that

1. where the resident contributor is at the particular time an indirect contributor to the trust, each other entity — that does not deal at arm’s length with the resident contributor and that is at the particular time a qualifying investor in respect of the trust and referred to as such in applying paragraph (c) of the definition “indirect contributor” in this subsection in determining that the resident contributor is an indi- rect contributor to the trust — is at the particular time a specified contributor to the trust, or

2. in any other case, the resident contributor is at the particular time a specified contributor to the trust, or

(B) the following conditions are met, namely,

(I) a prescribed form and a copy of the terms of the trust that apply at the particular time have been filed with the Minister by or on behalf of the trust on or before its filing due date for its taxation year that includes the particular time (or a later date that is acceptable to the Minister),

(II) it is reasonable to conclude (determined by reference to all the circumstances including the terms of the trust, an intention, the laws of a country or the existence of an agreement, a memorandum, a letter of wishes or any other arrangement) that each resident contributor (other than an indirect contributor) to the trust at the particular time is a specified contributor to the trust at the particular time,

(III) where the particular time is on or after November 9, 2006, and before 2007, throughout the trust’s taxation year that includes the particular time the trust holds no restricted property other than property that was held by the trust as restricted property on November 8, 2006, and

(IV) where the particular time is after 2006, throughout the trust’s taxation year that includes the particular time the trust holds no restricted property; or

(i) a trust that is, at the particular time, a prescribed trust or included in a prescribed class of trusts.

“exempt service” means a service rendered at any time by an entity (referred to in this definition as the “service provider”) to, for or on behalf of, another entity (referred to in this definition as a “recipient”) if

(a) the recipient is at that time a trust and the service relates to the administration of the trust; or

(b) the following conditions apply in respect of the service, namely,

(i) the service is rendered in the service provider’s capacity at that time as an employee or agent of the recipient,

(ii) in exchange for the service, the recipient transfers or loans property or becomes obligated to transfer or loan property, and

(iii) it is reasonable to conclude

(A) having regard only to the service and the exchange, that the service provider would be willing to carry out the service if the service provider were dealing at arm’s length with the recipient, and

(B) that the terms, conditions and circumstances under which the service is provided would be acceptable to the service provider if the service provider were dealing at arm’s length with the recipient.

“exempt taxpayer”, for a taxation year of the taxpayer, means

(a) a person whose taxable income for the taxation year is exempt from tax under this Part because of subsection 149(1) (otherwise than because of paragraph 149(1)(q.1), (t) or (z)); and

(b) an eligible trust that is resident in Canada at the end of the taxation year and under which

(i) the only beneficiaries that may for any reason receive, at any time and directly from the trust, any of the income or capital of the trust are persons that are qualifying investors in respect of the trust, and

(ii) each of those beneficiaries at each time in the taxation year is a person whose taxable income, for the period that includes all of those times in the taxation year, is exempt from tax under this Part because of subsection 149(1) (otherwise than because of paragraph 149(1)(q.1), (t) or (z)).

“indirect contributor”, to a trust at a particular time, means a particular entity that

(a) is at the particular time a contributor to the trust, but would not at the particular time be a contributor to the trust if this section were read without reference to paragraphs (b) and (c) of the definition “contribution” in this subsection and paragraphs (2)(l), (n) and (o);

(b) has at the particular time no rights (whether immediate or future, whether absolute or contingent or whether conditional on or subject to the exercise of any discretion by any entity) to receive directly from the trust any of the income or capital of the trust; and

(c) has at or before the particular time made a contribution to the trust

(i) because of a transfer of property to the trust by another entity that is at the particular time a qualifying investor in respect of the trust, in the case where the particular entity would not, at the particular time, be a contributor to the trust because of the transfer if this section were read without reference to paragraphs (b) and (c) of the definition “contribution” and to paragraph (2)(l), or

(ii) because of a transfer of property by another entity to the trust in exchange for property acquired from the trust if the acquisition was a transfer described in subparagraph (2)(g)(ii) or because of a contribution to the trust that is deemed by paragraph (2)(q) to have been made by another entity because of the acquisition by that other entity of a specified fixed interest in the trust in the case where

(A) the particular entity would not, at the particular time, be a contributor to the trust if this section were read without reference to paragraphs (b) and (c) of the definition “contribution” in this subsection and paragraphs (2)(n) and (o),

(B) as a result of the transfer or contribution by the other entity, the other entity acquired a specific fixed interest in the trust, and

(C) the other entity is, at the particular time, a qualifying investor in the trust.

“non-resident time”, of an entity in respect of a contribution to a trust and a particular time, means a time (referred to in this definition as the “contribution time”) at which the entity made a contribution to a trust that is before the particular time and at which the entity was non-resident, where the entity was non-resident or not in existence throughout the period that began 60 months before the contribution time (or, if the entity is an individual and the trust arose on and as a consequence of the death of the individual, 18 months before the contribution time) and ends at the earliest of

(a) the time that is 60 months after the contribution time,

(b) if the entity is an individual, the date of death of the individual, and

(c) the particular time.

“promoter”, of a trust at any time, means an entity that on or before that time establishes, organizes or substantially reorganizes the undertakings of the trust.

“qualifying investor”, in respect of a trust at a particular time, means an entity

(a) that is at the particular time a beneficiary (in this definition, determined without reference to subsection 248(25)) under the trust; and

(b) whose only interests as a beneficiary under the trust are, at all times that the interests exist during the trust’s taxation year that includes the particular time, specified fixed interests of the entity in the trust.

“qualifying services” means services that are

(a) rendered to an employer by an employee of the employer, which employee was non-resident throughout the period during which the services were rendered;

(b) rendered to an employer by an employee of the employer, other than services that were

(i) rendered primarily in Canada,

(ii) rendered primarily in connection with a business carried on by the employer in Canada, or

(iii) a combination of services described in subparagraphs (i) and (ii);

(c) rendered in a particular calendar month to an employer by an employee of the employer, which employee

(i) was resident in Canada throughout no more than 60 months during the 72-month period that ends at the end of the particular month, and

(ii) became a member of, or a beneficiary under, the plan or trust under which benefits in respect of the services may be provided (or a similar plan or trust for which the plan or the trust was substituted) before the end of the calendar month following the month in which the employee became resident in Canada; or

(d) any combination of services that are qualifying services determined without reference to this paragraph.

“resident beneficiary”, at any time under a particular trust, means an entity (other than an entity that is at that time a specified charity, or a successor beneficiary, in respect of the particular trust) that is, at that time, a beneficiary under the particular trust where, at that time,

(a) the entity is resident in Canada; and

(b) there is a connected contributor to the particular trust.

“resident contributor”, to a particular trust at any time, means an entity that is, at that time, resident in Canada and a contributor to the particular trust, but does not include

(a) an individual (other than a trust) who has not, at that time, been resident in Canada for a period of, or periods the total of which is, more than 60 months (other than an individ- ual who, before that time, was never non-resident); or

(b) an individual (other than a trust), if

(i) the particular trust is an inter vivos trust that was created before 1960 by a person who was non-resident when the trust was created, and

(ii) the individual has not, after 1959, made a contribution to the particular trust.

“restricted property” means

(a) a particular share (or a particular right to acquire a share) of the capital stock of a particular closely-held corporation if the particular share (or the particular right), or a property for which the particular share (or the particular right) was substituted, was at any time acquired as part of a transaction or series of transactions or events under which

(i) a specified share of the capital stock of a closely-held corporation was acquired by any entity in exchange for, as consideration for, or upon conversion of, any property, or

(ii) a share (other than a specified share) of the capital stock of a closely-held corporation becomes a specified share of the capital stock of the corporation;

(b) an indebtedness (or a right to acquire an indebtedness) owing by another entity if

(i) the other entity is a closely-held corporation,

(ii) the indebtedness (or the right), or a property for which the indebtedness (or the right) was substituted, was at any time acquired as part of a transaction or series of transactions or events under which

(A) a specified share of the capital stock of a closely-held corporation was acquired by any entity in exchange for, as consideration for, or upon conversion of, any property, or

(B) a share (other than a specified share) of the capital stock of a closely-held corporation becomes a specified share of the capital stock of the corporation, and

(iii) the amount of any payment under a right (whether immediate or future, whether absolute or contingent or whether conditional on or subject to the exercise of any discretion by any entity) to receive, in any manner whatever and from any entity, amounts in respect of the indebtedness, or the value of such a right, is, directly or indirectly, determined primarily by one or more of the following criteria in respect of one or more properties of the other entity (or an entity with which the other entity does not deal at arm’s length):

(A) the fair market value of the property, production from the property or use of the property,

(B) gains or profits from the disposition of the property,

(C) income from the property, profits from the property, revenue from the property, or cash flow from the property, or

(D) any other criterion similar to a criterion referred to in any of clauses (A) to (C); and

(c) any property the fair market value of which is derived in whole or in part, directly or indirectly, from a particular share, an indebtedness or a right described in paragraph (a) or (b).

“specified charity”, in respect of a trust at any particular time, means any person (referred to in this definition as the “charity”) that at the particular time is a person described in any of paragraphs (a) to (e) and (g.1) of the definition “total charitable gifts” in subsection 118.1(1) other than

(a) a charity that does not, at the particular time, deal at arm’s length with a specified entity in respect of the trust, and

(b) a charity that did not, at any specified prior time, deal at arm’s length with a specified entity in respect of the trust,

where

(c) “specified prior time” in respect of a charity means any time, before the particular time, at which

(i) an amount was payable to the charity as a beneficiary under the trust,

(ii) an amount was received by the charity on the disposition of all or part of its interest as a beneficiary under the trust, or

(iii) a benefit was received or enjoyed by the charity from or under the trust, and

(d) “specified entity” in respect of a trust at any time means

(i) an entity that is at that time

(A) a beneficiary under the trust,

(B) a contributor to the trust,

(C) a person related to a contributor to the trust,

(D) a trustee of the trust,

(E) an entity that could reasonably be considered to have influence over the operation of the trust or the enforcement of its terms, or

(F) an entity that could reasonably be considered to have influence over the selection or appointment of an entity referred to in clause (A), (D) or (E), or

(ii) any group of entities at least one of which is described in subparagraph (i).

“specified contributor”, to a trust at a particular time in a taxation year of a particular entity, means the particular entity, if

(a) the particular entity is, at the particular time, both a contributor to the trust and a beneficiary (in this definition, other than in clause (d)(ii)(B), determined without reference to subsection 248(25)) under the trust;

(b) at all times, after February 16, 1999 and on or before the particular time, when it is a beneficiary under the trust, the particular entity’s interest as a beneficiary under the trust is or would, if the definition “specified fixed interest” applied at those times, have been a specified fixed interest of the par- ticular entity in the trust;

(c) it is reasonable to conclude that, at no time that is after February 16, 1999 and on or before the particular time, has

(i) the particular entity made a contribution of restricted property to the trust, or

(ii) another entity made a contribution of restricted property to the trust when that other entity was not dealing at arm’s length with the particular entity; and

(d) where the particular entity is, at any time that is after February 16, 1999 and at or before the particular time, a beneficiary under the trust

(i) either

(A) a prescribed form has been filed with the Minister by or on behalf of the particular entity on or before the par- ticular entity’s filing-due date for that taxation year (or a later date that is acceptable to the Minister), or

(B) a prescribed form and a copy of the terms of the trust that apply at the particular time have been filed with the Minister by or on behalf of the trust on or before its filing due date for its taxation year that includes the particular time (or a later date that is acceptable to the Minister), and

(ii) unless the particular entity is an exempt taxpayer for the taxation year, with respect to each particular contribution made after February 16, 1999 and at or before the particular time by the particular entity to the trust, it is reasonable to conclude that

(A) no consideration was received (other than property received by the particular entity that is the particular entity’s interest as a beneficiary under the trust),

(B) none of the reasons (determined by reference to all the circumstances including the terms of the trust, an intention, the laws of a country or the existence of an agreement, a memorandum, a letter of wishes or any other arrangement) for the contribution is the acquisition at any time by any entity (other than the particular entity) of a right (whether immediate or future, whether absolute or contingent or whether conditional on or subject to the exercise of any discretion by any entity) as a beneficiary under the trust (other than the acquisition by any such entity of the particular entity’s interest as a beneficiary under the trust that was acquired as a result of the contribution) to receive, at any time and directly from the trust, income or capital of the trust, and

(C) the fair market value of the par- ticular contribution is equal to the fair market value, at the time of the par- ticular contribution, of the particular entity’s interest as a beneficiary under the trust acquired as a result of the particular contribution.

“specified controlled foreign affiliate”, of a particular entity at any time, means an entity that would, at that time, be a controlled foreign affiliate of the particular entity if the particular entity were resident in Canada at that time.

“specified fixed interest”, at any time of an entity in a trust, means an interest of the entity as a beneficiary under the trust if

(a) the interest includes, at that time, rights of the entity as a beneficiary under the trust to receive, at or after that time and directly from the trust, income and capital of the trust;

(b) the interest was issued by the trust, at or before that time, to an entity, in circumstances that are described by subparagraph (2)(g)(ii);

(c) the only manner in which any part of the interest may cease to be the entity’s is by way of a transfer (determined as if subsection (2) were read only with reference to clauses (2)(m)(ii)(B) and (D)) of that part by the entity, which transfer is a disposition (determined without reference to paragraph (i) of the definition “disposition” in subsection 248(1) and paragraph 248(8)(c)) by the entity of that part; and

(d) no amount of income or capital of the trust that any entity may receive directly from the trust at any time as a beneficiary under the trust depends on the exercise by any entity of, or the failure by any entity to exercise, a discretionary power.

“specified party”, in respect of a particular entity at any time, means an entity that is at that time

(a) an individual who is a spouse or common-law partner of the particular entity;

(b) a specified controlled foreign affiliate of

(i) the particular entity, or

(ii) if the particular entity is an individual, a spouse or common-law partner of the individual;

(c) an entity for which it is reasonable to conclude that the benefit referred to in subparagraph (8)(a)(iii) was conferred

(i) in contemplation of the entity becoming after that time a specified controlled foreign affiliate of an entity referred to in subparagraph (b)(i) or (ii), or

(ii) to avoid or minimize a liability under this Part that arose, or that would otherwise have arisen, because of the application of subsection (3) with respect to the particular entity; or

(d) a corporation in which the particular entity is a shareholder, if

(i) the corporation is on or before that time beneficially interested in a trust, and

(ii) the particular entity is a beneficiary under the trust solely because of the application of paragraph (b) of the definition “beneficiary” in this subsection to the particular entity in respect of the corporation.

“specified property” means

(a) a share of the capital stock of a corporation;

(b) an interest as a beneficiary under a trust;

(c) an interest in a partnership;

(d) an interest in any other entity;

(e) a right (whether immediate or future, whether absolute or contingent or whether conditional on or subject to the exercise of any discretion by any entity) to acquire property described in any of paragraphs (a) to (d); and

(f) any other property deriving its value primarily from property described in any of paragraphs (a) to (e).

“specified share” means a share of the capital stock of a corporation other than a share that is prescribed for the purpose of paragraph 110(1)(d).

“specified time”, in respect of a trust for a taxation year of the trust, means

(a) if the trust exists at the end of the taxation year, the time that is the end of that taxation year; and

(b) in any other case, the time in that taxation year that is immediately before the time at which the trust ceases to exist.

“successor beneficiary”, at any time in respect of a trust, means an entity that is a beneficiary under the trust solely because of a right of the beneficiary to receive any of the trust’s income or capital, if under that right the entity may so receive that income or capital only on or after the death after that time of an individual who, at that time, is alive and

(a) is a contributor to the trust;

(b) is related to a contributor to the trust; or

(c) would have been related to a contributor to the trust if every individual who was alive before that time were alive at that time.

“trust” includes, for greater certainty, an estate.

(2) In this section,

(a) an entity is deemed to have transferred, at any time, a property to a trust if

(i) at that time it transfers or loans property (other than by way of an arm’s length transfer or a transfer or loan to which paragraph (c) applies) to another entity, and

(ii) because of that transfer or loan

(A) the fair market value of one or more properties held by the trust increases at that time, or

(B) a liability or potential liability of the trust decreases at that time;

(b) the fair market value at any time of a property deemed by paragraph (a) to be transferred at that time is deemed to be the amount of the absolute value of the increase or decrease, as the case may be, referred to in subparagraph (a)(ii) in respect of the property;

(c) an entity is deemed to have transferred, at any time, a property to a trust if

(i) at that time it transfers or loans property (other than by way of an arm’s length transfer) to another entity, and

(ii) at or after that time, the trust holds property the fair market value of which is derived in whole or in part, directly or indirectly, from property held by the other entity;

(d) the fair market value at any time of a property deemed by paragraph (c) to be transferred at that time is deemed to be the fair market value of the property referred to in subparagraph (c)(i);

(e) if, at any time, a particular entity has given a guarantee on behalf of, or has provided any other financial assistance to, another entity,

(i) the particular entity is deemed to have transferred, at that time, property to that other entity, and

(ii) the property, if any, transferred to the particular entity from the other entity in exchange for the guarantee or other financial assistance is deemed to have been transferred to the particular entity in exchange for the property deemed by subparagraph (i) to have been transferred;

(f) if, at any time after June 22, 2000, a particular entity renders any service (other than an exempt service) to, for or on behalf of, another entity,

(i) the particular entity is deemed to have transferred, at that time, property to that other entity, and

(ii) the property, if any, transferred to the particular entity from the other entity in exchange for the service is deemed to have been transferred to the particular entity in exchange for the property deemed by subparagraph (i) to have been transferred;

(g) each of the following acquisitions of property by a particular entity is deemed to be a transfer of the property, at the time of the acquisition of the property, to the particular entity from the entity from which the property was acquired, namely, the acquisition by the particular entity of

(i) a share of the capital stock of a corporation from the corporation,

(ii) an interest as a beneficiary under a trust (otherwise than from a beneficiary under the trust),

(iii) an interest in a partnership (otherwise than from a member of the partnership),

(iv) an interest in an entity that is not a corporation, partnership or trust (otherwise than from an entity having an interest in the entity),

(v) a debt owing by an entity from the entity, and

(vi) a right (granted after June 22, 2000 by the entity from which the right was acquired) to acquire or to be loaned property;

(h) the fair market value at any time of a property deemed by subparagraph (e)(i) or (f)(i) to have been transferred at that time is deemed to be the fair market value, at that time, of the assistance or service, as the case may be, to which the property relates;

(i) a particular entity that at any time becomes obligated to do an act that would, if done, constitute the transfer or loan of a property to another entity is deemed to have become obligated at that time to transfer or loan, as the case may be, property to that other entity;

(j) in applying at any time the definition “non-resident time”, if a trust acquires property of an individual as a consequence of the death of the individual, the individual is deemed to have transferred the property to the trust immediately before the individual’s death;

(k) a transfer or loan of property at any time is deemed to be made at that time jointly by a particular entity and a second entity (referred to in this paragraph as the “specified entity”) if

(i) the particular entity transfers or loans property at that time to another entity,

(ii) the transfer or loan is made at the direction, or with the acquiescence, of the specified entity, and

(iii) it is reasonable to conclude that one of the reasons the transfer or loan is made is to avoid or minimize the liability, of any entity, under this Part that arose, or that would otherwise have arisen, because of the application of subsection (3);

(k.1) a transfer or loan of property made at any time on or after November 9, 2006, is deemed to be made at that time jointly by a particular entity and a second entity (referred to in this paragraph as the “specified entity”) if

(i) the particular entity transfers or loans property at that time to another entity, and

(ii) a purpose or effect of the transfer or loan may reasonably be considered to be to provide benefits in respect of services rendered by a person as an employee of the specified entity (whether the provision of the benefits is pursuant to a right that is immediate or future, absolute or contingent, or conditional on or subject to the exercise of any discretion by any entity);

(l) a transfer or loan of property at any time is deemed to be made at that time jointly by a particular entity and a second entity (referred to in this paragraph as the “specified entity”) if

(i) the particular entity transfers or loans property at that time to another entity,

(ii) the transfer or loan is made at the direction, or with the acquiescence, of the specified entity,

(iii) that time is not, or would not be, if the transfer or loan were a contribution of the specified entity, a non-resident time of the specified entity, and

(iv) either

(A) the particular entity is, at that time, an entity that is a controlled foreign affiliate of the specified entity, or would at that time be a controlled foreign affiliate of the specified entity if the specified entity were at that time resident in Canada, or

(B) it is reasonable to conclude that the transfer or loan was made in contemplation of the particular entity becoming after that time a particular entity described in clause (A);

(m) a particular entity is deemed to have transferred, at a particular time, a particular property or particular part of it, as the case may be, to a corporation described in subparagraph (i) or a second entity described in subparagraph (ii) if

(i) the particular property is a share of the capital stock of a corporation held at the particular time by the particular entity, and as consideration for the disposition at or before the particular time of the share, the particular entity received at the particular time (or became entitled at the particular time to receive) from the corporation a share of the capital stock of the corporation, or

(ii) the particular property (or property for which the particular property is substituted) was acquired, before the particular time, from the second entity by any entity, in circumstances that are described by any of subparagraphs (g)(i) to (vi) (or would be so described if it applied at the time of that acquisition) and at the particular time,

(A) the terms or conditions of the particular property change,

(B) the second entity redeems, acquires or cancels the particular property or the particular part of it,

(C) where the particular property is a debt owing by the second entity, the debt or the particular part of it is settled or cancelled, or

(D) where the particular property is a right to acquire or to be loaned property, the particular entity exercises the right;

(n) a contribution made at any time by a particular trust to another trust is deemed to have been made at that time jointly by the particular trust and by each entity that is at that time a contributor to the particular trust;

(o) a contribution made at any time by a particular partnership to a trust is deemed to have been made at that time jointly by the particular partnership and by each entity that is at that time a member of the particular partnership (other than a member of the particular partnership where the liability of the member as a member of the particular partnership is limited by operation of any law governing the partnership arrangement);

(p) subject to paragraph (q) and subsection (9), the amount of a contribution to a trust at the time it was made is deemed to be the fair market value, at that time, of the property that was the subject of the contribution;

(q) an entity that at any time acquires a specified fixed interest in a trust (or a right, issued by the trust, to acquire a specified fixed interest in the trust) from another entity (other than the trust that issued the specified fixed interest or the right) is deemed to have made at that time a contribution to the trust and the amount of the contribution is deemed to be equal to the fair market value at that time of the specified fixed interest or right, as the case may be;

(r) a particular entity that has acquired a specified fixed interest in a trust as a consequence of making a contribution to the trust — or that has made a contribution to the trust as a consequence of having acquired a specified fixed interest in the trust or a right described in paragraph (q) — is, for the purpose of applying this section at any time after the time that the particular entity transfers the specified fixed interest or the right, as the case may be, to another entity (which transfer is referred to in this paragraph as the “sale”), deemed not to have made the contribution in respect of the specified fixed interest, or right, that is the subject of the sale where

(i) immediately before the sale, the par- ticular entity would be a specified con- tributor to the trust if

(A) the definition “specified contributor” were read without reference to subparagraph (d)(i) of that definition,

(B) in applying paragraph (b) of that definition, a specified fixed interest included the right, and

(C) that definition applied immediately before the sale,

(ii) in exchange for the sale, the other entity transfers or loans, or becomes obligated to transfer or loan, property (which property is referred to in subparagraph (iii) as the “consideration”) to the particular entity, and

(iii) it is reasonable to conclude

(A) having regard only to the sale and the consideration that the particular entity would be willing to make the sale if the particular entity were dealing at arm’s length with the other entity, and

(B) that the terms and conditions made or imposed in respect of the exchange would be acceptable to the particular entity if the particular entity were dealing at arm’s length with the other entity;

(s) a transfer to a trust by a particular entity is deemed not to be, at a particular time, a contribution to the trust if

(i) the particular entity has transferred, at or before the particular time and in the ordinary course of business of the par- ticular entity, property to the trust,

(ii) the transfer is not an arm’s length transfer, but would be an arm’s length transfer if the definition “arm’s length transfer” were read without reference to paragraph (a), and subparagraphs (b)(i) to (iii) and (v) to (viii), of that definition,

(iii) it is reasonable to conclude that the particular entity was the only entity that acquired, in respect of the transfer, an interest as a beneficiary under the trust,

(iv) the particular entity was required, under the securities law of a country or of a political subdivision of the country in respect of the issuance by the trust of interests as a beneficiary under the trust, to acquire an interest because of the particular entity’s status at the time of the transfer as a manager or promoter of the trust,

(v) at the particular time the trust is not an exempt foreign trust, but would be at that time an exempt foreign trust if it had not made an election under paragraph (g) of the definition “eligible trust”, and

(vi) the particular time is before the earliest of

(A) the first time at which the trust becomes an exempt foreign trust,

(B) the first time at which the particular entity ceases to be a manager or promoter of the trust, and

(C) the time that is 24 months after the first time at which the total fair market value of consideration received by the trust in exchange for interests as a beneficiary (other than the particular entity’s interest referred to in subparagraph (iii)) under the trust is greater than $500,000;

(t) a transfer, by a Canadian corporation of particular property, that is at a particular time a contribution by the Canadian corporation to a trust, is deemed not to be, after the particular time, a contribution by the Canadian corporation to the trust if

(i) either

(A) the trust acquired the particular property before the particular time from the Canadian corporation in circumstances described in subparagraph (g)(i) or (v), or

(B) another entity acquired property before the particular time from the Canadian corporation in circumstances described in subparagraph (g)(i) or (v) and because of that acquisition the Canadian corporation was deemed by paragraph (c) to have transferred the particular property to the trust,

(ii) as a result of a transfer (which transfer is referred to in this paragraph as the “sale”) at the particular time by any entity (referred to in this paragraph as the “seller”) to another entity (referred to in this paragraph as the “buyer”) the trust

(A) no longer holds any property that is shares of the capital stock of, or debt issued by, the Canadian corporation, and

(B) no longer holds any property that is property the fair market value of which is derived in whole or in part, directly or indirectly, from shares of the capital stock of, or debt issued by, the Canadian corporation,

(iii) the buyer deals at arm’s length immediately before the particular time with the Canadian corporation, the trust and the seller,

(iv) in exchange for the sale, the buyer transfers or becomes obligated to transfer property (which property is referred to in this paragraph as the “consideration”), to the seller, and

(v) it is reasonable to conclude

(A) having regard only to the sale and the consideration that the seller would be willing to make the sale if the seller were dealing at arm’s length with the buyer,

(B) that the terms and conditions made or imposed in respect of the exchange would be acceptable to the seller if the seller were dealing at arm’s length with the buyer, and

(C) that the value of the consideration is not, at or after the particular time, determined in whole or in part, directly or indirectly, by reference to shares of the capital stock of, or debt issued by, the Canadian corporation; and

(u) a transfer, before October 11, 2002, to a personal trust by an individual (other than a trust) of particular property is deemed not to be a contribution of the particular property by the individual to the trust if

(i) the individual identifies the trust in prescribed form filed with the Minister on or before the individual’s filing-due date for the individual’s 2003 taxation year (or a later date that is acceptable to the Minister), and

(ii) the Minister is satisfied that

(A) the individual (and any entity not dealing at any time at arm’s length with the individual) has never loaned or transferred, directly or indirectly, restricted property to the trust,

(B) in respect of each contribution (determined without reference to this paragraph) made before October 11, 2002 by the individual to the trust, none of the reasons (determined by reference to all the circumstances including the terms of the trust, an intention, the laws of a country or the existence of an agreement, a memorandum, a letter of wishes or any other arrangement) for the contribution was to permit or facilitate, directly or indirectly, the conferral at any time of a benefit (for greater certainty, including an interest as a beneficiary under the trust) on

(I) the individual,

(II) a descendant of the individual, or

(III) any entity with whom the individual or descendant does not, at any time, deal at arm’s length, and

(C) the total of all amounts each of which is the amount of a contribution (determined without reference to this paragraph) made before October 11, 2002 by the individual to the trust does not exceed the greater of

(I) 1% of the total of all amounts each of which is the amount of a contribution (determined without reference to this paragraph) made to the trust before October 11, 2002, and

(II) $500.

(3) Where at a specified time in a particular taxation year of a trust (other than a trust that is, at that time, an exempt foreign trust) the trust is non-resident (determined without reference to this subsection) and, at that time, there is a resident contributor to the trust or a resident beneficiary under the trust,

(a) the trust is deemed to be resident in Canada throughout the particular taxation year for the purposes of

(i) section 2,

(ii) computing the trust’s income for the particular taxation year,

(iii) applying subsections 104(13.1) to (29) and 107(2.1), in respect of the trust and a beneficiary under the trust,

(iv) applying clause 53(2)(h)(i.1)(B), the definition “non-resident entity” in subsection 94.1(1), subsection 107(2.002) and section 115, in respect of a beneficiary under the trust,

(v) subsection 111(9),

(vi) determining an obligation of the trust to file a return under section 233.3 or 233.4,

(vii) determining the rights and obligations of the trust under Divisions I and J,

(viii) determining the liability of the trust for tax under Part I, and under Part XIII on amounts paid or credited (in this paragraph having the meaning assigned by Part XIII) to the trust,

(ix) applying Part XIII in respect of an amount (other than an exempt amount) paid or credited by the trust to any person, and

(x) determining whether a foreign affiliate of a taxpayer (other than the trust) is a controlled foreign affiliate of the taxpayer;

(b) in applying subsections 20(11) and (12) and section 126,

(i) in determining the non-business income tax (as defined by subsection 126(7)) paid by the trust for the particular taxation year to the government of a country other than Canada no amount shall be included to the extent that it can reasonably be regarded as attributable to income from a source in Canada, and

(ii) if the trust elects, by notifying the Minister in writing in its return of income for the particular taxation year, to have this paragraph apply,

(A) the trust’s income for the particular taxation year (other than the portion of the income that is from sources inside Canada or that is from a source, outside Canada, that is a business carried on by the trust outside Canada) is deemed

(I) to be from sources (other than a business carried on by the trust) in the particular country (other than Canada) in which the trust is resident (determined without reference to this subsection), and

(II) not to be from any other source, and

(B) in determining the income or profits tax paid by the trust for the particular taxation year to the government of the particular country there shall be included only the total of all amounts each of which is the amount of an income or profits tax that was paid by the trust for the particular taxation year to the government of a country (other than Canada) and that can reasonably be regarded as a tax paid on the trust’s income for the particular taxation year (other than the portion of the income that is from sources inside Canada or that is from a source, outside Canada, that is a business carried on by the trust outside Canada);

(c) if the trust was non-resident throughout its taxation year (referred to in this paragraph as the “preceding year”) immediately preceding the particular taxation year, the trust is deemed to have

(i) immediately before the end of the preceding year, disposed of each property (other than property described in any of subparagraphs 128.1(1)(b)(i) to (iv)) held by the trust at that time for proceeds of disposition equal to its fair market value at that time, and

(ii) at the beginning of the particular taxation year, acquired each of those properties so disposed of at a cost equal to its proceeds of disposition;

(d) each entity that at any time in the particular taxation year is a resident contributor to the trust or a resident beneficiary under the trust

(i) has jointly and severally, or solidarily, with the trust and with each other such entity, the rights and obligations of the trust in respect of the particular taxation year under Divisions I and J, and

(ii) is subject to Part XV in respect of those rights and obligations; and

(e) each entity that at any time in the particular taxation year is a beneficiary under the trust and was a person from whom an amount would be recoverable at the end of 2006 (or, where this subsection applies to a taxation year of the trust that begins before 2007, at the end of the last taxation year of the trust that begins before the first such taxation year of the trust) under subsection (2) (as it read in its application to taxation years that began before 2007 or, where this subsection applies to a taxation year of the trust that begins before 2007, as it read in its application to taxation years of the trust that began before the first such taxation year) in respect of the trust if the entity had received before 2007 amounts described under paragraph (2)(a) or (b) in respect of the trust (as those paragraphs read in their application to taxation years that began before 2007 or, where this subsection applies to a taxation year of the trust that begins before 2007, as those paragraphs read in their application to taxation years of the trust that began before the first such taxation year)

(i) has, to the extent of the entity’s recovery limit for the year, jointly and severally, or solidarily, with the trust and with each other such entity, the rights and obligations of the trust in respect of the taxation years, of the trust, that began before 2007 (or, where this subsection applies to a taxation year of the trust that begins before 2007, in respect of the taxation years, of the trust, that began before the first such taxation year) under Divisions I and J, and

(ii) is, to the extent of the entity’s recovery limit for the year, subject to Part XV in respect of those rights and obligations.

(4) Paragraph (3)(a) does not apply to deem a trust to be resident in Canada for the purposes of

(a) the definitions “arm’s length transfer”, “exempt foreign trust” and “exempt taxpayer” in subsection (1);

(b) paragraph (14)(b), subsections 70(6) and 73(1), the definition “Canadian partnership” in subsection 102(1), paragraph 107.4(1)(c) and paragraph (a) of the definition “mutual fund trust” in subsection 132(6);

(c) determining the liability of a person (other than the trust) that would arise under section 215;

(d) determining whether, in applying subsection 128.1(1), the trust becomes resident in Canada at a particular time;

(e) determining whether, in applying subsection 128.1(4), the trust ceases to be resident in Canada at a particular time;

(f) subparagraph (f)(i) of the definition “disposition” in subsection 248(1);

(g) determining whether subsection 107(5) applies to a distribution on or after July 18, 2005 of property to the trust; and

(h) determining whether subsection 75(2) applies to deem an amount to be an income, loss, taxable capital gain or allowable capital loss of the trust.

(5) A trust is deemed to cease to be resident in Canada at the earliest time at which there is neither a resident contributor to the trust nor a resident beneficiary under the trust in a period that would, if this Act were read without reference to subsection 128.1(4), be a taxation year of the trust

(a) that immediately follows a taxation year of the trust throughout which it was resident in Canada;

(b) at the beginning of which there was a resident contributor to the trust or a resident beneficiary under the trust; and

(c) at the end of which the trust is non-resident.

(6) If at any time a trust becomes or ceases to be an exempt foreign trust (otherwise than because of becoming resident in Canada),

(a) its taxation year that would otherwise include that time is deemed to have ended immediately before that time and a new taxation year of the trust is deemed to begin at that time; and

(b) for the purpose of determining the trust’s fiscal period after that time, the trust is deemed not to have established a fiscal period before that time.

(7) The maximum amount recoverable under the provisions referred to in paragraph (3)(d) at any particular time from an entity in respect of a trust (other than an entity that is deemed, under subsection (12) or (13), to be a contributor or a resident contributor to the trust) and a particular taxation year of the trust is the entity’s recovery limit at the particular time in respect of the trust and the particular year if

(a) either

(i) the entity is liable under a provision referred to in paragraph (3)(d) in respect of the trust and the particular year solely because the entity was a resident beneficiary under the trust at a specified time in respect of the trust in the particular year, or

(ii) at a specified time in respect of the trust in the particular year, the total of all amounts each of which is the amount, at the time it was made, of a contribution to the trust made before the specified time by the entity, or by another entity not dealing at arm’s length with the entity, is not more than the greater of

(A) $10,000, and

(B) 10% of the total of all amounts each of which was the amount, at the time it was made, of a contribution made to the trust before the specified time;

(b) except where the total determined in subparagraph (a)(ii) in respect of the entity and all entities not dealing at arm’s length with it is $10,000 or less, the entity has filed on a timely basis under section 233.2 all information returns required to be filed by it before the particular time in respect of the trust (or on any later day that is acceptable to the Minister); and

(c) it is reasonable to conclude that for each transaction or event that occurred before the end of the particular year at the direction of, or with the acquiescence of, the entity

(i) none of the purposes of the transaction or event was to enable the entity to avoid or minimize any liability under a provision referred to in paragraph (3)(d) in respect of the trust, and

(ii) the transaction or event was not part of a series of transactions or events any of the purposes of which was to enable the entity to avoid or minimize any liability under a provision referred to in paragraph (3)(d) in respect of the trust.

(8) The recovery limit referred to in paragraph (3)(e) and subsection (7) at a particular time of a particular entity in respect of a trust and a particular taxation year of the trust is the amount, if any, by which the greater of

(a) the total of all amounts each of which is

(i) an amount received or receivable after 2000 and before the particular time

(A) by the particular entity on the disposition of all or part of the particular entity’s interest as a beneficiary under the trust, or

(B) by another entity (that was, when the amount became receivable, a specified party in respect of the particular entity) on the disposition of all or part of the specified party’s interest as a beneficiary under the trust,

(ii) an amount (other than an amount described in subparagraph (i)) made payable by the trust after 2000 and before the particular time to

(A) the particular entity because of the interest of the particular entity as a beneficiary under the trust, or

(B) another entity (that was, when the amount became payable, a specified party in respect of the particular entity) because of the interest of the specified party as a beneficiary under the trust,

(iii) an amount (other than an amount described in subparagraph (i) or (ii)) that is the fair market value of a benefit received or enjoyed, after 2000 and before the particular time, from or under the trust by

(A) the particular entity, or

(B) another entity that was, when the benefit was received or enjoyed, a specified party in respect of the par- ticular entity, or

(iv) the maximum amount that would be recoverable from the particular entity at the end of 2006 (or, where this subsection applies to a taxation year of the trust that begins before 2007, at the end of the last taxation year of the trust beginning before the first such taxation year) under subsection (2) (as it read in its application to taxation years that began before 2007, or, where this subsection applies to a taxation year of the trust that begins before 2007, in its application to taxation years of the trust that began before the first such taxation year) if the trust had tax payable under this Part at the end of 2006 and that tax payable exceeded the total of the amounts described in respect of the entity under paragraphs (2)(a) and (b) (as they read in their application to taxation years that began before 2007, or, where this subsection applies to a taxation year of the trust that begins before 2007, as they read in their application to taxation years of the trust that began before the first such taxation year), except to the extent that the amount so recoverable is in respect of an amount that is included in the particular entity’s recovery limit because of subparagraph (i) or (ii), and

(b) the total of all amounts each of which is the amount, when made, of a contribution to the trust before the particular time by the particular entity,

exceeds the total of all amounts each of which is

(c) an amount recovered before the particular time from the particular entity in connection with a liability of the particular entity (in respect of the trust and the particular year or a preceding taxation year of the trust) that arose because of the application of subsection (3) (or the application of this section as it read in its application to taxation years that began before 2007, or, where this subsection applies to a taxation year of the trust that begins before 2007, as it read in its application to taxation years of the trust that began before the first such taxation year),

(d) an amount (other than an amount in respect of which this paragraph has applied in respect of any other entity) recovered before the particular time from a specified party in respect of the particular entity in connection with a liability of the particular entity (in respect of the trust and the particular year or a preceding taxation year of the trust) that arose because of the application of subsection (3) (or the application of this section as it read in its application to taxation years that began before 2007, or, where this subsection applies to a taxation year of the trust that begins before 2007, as it read in its application to taxation years of the trust that began before the first such taxation year), or

(e) the amount, if any, by which the particular entity’s tax payable under this Part for any taxation year in which an amount described in any of subparagraphs (a)(i) to (iii) was paid, became payable, was received, became receivable or was enjoyed by the particular entity exceeds the amount that would have been the particular entity’s tax payable under this Part for that taxation year if no such amount were paid, became payable, were received, became receivable or were enjoyed by the particular entity in that taxation year.

(9) If a contribution is made at any time by an entity to a trust as a consequence of a transaction that is, or as a consequence of a series of transactions or events that includes, the transfer at that time to the trust of a specified property, the amount of the contribution at that time is deemed, for the purposes of clause (2)(u)(ii)(C), subparagraph (7)(a)(ii) and subsection (8), to be the greater of

(a) the amount, determined without reference to this subsection, of the contribution at that time, and

(b) the amount that is the greatest fair market value of the specified property, or property substituted for it, in the period that

(i) begins immediately after that time, and

(ii) ends at the end of the third calendar year that ends after that time.

(10) In applying this section at each specified time, in respect of a taxation year of a trust, that is before the particular time at which a contributor to the trust becomes resident in Canada within 60 months after making a contribution to the trust, the contribution is deemed to have been made at a time other than a non-resident time of the contributor if

(a) in applying the definition “non-resident time” in subsection (1) at each of those specified times, the contribution was made at a non-resident time of the contributor; and

(b) in applying the definition “non-resident time” in subsection (1) immediately after the particular time, the contribution is made at a time other than a non-resident time of the contributor.

(11) Subsections (12) and (13) apply to a trust or an entity in respect of a trust if

(a) at any time property of a trust (referred to in this subsection and subsections (12) and (13) as the “original trust”) is transferred or loaned, directly or indirectly, in any manner, to another trust (referred to in this subsection and subsections (12) and (13) as the “transferee trust”);

(b) the original trust

(i) is deemed to be resident in Canada immediately before that time because of paragraph (3)(a),

(ii) would be deemed to be resident in Canada immediately before that time because of paragraph (3)(a) if this section were read without reference to paragraph (a) of the definition “connected contributor” in subsection (1) and paragraph (a) of the definition “resident contributor” in that subsection,

(iii) was deemed to be resident in Canada immediately before that time because of subsection (1) as it read in its application to taxation years that began before 2007 (or, where this subsection applies to a taxation year of the trust that begins before 2007, as it read in its application to taxation years of the trust that began before the first such taxation year), or

(iv) would have been deemed to be resident in Canada immediately before that time because of subsection (1) as it read in its application to taxation years that began before 2007 (or, where this subsection applies to a taxation year of the trust that begins before 2007, as it read in its application to taxation years of the trust that began before the first such taxation year) if that subsection were read in that application without reference to subclause (b)(i)(A)(III) of that subsection; and

(c) it is reasonable to conclude that one of the reasons the transfer or loan is made is to avoid or minimize a liability under this Part that arose, or that would otherwise have arisen, because of the application of subsection (3) (or the application of this section as it read in its application to taxation years that began before 2007 or, where this subsection applies in respect of a taxation year of the trust that begins before 2007, as it read in its application to taxation years of the trust that began before the first such taxation year).

(12) The original trust described in subsection (11) (including a trust that has ceased to exist) is deemed to be, at and after the time of the transfer or loan referred to in that subsection, a resident contributor to the transferee trust for the purpose of applying this section in respect of the transferee trust.

(13) An entity (including any entity that has ceased to exist) that is, at the time of the transfer or loan referred to in subsection (11), a contributor to the original trust, is deemed to be at and after that time

(a) a contributor to the transferee trust; and

(b) a connected contributor to the transferee trust, if at that time the entity is a connected contributor to the original trust.

(14) A particular property that is, or will be, at any time held, loaned or transferred, as the case may be, by an entity is not restricted property held, loaned or transferred, as the case may be, at that time by the entity if

(a) the particular property is a share of a specified class (as defined by subsection 256(1.1)) of the shares of the capital stock of a corporation and

(i) the particular property was acquired, as part of a transaction or series of transactions or events, from the corporation in exchange for, or as consideration for, property that is money only, and

(ii) no other property (other than property that is identical to the particular property) was acquired by any entity as part of that transaction or series of transactions or events;

(b) the particular property is identified in prescribed form, containing prescribed information, filed, by or on behalf of the entity, with the Minister on or before the entity’s filing-due date (or another date that is acceptable to the Minister) for the entity’s taxation year that includes that time, and

(i) the particular property (and property, if any, for which the particular property is, or is to be, substituted property) was not, and will not be, at any time acquired, held, loaned or transferred by the entity (or any entity with whom the entity does not at any time deal at arm’s length) in whole or in part for the purpose of permitting any change in the value of the property of a corporation (that is, at any time, a closely-held corporation) to accrue directly or indirectly in any manner whatever to the value of property held by a non-resident trust, and

(ii) the Minister is satisfied that the particular property (and property, if any, for which it is, or is to be, substituted) is described by subparagraph (i); or

(c) the property is at that time excluded property.

(15) In determining whether an entity and another entity are related to each other or deal at arm’s length with each other, a person referred to in section 251 includes an entity.

(16) In applying this section,

(a) if it can reasonably be considered that one of the main reasons that an entity is at any time a shareholder of a corporation is to cause the condition in paragraph (b) of the definition “closely-held corporation” in subsection (1) to be satisfied in respect of the corporation, the condition is deemed not to have been satisfied at that time in respect of the corporation;

(b) if it can reasonably be considered that one of the main reasons that an entity holds at any time an interest in a trust is to cause the condition in subclause (h)(ii)(A)(I) of the definition “exempt foreign trust” in subsection (1) to be satisfied in respect of the trust, the condition is deemed not to have been satisfied at that time in respect of the trust; and

(c) if it can reasonably be considered that one of the main reasons that a person holds at any time a property is to cause the condition in paragraph (b) of the definition “excluded property” in subsection (1) to be satisfied in respect of the property or an identical property held by any person, the condition is deemed not to have been satisfied at that time in respect of the property or the identical property.

(2) Subsection (1) applies to trust taxation years that begin after 2006, except that

(a) it also applies to taxation years that begin in each of 2001, 2002, 2003, 2004, 2005 and 2006 of a trust if the trust was created in 2001 and elects, in writing, to have section 94 of the Act, as enacted by subsection (1), apply to those taxation years by filing the election with the Minister of National Revenue on or before the trust’s filing-due date for the trust’s taxation year in which this Act is assented to;

(b) it also applies to taxation years that begin in each of 2002, 2003, 2004, 2005 and 2006 of a trust if the trust was created in 2002 and elects, in writing, to have section 94 of the Act, as enacted by subsection (1), apply to those taxation years by filing the election with the Minister of National Revenue on or before the trust’s filing-due date for the trust’s taxation year in which this Act is assented to;

(c) it also applies to taxation years that begin in each of 2003, 2004, 2005 and 2006 of a trust if the trust elects, in writing, to have section 94 of the Act, as enacted by subsection (1), apply to those taxation years by filing the election with the Minister of National Revenue on or before the trust’s filing-due date for the trust’s taxation year in which this Act is assented to;

(d) it also applies to taxation years that begin in each of 2004, 2005 and 2006 of a trust if the trust elects, in writing, to have section 94 of the Act, as enacted by subsection (1), apply to those taxation years by filing the election with the Minister of National Revenue on or before the trust’s filing-due date for the trust’s taxation year in which this Act is assented to;

(e) it also applies to taxation years that begin in 2005 and 2006 of a trust if the trust elects, in writing, to have section 94 of the Act, as enacted by subsection (1), apply to those taxation years by filing the election with the Minister of National Revenue on or before the trust’s filing-due date for the trust’s taxation year in which this Act is assented to;

(f) it also applies to taxation years that begin in 2006 of a trust if the trust elects, in writing, to have section 94 of the Act, as enacted by subsection (1), apply to those taxation years by filing the election with the Minister of National Revenue on or before the trust’s filing-due date for the trust’s taxation year in which this Act is assented to;

(g) any election or form referred to in section 94 of the Act, as enacted by subsection (1), that would otherwise be required to be filed before 120 days after the day on which this Act is assented to is deemed to have been filed with the Minister of National Revenue on a timely basis if it is filed with the Minister of National Revenue within 365 days after the day on which this Act is assented to;

(h) if a trust elects, by notifying the Minister of National Revenue in writing on or before its filing-due date for its taxation year that includes the day on which this Act is assented to, that this paragraph apply, in applying section 94 of the Act, as enacted by subsection (1), in respect of the trust the definition “arm’s length transfer” in subsection 94(1) of the Act, as enacted by subsection (1), does not include a loan or other transfer of property that is identified in the election and that is made in a taxation year that begins before 2003;

(i) unless a trust elects, by notifying the Minister of National Revenue in writing on or before its filing-due date for its taxation year that includes the day on which this Act is assented to, that this paragraph not apply, paragraphs (a) and (b) of the definition “closely-held corporation” in subsection 94(1) of the Act, as enacted by subsection (1), are, in respect of the trust for its taxation years that begin on or before July 18, 2005, to be read as follows:

(a) there are one or more classes of shares of its capital stock that are not a specified class within the meaning assigned by subsection 256(1.1); and

(b) it is reasonable to conclude that at that time

(i) the shares of those classes (other than such a specified class) are held by at least 150 entities each of whom holds shares that have a total fair market value of at least $500, and

(ii) the total number of issued and outstanding shares of a class (other than such a specified class) held by a particular entity or by any other entity with whom the particular entity does not deal at arm’s length is not more than 10% of the total number of the issued and outstanding shares of that class.

(j) if a trust elects, by notifying the Minister of National Revenue in writing on or before its filing-due date for its taxation year that includes the day on which this Act is assented to, that this paragraph apply, paragraph (f) of the definition “eligible trust” in subsection 94(1) of the Act, as enacted by subsection (1), is, in respect of the trust for its taxation years that begin on or before July 18, 2005, to be read as follows:

(f) that at or before that time was a personal trust; or

(k) subparagraph (b)(i) of the definition “exempt foreign trust” in subsection 94(1) of the Act, as enacted by subsection (1), is, for taxation years that begin on or before July 18, 2005, to be read as follows:

(i) the trust was created after the breakdown of a marriage or common-law partnership of two particular individuals to provide for the maintenance of a beneficiary under the trust who is a child of one of those particular individuals (which beneficiary is referred to in this paragraph as a “child beneficiary”),

(l) unless a trust elects, by notifying the Minister of National Revenue in writing on or before its filing-due date for its taxation year that includes the day on which this Act is assented to, that this paragraph not apply, paragraphs (f) and (g) of the definition “exempt foreign trust” in subsection 94(1) of the Act, as enacted by subsection (1), are, in respect of the trust for its taxation years that begin on or before July 18, 2005, to be read as follows:

(f) a non-resident trust, if throughout the trust’s taxation year that includes the par- ticular time

(i) the trust is a trust governed by an employee benefit plan or is a trust described in paragraph (a.1) of the definition “trust” in subsection 108(1),

(ii) the trust is maintained primarily for the benefit of non-resident individuals,

(iii) the trust holds no restricted property, and

(iv) no benefits are provided under the trust, other than benefits in respect of

(A) services rendered to an employer by an employee of the employer, which employee was non-resident throughout the period during which the services were rendered,

(B) services rendered to an employer by an employee of the employer, other than services that were

(I) rendered primarily in Canada,

(II) rendered primarily in connection with a business carried on by the employer in Canada, or

(III) a combination of services described in subclauses (I) and (II),

(C) services rendered to an employer by an employee, of the employer, in a particular calendar month, which employee

(I) was resident in Canada throughout no more than 60 months during the 72-month period that ends at the end of the particular month, and

(II) became a member of, or a beneficiary under, the plan or trust under which benefits in respect of the services may be provided (or a similar plan or trust for which the plan or the trust was substituted) before the end of the calendar month following the month in which the employee became resident in Canada, or

(D) any combination of services described by clauses (A) to (C);

(g) a non-resident trust that, throughout the particular period that began at the time it was created and ends at the particular time,

(i) has been operated exclusively for the purpose of administering or providing superannuation, pension, retirement or employee benefits,

(ii) has

(A) been maintained for the benefit of persons all or substantially all of whom are non-resident individuals, or

(B) been maintained for the benefit of persons

(I) the majority of whom are non-resident individuals, and

(II) all or substantially all of whom are employed by one corporation or by two or more corporations each of which is related to each other, and

(iii) has

(A) been resident in a country (other than Canada) the laws of which impose an income or profits tax, and been exempt, under the laws of that country, from the payment of income tax and profits tax to the government of that country in recognition of the purposes for which the trust is operated, or

(B) held cash or shares of the capital stock of one or more corporations referred to in subclause (ii)(B)(II) the value of which at any time in the particular period represents all or substantially all of the value of its property at that time, held no restricted property, and been governed by terms that provide, in respect of each individual who is a beneficiary under the trust and was resident in Canada at any time while employed by one of those corporations, for a transfer of property to be made by the trust to the individual in satisfaction of a right (other than a right under an arrangement to which subsection 7(2) or (6) applies) of the individual as a beneficiary under the trust only on or after the satisfaction of the conditions, if any, attached to that right;

(m) subparagraph (f)(iv) of the definition “exempt foreign trust” in subsection 94(1) of the Act, as enacted by subsection (1), is, in respect of a trust for its taxation years that end before 2009, to be read as follows:

(iv) throughout the trust’s taxation year that includes the particular time, no benefits are provided under the trust, other than benefits in respect of

(A) qualifying services,

(B) particular services rendered before November 9, 2006, to an employer by an employee of the employer if the employee had on November 8, 2006, a right (whether immediate or future or whether absolute or contingent) to receive the benefits in respect of the particular services pursuant to an agreement in writing

(I) that was entered into before November 9, 2006, and

(II) where the employee was resident in Canada on November 9, 2006, a copy of which was filed with a prescribed form with the Minister by or on behalf of the employer no later than April 30 of the first calendar year that begins after November 9, 2006, or

(C) any combination of services that are described in clause (A) or (B);

(n) if a trust elects, by notifying the Minister of National Revenue in writing on or before its filing-due date for its taxation year that includes the day on which this Act is assented to, that this paragraph apply, paragraph (h) of the definition “exempt foreign trust” in subsection 94(1) of the Act, as enacted by subsection (1), is, in respect of the trust for its taxation years that begin on or before July 18, 2005, to be read as follows:

(h) a non-resident trust that is, at the particular time, an eligible trust

(i) under which the interest of each beneficiary (in this subparagraph, determined without reference to subsection 248(25)) is, at all times that the interest exists during the trust’s taxation year that includes the particular time, a specified fixed interest of the beneficiary in the trust, if at the particular time

(A) there are at least 150 beneficiaries each of whom holds a specified fixed interest in the trust with a fair market value of at least $500, and

(B) where in respect of a class of interests as a beneficiary under the trust, the total fair market value of interests of that class held by a resident contributor or by any other entity with whom the resident contributor does not deal at arm’s length is more than 10% of the total fair market value of interests of that class, it is reasonable to conclude (determined by reference to all the circumstances including the terms of the trust, an intention, the laws of a country or the existence of an agreement, a memorandum, a letter of wishes or any other arrangement) that that resident contributor is a specified contributor to the trust, or

(ii) under which the interest of each beneficiary under the trust is, at all times that the interest exists during the trust’s taxation year that includes the particular time, a specified fixed interest of the beneficiary in the trust, if in respect of the trust

(A) a prescribed form and a copy of the terms of the trust that apply at the particular time have been filed with the Minister by or on behalf of the trust on or before its filing due date for its taxation year that includes the particular time (or a later date that is acceptable to the Minister), and

(B) it is reasonable to conclude (determined by reference to all the circumstances including the terms of the trust, an intention, the laws of a country or the existence of an agreement, a memorandum, a letter of wishes or any other arrangement) that each resident con- tributor (other than an indirect contributor) to the trust at the particular time is a specified contributor to the trust at the particular time; or

(o) the expression “if the entity is an individual and the trust arose on and as a consequence of the death of the individ- ual, 18 months before the contribution time” in the definition “non-resident time” in subsection 94(1) of the Act, as enacted by subsection (1), is, in respect of contributions made before June 23, 2000, to be read as the expression “if the contribution time is before June 23, 2000, 18 months before the end of the trust’s taxation year that includes the contribution time”;

(p) the portion of subparagraph (b)(iii) of the definition “restricted property” in subsection 94(1) of the Act before clause (A), as enacted by subsection (1), is, for taxation years that begin on or before July 18, 2005, to be read as follows:

(iii) the amount of any payment (under a right to receive, in any manner whatever and from any entity, amounts in respect of the indebtedness), or the value of such a right, is, directly or indirectly, determined primarily by one or more of the following criteria in respect of one or more properties of the other entity (or an entity with which the other entity does not deal at arm’s length):

(q) the definition “restricted property” in subsection 94(1) of the Act, as enacted by subsection (1), is, in respect of taxation years that begin on or before November 9, 2006, to be read without reference to its subparagraph (a)(ii) and its clause (b)(ii)(B);

(r) if a trust elects, by notifying the Minister of National Revenue in writing on or before its filing-due date for its taxation year that includes the day on which this Act is assented to, that this paragraph apply, in applying section 94 of the Act, as enacted by subsection (1), in respect of the trust the definition “specified fixed interest” in subsection 94(1) of the Act, as enacted by subsection (1), is, for its taxation years that begin on or before July 18, 2005, to be read as follows:

“specified fixed interest”, at any time of an entity in a trust, means a capital interest of the entity in the trust if

(a) the interest includes, at that time, a right of the entity as a beneficiary under the trust to receive, at or after that time and directly from the trust, income or capital of the trust;

(b) the interest was acquired, at or before that time, from the trust by any entity, in circumstances that are described by subparagraph (2)(g)(ii);

(c) no right of the entity as a beneficiary under the trust to income or capital of the trust may cease to be a right of the entity (or the entity’s legal representatives) otherwise than because of

(i) a gift of that interest made by the entity, or

(ii) a transaction or event under which the entity (or the entity’s legal representatives) is entitled to receive an amount equal to the fair market value, immediately before that cessation, of the right; and

(d) the trust was not at any time at or before that time a personal trust.

(s) paragraph (e) of the definition “specified property” in subsection 94(1) of the Act, as enacted by subsection (1), is, in respect of taxation years that begin on or before November 9, 2006, to be read as follows:

(e) a right to acquire property described in any of paragraphs (a) to (d); and

(t) if a trust ceased to exist before October 31, 2003, the definition “specified time” in subsection 94(1) of the Act, as enacted by subsection (1), is to be read in respect of the trust without reference to paragraph (b) of that definition;

(u) if subsection (1) applies to a trust for any taxation year that begins after 2000 and before 2007,

(i) paragraph 94(3)(e) and subparagraphs 94(8)(a)(iv) and (11)(b)(iii) and (iv) of the Act, as enacted by subsection (1), do not apply to the trust, and

(ii) paragraphs 94(8)(c) and (d) and (11)(c) of the Act, as enacted by subsection (1), in their application to the trust are to be read without reference to the expression “(or the application of this section as it read in its application to taxation years that began before 2007)”;

(v) subparagraph 94(3)(a)(x) of the Act, as enacted by subsection (1), does not apply in determining, on or before July 18, 2005, whether a foreign affiliate is a controlled foreign affiliate of a taxpayer;

(w) paragraph 94(4)(b) of the Act, as enacted by subsection (1), is

(i) subject to subparagraph (ii), for taxation years that begin on or before July 18, 2005, to be read without reference to “the definition “Canadian partnership” in subsection 102(1),”, and

(ii) to be read as follows in its application to a transfer, by a trust, that occurred before February 28, 2004:

(b) subsections 70(6) and 73(1), paragraph 107.4(1)(c) other than subparagraph (i) of that paragraph and paragraph (a) of the definition “mutual fund trust” in subsection 132(6);

(x) if a trust was, for its last taxation year that began before 2007 (or, where section 94 of the Act, as enacted by subsection (1), applies to a taxation year of the trust that begins before 2007, for its last taxation year that began before the first such taxation year), deemed by paragraph 94(1)(c) of the Act (as it read in its application to that taxation year) to be resident in Canada, paragraphs 94(4)(d) and (e) of the Act, as enacted by subsection (1), do not apply to the trust for the period that starts immediately before the end of that last taxation year and that ends immediately after the beginning of its first taxation year that begins after 2006 (or, where section 94 of the Act, as enacted by subsection (1), applies to a taxation year of the trust that begins before 2007, for the period that starts immediately before the end of the last taxation year beginning before the first such taxation year and that ends immediately after the beginning of that first such taxation year), unless during that period a change in the trustees of the trust occurred;

(y) paragraph 94(4)(f) of the Act, as enacted by subsection (1), is, in its application to a transfer by a trust that occurred before February 28, 2004, to be read as follows:

(f) determining the residency of the transferee in applying subparagraph (f)(ii) of the definition “disposition” in subsection 248(1);

18. (1) Section 94.1 of the Act is replaced by the following: