Bill C-10

Cost of Tax Shelter Investments and Limited-recourse Debt in Respect of Gifting Arrangements

(2) Section 143.2 of the Act is amended by adding the following after subsection (6):

(6.1) The limited-recourse debt in respect of a gift or monetary contribution of a taxpayer, at the time the gift or monetary contribution is made, is the total of

(a) each limited-recourse amount at that time, of the taxpayer and of all other taxpayers not dealing at arm’s length with the taxpayer, that can reasonably be considered to relate to the gift or monetary contribution,

(b) each limited-recourse amount at that time, determined under this section when this section is applied to each other taxpayer who deals at arm’s length with and holds, directly or indirectly, an interest in the taxpayer, that can reasonably be considered to relate to the gift or monetary contribution, and

(c) each amount that is the unpaid amount at that time of any other indebtedness, of any taxpayer referred to in paragraph (a) or (b), that can reasonably be considered to relate to the gift or monetary contribution if there is a guarantee, security or similar indemnity or covenant in respect of that or any other indebtedness.

(3) The portion of subsection 143.2(13) of the Act before paragraph (a) is replaced by the following:

(13) For the purpose of this section, if it can reasonably be considered that information relating to indebtedness that relates to a taxpayer’s expenditure, gift or monetary contribution is available outside Canada and the Minister is not satisfied that the unpaid principal of the indebtedness is not a limited-recourse amount, the unpaid principal of the indebtedness relating to the taxpayer’s expenditure, gift or monetary contribution is deemed to be a limited-recourse amount relating to the expenditure, gift or monetary contribution unless

(4) Subsections (1) to (3) apply in respect of expenditures, gifts and monetary contributions made after February 18, 2003.

140. (1) The Act is amended by adding the following after section 143.2:

Expenditure — Limitations

143.3 (1) The following definitions apply in this section.

“expenditure” of a taxpayer means an expense, expenditure or outlay made or incurred by the taxpayer, or a cost or capital cost of property acquired by the taxpayer.

“option” means an option, warrant or similar right, issued or granted by a taxpayer, giving the holder the right to acquire an interest in the taxpayer or in another taxpayer with whom the taxpayer does not, at the time the option, warrant or similar right is issued or granted, deal at arm’s length.

“taxpayer” includes a partnership.

(2) In computing a taxpayer’s income, taxable income or tax payable or an amount considered to have been paid on account of the taxpayer’s tax payable, an expenditure of the taxpayer is deemed not to include any portion of the expenditure that would — if this Act were read without reference to this subsection — be included in determining the expenditure because of the taxpayer having granted or issued an option on or after November 17, 2005.

(3) In computing a corporation’s income, taxable income or tax payable or an amount considered to have been paid on account of the corporation’s tax payable, an expenditure of the corporation that would — if this Act were read without reference to this subsection — include an amount because of the corporation having issued a share of its capital stock at any particular time on or after November 17, 2005 is reduced by

(a) if the issuance of the share is not a consequence of the exercise of an option, the amount, if any, by which the fair market value of the share at the particular time exceeds

(i) if the transaction under which the share is issued is a transaction to which section 85, 85.1 or 138 applies, the amount determined under that section to be the cost to the issuing corporation of the property acquired in consideration for issuing the share, or

(ii) in any other case, the amount of the consideration that is the fair market value of the property transferred to, or the services provided to, the issuing corporation for issuing the share; and

(b) if the issuance of the share is a consequence of the exercise of an option, the amount, if any, by which the fair market value of the share at the particular time exceeds the amount paid, pursuant to the terms of the option, by the holder to the issuing taxpayer for issuing the share.

(4) In computing a taxpayer’s (other than a corporation’s) income, taxable income or tax payable or an amount considered to have been paid on account of the taxpayer’s tax payable, an expenditure of the taxpayer that would — if this Act were read without reference to this subsection — include an amount because of the taxpayer having issued an interest, or because of an interest being created, in itself at any particular time on or after November 17, 2005 is reduced by

(a) if the issuance or creation of the interest is not a consequence of the exercise of an option, the amount, if any, by which the fair market value of the interest at the particular time exceeds

(i) if the transaction under which the interest is issued is a transaction to which paragraph 70(6)(b) or 73(1.01)(c),subsection 97(2) or section 107.4 or 132.2 applies, the amount determined under that provision to be the cost to the taxpayer of the property acquired for the interest, or

(ii) in any other case, the amount of the consideration that is the fair market value of the property transferred to, or the services provided to, the taxpayer for the interest; and

(b) if the issuance or creation of the interest is a consequence of the exercise of an option, the amount, if any, by which the fair market value of the interest at the particular time exceeds the amount paid, pursuant to the terms of the option, by the holder to the taxpayer for the interest.

(5) For greater certainty,

(a) subsection (2) does not apply to reduce an expenditure that is a commission, fee or other amount for services rendered by a person as a salesperson, agent or dealer in securities in the course of the issuance of an option;

(b) subsections (3) and (4) do not apply to reduce an expenditure of a taxpayer to the extent that the expenditure does not include an amount determined to be an excess under those subsections;

(c) this section does not apply to determine the cost or capital cost of property determined under subsection 70(6), section 73, 85 or 85.1, subsection 97(2) or section 107.4, 132.2 or 138; and

(d) this section does not apply to determine the amount of a taxpayer’s expenditure if the amount of the expenditure as determined under section 69 is less than the amount that would, if this subsection were read without reference to this paragraph, be the amount of the expenditure as determined under this section.

(2) Subsection (1) applies on and after November 17, 2005.

141. (1) Paragraph (b) of the definition “earned income” in subsection 146(1) of the Act is replaced by the following:

(b) an amount included under paragraph 56(1)(b), (c.1), (c.2), (g) or (o) in computing the taxpayer’s income for a period in the year throughout which the taxpayer was resident in Canada,

(2) Paragraph (d) of the definition “revenu gagné” in subsection 146(1) of the French version of the Act is replaced by the following:

(3) Subparagraph (d)(i) of the definition “earned income” in subsection 146(1) of the English version of the Act is replaced by the following:

(i) that paragraph were read without reference to subparagraph 115(2)(e)(iv), and

(4) Paragraph (f) of the definition “earned income” in subsection 146(1) of the Act is replaced by the following:

(f) an amount deductible under paragraph 60(b) or (c.1), or deducted under paragraph 60(c.2), in computing the taxpayer’s income for the year,

(5) Paragraph (h) of the definition “earned income” in subsection 146(1) of the Act is replaced by the following:

(h) the portion of an amount included under subparagraph (a)(ii) or (c)(ii) in determining the taxpayer’s earned income for the year because of paragraph 14(1)(b)

(6) Subsection 146(8.1) of the Act is replaced by the following:

(8.1) Where a payment out of or under a registered retirement savings plan of a deceased annuitant to the annuitant’s legal representative would have been a refund of premiums if it had been paid under the plan to an individual who is a beneficiary (as defined in subsection 108(1)) under the deceased’s estate, the payment is, to the extent it is so designated jointly by the legal representative and the individual in prescribed form filed with the Minister, deemed to be received by the individual (and not by the legal representative) at the time it was so paid as a benefit that is a refund of premiums.

(7) Subparagraph 146(10.1)(b)(ii) of the Act is replaced by the following:

(ii) paragraphs 38(a) and (b) are to be read as if the fraction set out in each of those paragraphs were replaced by the word “all”.

(8) Subsections (1) and (4) apply to the 1997 and subsequent taxation years.

(9) Subsections (2) and (3) apply to the 1993 and subsequent taxation years.

(10) Subsection (5) applies to amounts included in computing income for taxation years in respect of business fiscal periods that end after February 27, 2000.

(11) Subsection (6) applies after 1988 except that, before 1999, subsection 146(8.1) of the Act, as enacted by subsection (6), is to be read as follows:

(8.1) Such portion of an amount paid in a taxation year out of or under a registered retirement savings plan of a deceased annuitant to the annuitant’s legal representative as, had that portion been paid under the plan to an individual who is a beneficiary (as defined in subsection 108(1)) under the deceased’s estate, would have been a refund of premiums is, to the extent it is so designated jointly by the legal representative and the individual in prescribed form filed with the Minister, deemed to be received by the individual in the year as a benefit that is a refund of premiums.

142. (1) The definition “quarter” in subsection 146.01(1) of the Act is repealed.

(2) Subsection 146.01(8) of the Act is repealed.

(3) Subsections (1) and (2) apply in respect of the 2002 and subsequent taxation years.

143. (1) Subsection 146.1(2) of the Act is amended by adding the following after paragraph (g.2):

(g.3) the plan provides that an individual is permitted to be designated as a beneficiary under the plan, and that a contribution to the plan in respect of an individual who is a beneficiary under the plan is permitted to be made, only if

(i) in the case of a designation, the individual’s Social Insurance Number is provided to the promoter before the designation is made and either

(A) the individual is resident in Canada when the designation is made, or

(B) the designation is made in conjunction with a transfer of property into the plan from another registered education savings plan under which the individual was a beneficiary immediately before the transfer, and

(ii) in the case of a contribution, either

(A) the individual’s Social Insurance Number is provided to the promoter before the contribution is made and the individual is resident in Canada when the contribution is made, or

(B) the contribution is made by way of transfer from another registered education savings plan under which the individual was a beneficiary immediately before the transfer;

(2) Section 146.1 of the Act is amended by adding the following after subsection (2.2):

(2.3) Notwithstanding paragraph (2)(g.3), an education savings plan may provide that an individual’s Social Insurance Number need not be provided in respect of

(a) a contribution to the plan, if the plan was entered into before 1999; and

(b) a designation of a non-resident individual as a beneficiary under the plan, if the individual was not assigned a Social Insurance Number before the designation is made.

(3) Subsections (1) and (2) apply after 2003.

144. (1) Paragraph (b) of the definition “annuitant” in subsection 146.3(1) of the Act is replaced by the following:

(b) after the death of the first individual, a spouse or common-law partner (in this definition referred to as the “survivor”) of the first individual to whom the carrier has undertaken to make payments described in the definition “retirement income fund” out of or under the fund after the death of the first individual, if the survivor is alive at that time and the undertaking was made

(i) pursuant to an election that is described in that definition and that was made by the first individual, or

(ii) with the consent of the legal representative of the first individual, and

(2) The portion of paragraph 146.3(2)(c) of the English version of the Act before subparagraph (i) is replaced by the following:

(c) if the carrier is a person referred to as a depositary in section 146, the fund provides that

(3) Paragraph 146.3(2)(f) of the Act is amended by striking out the word “or” at the end of subparagraph (vi), by adding the word “or” at the end of subparagraph (vii) and by adding the following after subparagraph (vii):

(viii) a deferred profit sharing plan in accordance with subsection 147(19);

(4) The portion of subsection 146.3(5.1) of the English version of the Act before paragraph (a) is replaced by the following:

(5.1) If at any time in a taxation year a particular amount in respect of a registered retirement income fund that is a spousal or common-law partner plan (within the meaning assigned by subsection 146(1)) in relation to a taxpayer is required to be included in the income of the taxpayer’s spouse or common-law partner and the taxpayer is not living separate and apart from the taxpayer’s spouse or common-law partner at that time by reason of the breakdown of their marriage or common-law partnership, there shall be included at that time in computing the taxpayer’s income for the year an amount equal to the least of

(5) The portion of subsection 146.3(9) of the Act before paragraph (a) is replaced by the following:

(9) If a trust that is governed by a registered retirement income fund holds, at any time in a taxation year, a property that is not a qualified investment,

(6) Subparagraph 146.3(9)(b)(ii) of the Act is replaced by the following:

(ii) paragraphs 38(a) and (b) are to be read as if the fraction set out in each of those paragraphs were replaced by the word “all”.

(7) Subsections (1) and (4) apply to the 2001 and subsequent taxation years except that, if a taxpayer and a person have jointly elected under section 144 of the Modernization of Benefits and Obligations Act, in respect of the 1998, 1999 or 2000 taxation years, subsections (1) and (4) apply to the taxpayer and the person in respect of the applicable taxation year and subsequent taxation years.

(8) Subsection (2) applies after 2001.

(9) Subsection (3) applies after March 20, 2003.

(10) Subsection (5) applies to the 2003 and subsequent taxation years.

145. (1) Paragraph 147(2)(e) of the Act is replaced by the following:

(e) the plan includes a provision stipulating that no right of a person under the plan is capable of any surrender or assignment other than

(i) an assignment under a decree, an order or a judgment of a competent tribunal, or under a written agreement, that relates to a division of property between an individual and the individual’s spouse or common-law partner, or former spouse or common-law partner, in settlement of rights that arise out of, or on a breakdown of, their marriage or common-law partnership,

(ii) an assignment by a deceased individ- ual’s legal representative on the distribution of the individual’s estate, and

(iii) a surrender of benefits to avoid revocation of the plan’s registration;

(2) Subsection 147(5.11) of the Act is repealed.

(3) Subparagraph 147(19)(b)(ii) of the Act is replaced by the following:

(ii) who is a spouse or common-law partner, or former spouse or common-law partner, of an employee or former employee referred to in subparagraph (i) and who is entitled to the amount

(A) as a consequence of the death of the employee or former employee, or

(B) under a decree, an order or a judgment of a competent tribunal, or under a written agreement, that relates to a division of property between the employee or former employee and the individual in settlement of rights that arise out of, or on a breakdown of, their marriage or common-law partnership;

(4) The portion of paragraph 147(19)(d) of the French version of the Act before subparagraph (i) is replaced by the following:

(5) Paragraph 147(19)(d) of the Act is amended by striking out the word “or” at the end of subparagraph (ii), by adding the word “or” at the end of subparagraph (iii) and by adding the following after subparagraph (iii):

(iv) a registered retirement income fund under which the individual is the annuitant (within the meaning assigned by subsection 146.3(1)).

(6) Subsection (1) applies after March 20, 2003.

(7) Subsection (2) applies to cessations of employment that occur after 2002.

(8) Subsections (3) to (5) apply to transfers that occur after March 20, 2003.

146. (1) Paragraph 148(1)(e) of the Act is amended by striking out the word “or” at the end of subparagraph (i) and by adding the following after that subparagraph:

(i.1) the annuity contract is a qualifying trust annuity with respect to a taxpayer and the amount paid to acquire it was deductible under paragraph 60(l) in computing the taxpayer’s income, or

(2) Subsection 148(8.2) of the French version of the Act is replaced by the following:

(3) Subsection (1) applies after August 1992.

(4) Paragraph 148(1)(e) of the Act, as it applies after 1988 and before September 1992, is to be read as follows:

(e) an annuity contract

(i) the payment for which was deductible in computing the policyholder’s income by virtue of paragraph 60(l), or

(ii) that is a qualifying trust annuity with respect to a taxpayer, the payment for which was deductible under paragraph 60(l) in computing the taxpayer’s income,

147. (1) The definition “versement admissible” in subsection 148.1(1) of the French version of the Act is replaced by the following:

(2) The description of C in subsection 148.1(3) of the Act is replaced by the following:

C      is the amount determined by the formula

D - E

where

D      is the total of all relevant contributions made before the particular time in respect of the individual under the arrangement (other than contributions in respect of the individual that were in a cemetery care trust), and

E      is the total of all amounts each of which is the amount, if any, by which

(a) an amount relating to the balance in respect of the individual under the arrangement that is deemed by subsection (4) to have been distributed before the particular time from the arrangement

exceeds

(b) the portion of the amount referred to in paragraph (a) that is added, because of this subsection, in computing a taxpayer’s income.

(3) Section 148.1 of the Act is amended by adding the following after subsection (3):

(4) If at a particular time an amount relating to the balance in respect of an individual (referred to in this subsection and in subsection (5) as the “transferor”) under an eligible funeral arrangement (referred to in this subsection and in subsection (5) as the “transferor arrangement”) is transferred, credited or added to the balance in respect of the same or another individual (referred to in this subsection and in subsection (5) as the “recipient”) under the same or another eligible funeral arrangement (referred to in this subsection and in subsection (5) as the “recipient arrangement”),

(a) the amount is deemed to be distributed to the transferor (or, if the transferor is deceased at the particular time, to the recipient) at the particular time from the transferor arrangement and to be paid from the balance in respect of the transferor under the transferor arrangement; and

(b) the amount is deemed to be a contribution made (other than by way of a transfer from an eligible funeral arrangement) at the particular time under the recipient arrangement for the purpose of funding funeral or cemetery services with respect to the recipient.

(5) Subsection (4) does not apply if

(a) the transferor and the recipient are the same individual;

(b) the amount that is transferred, credited or added to the balance in respect of the individual under the recipient arrangement is equal to the balance in respect of the individual under the transferor arrangement immediately before the particular time; and

(c) the transferor arrangement is terminated immediately after the transfer.

(4) Subsections (2) and (3) apply to amounts that are transferred, credited or added after December 20, 2002.

148. (1) Paragraph 149(1)(d.5) of the Act is replaced by the following:

(d.5) subject to subsections (1.2) and (1.3), a corporation, commission or association not less than 90% of the capital of which was owned by one or more entities each of which is a municipality in Canada, or a municipal or public body performing a function of government in Canada, if the income for the period of the corporation, commission or association from activities carried on outside the geographical boundaries of the entities does not exceed 10% of its income for the period;

(2) Subparagraphs 149(1)(d.6)(i) and (ii) of the Act are replaced by the following:

(i) if paragraph (d.5) applies to the other corporation, commission or association, the geographical boundaries of the entities referred to in that paragraph in its application to that other corporation, commission or association, or

(ii) if this paragraph applies to the other corporation, commission or association, the geographical boundaries of the entities referred to in subparagraph (i) in its application to that other corporation, commission or association;

(3) Subsection 149(1) of the Act is amended by striking out the word “or” at the end of paragraph (y) and by adding the following after paragraph (z):

(z.1) a trust

(i) that was created because of a requirement imposed by section 56 of the Environment Quality Act, R.S.Q., c. Q-2,

(ii) that is resident in Canada, and

(iii) in which the only persons that are beneficially interested are

(A) Her Majesty in right of Canada,

(B) Her Majesty in right of a province, or

(C) a municipality (as defined in section 1 of that Act) that is exempt because of this subsection from tax under this Part on all of its taxable income; or

(z.2) a trust

(i) that was created because of a requirement imposed by subsection 9(1) of the Nuclear Fuel Waste Act, S.C. 2002, c. 23,

(ii) that is resident in Canada, and

(iii) in which the only persons that are beneficially interested are

(A) Her Majesty in right of Canada,

(B) Her Majesty in right of a province,

(C) a nuclear energy corporation (as defined in section 2 of that Act) all of the shares of the capital stock of which are owned by one or more persons described in clause (A) or (B),

(D) the waste management organization established under section 6 of that Act if all of the shares of its capital stock are owned by one or more nuclear energy corporations described in clause (C), or

(E) Atomic Energy of Canada Limited, being the company incorporated or acquired pursuant to subsection 10(2) of the Atomic Energy Control Act, R.S.C. 1970, c. A-19.

(4) The portion of subsection 149(1.2) of the Act before paragraph (b) is replaced by the following:

(1.2) For the purposes of paragraphs (1)(d.5) and (d.6), income of a corporation, a commission or an association from activities carried on outside the geographical boundaries of a municipality or of a municipal or public body does not include income from activities carried on

(a) under an agreement in writing between

(i) the corporation, commission or association, and

(ii) a person who is Her Majesty in right of Canada or of a province, a municipality, a municipal or public body or a corporation to which any of paragraphs (1)(d) to (d.6) applies and that is controlled by Her Majesty in right of Canada or of a province, by a municipality in Canada or by a municipal or public body in Canada

within the geographical boundaries of,

(iii) if the person is Her Majesty in right of Canada or a corporation controlled by Her Majesty in right of Canada, Canada,

(iv) if the person is Her Majesty in right of a province or a corporation controlled by Her Majesty in right of a province, the province,

(v) if the person is a municipality in Canada or a corporation controlled by a municipality in Canada, the municipality, and

(vi) if the person is a municipal or public body performing a function of government in Canada or a corporation controlled by such a body, the area described in subsection (11) in respect of the person; or

(5) Subsection 149(1.3) of the Act is replaced by the following:

(1.3) Paragraphs (1)(d) to (d.6) do not apply in respect of a person’s taxable income for a period in a taxation year if at any time during the period

(a) the person is a corporation shares of the capital stock of which are owned by one or more other persons that, in total, give them more than 10% of the votes that could be cast at a meeting of shareholders of the corporation, other than shares that are owned by one or more persons each of which is

(i) Her Majesty in right of Canada or of a province,

(ii) a municipality in Canada,

(iii) a municipal or public body performing a function of government in Canada, or

(iv) a corporation, a commission or an association, to which any of paragraphs (1)(d) to (d.6) apply; or

(b) the person is, or would be if the person were a corporation, controlled, directly or indirectly in any manner whatever, by a person, or by a group of persons that includes a person, who is not

(i) Her Majesty in right of Canada or of a province,

(ii) a municipality in Canada,

(iii) a municipal or public body performing a function of government in Canada, or

(iv) a corporation, a commission or an association, to which any of paragraphs (1)(d) to (d.6) apply.

(6) Section 149 of the Act is amended by adding the following after subsection (10):

(11) For the purpose of this section, the geographical boundaries of a municipal or public body performing a function of government are

(a) the geographical boundaries that encompass the area in respect of which an Act of Parliament or an agreement given effect by an Act of Parliament recognizes or grants to the body a power to impose taxes; or

(b) if paragraph (a) does not apply, the geographical boundaries within which that body has been authorized by the laws of Canada or of a province to exercise that function.

(7) Subsections (1), (2) and (4) to (6) apply to taxation years that begin after May 8, 2000, except that, for those taxation years that began before December 21, 2002, subsection 149(1.3) of the Act, as enacted by subsection (5), is to be read as follows:

(1.3) For the purposes of paragraph (1)(d.5) and subsection (1.2), 90% of the capital of a corporation that has issued share capital is owned by one or more entities, each of which is a municipality or a municipal or public body, only if the entities own shares of the capital stock of the corporation that give the entities 90% or more of the votes that could be cast under all circumstances at an annual meeting of shareholders of the corporation.

(8) Subsection (3) applies to the 1997 and subsequent taxation years.

(9) Notwithstanding subsections 152(4) to (5) of the Act, any assessment of a taxpayer’s tax payable under the Act for any taxation year that began before February 27, 2004 shall be made that is necessary to give effect to the provisions of the Act enacted by subsections (1), (2) and (4) to (7).

149. (1) The definition “public foundation” in subsection 149.1(1) of the Act is replaced by the following:

“public foundation”, at a particular time, means a charitable foundation

(a) more than 50% of the directors, trustees, officers or like officials of which deal at arm’s length with each other and with

(i) each of the other directors, trustees, officers and like officials of the foundation,

(ii) each person described by subparagraph (b)(i) or (ii), and

(iii) each member of a group of persons (other than Her Majesty in right of Canada or of a province, a municipality, another registered charity that is not a private foundation, and any club, society or association described in paragraph 149(1)(l)) who do not deal with each other at arm’s length, if the group would, if it were a person, be a person described by subparagraph (b)(i), and

(b) that is not, at the particular time, and would not at the particular time be, if the foundation were a corporation, controlled directly or indirectly in any manner whatever

(i) by a person (other than Her Majesty in right of Canada or of a province, a municipality, another registered charity that is not a private foundation, and any club, society or association described in paragraph 149(1)(l)),

(A) who immediately after the particular time, has contributed to the foundation amounts that are, in total, greater than 50% of the capital of the foundation immediately after the particular time, and

(B) who immediately after the person’s last contribution at or before the par- ticular time, had contributed to the foundation amounts that were, in total, greater than 50% of the capital of the foundation immediately after the making of that last contribution, or

(ii) by a person, or by a group of persons that do not deal at arm’s length with each other, if the person or any member of the group does not deal at arm’s length with a person described in subparagraph (i);

(2) The portion of the definition “charitable organization” in subsection 149.1(1) of the Act before paragraph (a) is replaced by the following:

“charitable organization”, at any particular time, means an organization, whether or not incorporated,

(3) Paragraphs (c) and (d) of the definition “charitable organization” in subsection 149.1(1) of the Act are replaced by the following:

(c) more than 50% of the directors, trustees, officers or like officials of which deal at arm’s length with each other and with

(i) each of the other directors, trustees, officers and like officials of the organization,

(ii) each person described by subparagraph (d)(i) or (ii), and

(iii) each member of a group of persons (other than Her Majesty in right of Canada or of a province, a municipality, another registered charity that is not a private foundation, and any club, society or association described in paragraph 149(1)(l)) who do not deal with each other at arm’s length, if the group would, if it were a person, be a person described by subparagraph (d)(i), and

(d) that is not, at the particular time, and would not at the particular time be, if the organization were a corporation, controlled directly or indirectly in any manner whatever

(i) by a person (other than Her Majesty in right of Canada or of a province, a municipality, another registered charity that is not a private foundation, and any club, society or association described in paragraph 149(1)(l)),

(A) who immediately after the particular time, has contributed to the organization amounts that are, in total, greater than 50% of the capital of the organization immediately after the particular time, and

(B) who immediately after the person’s last contribution at or before the par- ticular time, had contributed to the organization amounts that were, in total, greater than 50% of the capital of the organization immediately after the making of that last contribution, or

(ii) by a person, or by a group of persons that do not deal at arm’s length with each other, if the person or any member of the group does not deal at arm’s length with a person described in subparagraph (i);

(4) Paragraph (d) of the definition “enduring property” in subsection 149.1(1) of the English version of the Act is replaced by the following:

(d) a gift received by the registered charity as a transferee from an original recipient charity or another transferee of a property that was, before that gift was so received, an enduring property of the original recipient charity or of the other transferee because of paragraph (a) or (c) or this paragraph, or property substituted for the gift, if, in the case of a property that was an enduring property of an original recipient charity because of paragraph (c), the gift is subject to the same terms and conditions under the trust or direction as applied to the original recipient charity;

(5) Subsection 149.1(2) of the Act is amended by striking out the word “or” at the end of paragraph (a), by adding the word “or” at the end of paragraph (b) and by adding the following after paragraph (b):

(c) makes a disbursement by way of a gift, other than a gift made

(i) in the course of charitable activities carried on by it, or

(ii) to a donee that is a qualified donee at the time of the gift.

(6) Subsection 149.1(3) of the Act is amended by adding the following after paragraph (b):

(b.1) makes a disbursement by way of a gift, other than a gift made

(i) in the course of charitable activities carried on by it, or

(ii) to a donee that is a qualified donee at the time of the gift;

(7) Subsection 149.1(4) of the Act is amended by adding the following after paragraph (b):

(b.1) makes a disbursement by way of a gift, other than a gift made

(i) in the course of charitable activities carried on by it, or

(ii) to a donee that is a qualified donee at the time of the gift;

(8) The portion of subsection 149.1(9) of the Act after paragraph (b) is replaced by the following:

is, notwithstanding subsection (8), deemed to be income of the charity for, and the eligible amount of a gift for which it issued a receipt described in subsection 110.1(2) or 118.1(2) in, its taxation year in which the period referred to in paragraph (a) expires or the time referred to in paragraph (b) occurs, as the case may be.

(9) Paragraph 149.1(15)(b) of the Act is replaced by the following:

(b) the Minister may make available to the public in any manner that the Minister considers appropriate a listing of all registered, or previously registered, charities and Canadian amateur athletic associations that indicates for each of them

(i) its name and address,

(ii) its registration number and date of registration, and

(iii) the effective date of any revocation, annulment or termination of its registration.

(10) Subsection (1) applies after 1999 except that, in respect of a foundation that has not been designated before 2000 as a private foundation or a charitable organization under subsection 149.1(6.3) of the Act or under subsection 110(8.1) or (8.2) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, and that has not applied after February 15, 1984 for registration under paragraph 110(8)(c) of that Act or under the definition “registered charity” in subsection 248(1) of the Act, subparagraph (a)(iii) and paragraph (b) of the definition “public foundation” in subsection 149.1(1) of the Act, as enacted by subsection (1), are in their application before the earlier of the day, if any, on which the foundation is designated after 1999 as a private foundation or a charitable organization under subsection 149.1(6.3) of the Act and January 1, 2005 to be read

(a) without reference to “(other than Her Majesty in right of Canada or of a province, a municipality, another registered charity that is not a private foundation, and any club, society or association described in paragraph 149(1)(l))”; and

(b) as if the references to “50%” in paragraph (b) of that definition were references to “75%”.

(11) Subsections (2) and (3) apply after 1999 except that, in respect of a charitable organization that has not been designated before 2000 as a private foundation or a public foundation under subsection 149.1(6.3) of the Act or under subsection 110(8.1) or (8.2) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, and that has not applied after February 15, 1984 for registration under paragraph 110(8)(c) of that Act or under the definition “registered charity” in subsection 248(1) of the Act, subparagraphs (c)(ii) and (iii) of the definition “charitable organization” in subsection 149.1(1) of the Act, as enacted by subsection (3), apply after the earlier of the day, if any, on which the organization is designated after 1999 as a private foundation or a public foundation under subsection 149.1(6.3) of the Act and December 31, 2004.

(12) Subsection (4) applies to taxation years that begin after March 22, 2004.

(13) Subsections (5) to (7) apply to gifts made after December 20, 2002.

(14) Subsection (8) applies after December 20, 2002.

(15) In its application to gifts made after December 20, 2002 but in a taxation year that begins before March 23, 2004, the portion of the description of A in the definition “disbursement quota” in subsection 149.1(1) of the Act before paragraph (a) shall be read as follows:

A      is 80% of the total of all amounts each of which is the eligible amount of a gift for which the foundation issued a receipt described in subsection 110.1(2) or 118.1(2) in its immediately preceding taxation year, other than

(16) In its application to gifts made after December 20, 2002 but in a taxation year that begins before March 23, 2004, the portion of the description of A.1 in the definition “disbursement quota” in subsection 149.1(1) of the Act before paragraph (a) shall be read as follows:

A.1      is 80% of the total of all amounts each of which is the eligible amount of a gift received in a preceding taxation year, to the extent that the eligible amount

(17) An application referred to in subsection 149.1(6.3) of the Act, in respect of one or more taxation years after 1999, may be made after 1999 and before the 90th day after this Act is assented to. If a designation referred to in that subsection for any of those taxation years is made in response to the application, the charity is deemed to be registered as a charitable organization, a public foundation or a private foundation, as the case may be, for the taxation years that the Minister of National Revenue specifies.

150. (1) The portion of subsection 152(1.2) of the Act before paragraph (a) is replaced by the following:

(1.2) Paragraphs 56(1)(l) and 60(o), this Division and Division J, as they relate to an assessment or a reassessment and to assessing or reassessing tax, apply, with any modifications that the circumstances require, to a determination or a redetermination of an amount under this Division or an amount deemed under section 122.61 to be an overpayment on account of a taxpayer’s liability under this Part, except that

(2) Subsections 152(3.4) and (3.5) of the Act are repealed.

(3) Subsections (1) and (2) apply in respect of forms filed after March 20, 2003.

151. (1) Paragraph 153(1)(d.1) of the Act is replaced by the following:

(d.1) an amount described in subparagraph 56(1)(a)(iv) or (vii),

(2) Subsection (1) applies to the 2006 and subsequent taxation years.

152. (1) Paragraph 157(3)(c) of the Act is replaced by the following:

(c) if the corporation is a mutual fund corporation, 1/12 of the total of

(i) the corporation’s capital gains refund (within the meaning assigned by section 131) for the year, and

(ii) the amount that, because of subsection 131(5) or, where the corporation is a prescribed labour-sponsored venture capital corporation, because of subsection 131(11), is the corporation’s dividend refund (within the meaning assigned by section 129) for the year,

(2) Subsection (1) applies to the 1999 and subsequent taxation years.

153. (1) Subsection 159(3) of the Act is replaced by the following:

(3) If a legal representative (other than a trustee in bankruptcy) of a taxpayer distributes to one or more persons property in the possession or control of the legal representative, acting in that capacity, without obtaining a certificate under subsection (2) in respect of the amounts referred to in that subsection,

(a) the legal representative is personally liable for the payment of those amounts to the extent of the value of the property distributed;

(b) the Minister may at any time assess the legal representative in respect of any amount payable because of this subsection; and

(c) the provisions of this Division (including, for greater certainty, the provisions in respect of interest payable) apply, with any modifications that the circumstances require, to an assessment made under this subsection as though it had been made under section 152 in respect of taxes payable under this Part.

(2) Subsection (1) applies to assessments made after December 20, 2002.

154. (1) The portion of subsection 160(1) of the Act after subparagraph (e)(i) is replaced by the following:

(ii) the total of all amounts each of which is an amount that the transferor is liable to pay under this Act (including, for greater certainty, an amount that the transferor is liable to pay under this section, regardless of whether the Minister has made an assessment under subsection (2) for that amount) in or in respect of the taxation year in which the property was transferred or any preceding taxation year,

but nothing in this subsection limits the liability of the transferor under any other provision of this Act or of the transferee for the interest that the transferee is liable to pay under this Act on an assessment in respect of the amount that the transferee is liable to pay because of this subsection.

(2) The portion of subsection 160(1.1) of the Act after the description of B is replaced by the following:

but nothing in this subsection limits the liability of the other taxpayer under any other provision of this Act or of any person for the interest that the person is liable to pay under this Act on an assessment in respect of the amount that the person is liable to pay because of this subsection.

(3) Paragraphs 160(1.2)(a) and (b) of the Act are replaced by the following:

(a) carried on a business that was provided property or services by a partnership or trust all or a portion of the income of which partnership or trust is directly or indirectly included in computing the individual’s split income for the year,

(b) was a specified shareholder of a corporation that was provided property or services by a partnership or trust all or a portion of the income of which partnership or trust is directly or indirectly included in computing the individual’s split income for the year,

(4) Paragraph 160(1.2)(d) of the Act is replaced by the following:

(d) was a shareholder of a professional corporation that was provided property or services by a partnership or trust all or a portion of the income of which partnership or trust is directly or indirectly included in computing the individual’s split income for the year, or

(5) Subsection 160(1.2) of the Act is amended by adding the following after paragraph (e):

but nothing in this subsection limits the liability of the specified individual under any other provision of this Act or of the parent for the interest that the parent is liable to pay under this Act on an assessment in respect of the amount that the parent is liable to pay because of this subsection.

(6) Subsection 160(2) of the Act is replaced by the following:

(2) The Minister may at any time assess a taxpayer in respect of any amount payable because of this section, and the provisions of this Division (including, for greater certainty, the provisions in respect of interest payable) apply, with any modifications that the circumstances require, in respect of an assessment made under this section as though it had been made under section 152 in respect of taxes payable under this Part.

(7) Subsections (1), (2), (5) and (6) apply in respect of assessments made after December 20, 2002.

(8) Subsections (3) and (4) apply after December 20, 2002.

155. (1) Subsection 160.1(3) of the Act is replaced by the following:

(3) The Minister may at any time assess a taxpayer in respect of any amount payable by the taxpayer because of subsection (1) or (1.1) or for which the taxpayer is liable because of subsection (2.1) or (2.2), and the provisions of this Division (including, for greater certainty, the provisions in respect of interest payable) apply, with any modifications that the circumstances require, in respect of an assessment made under this section, as though it were made under section 152 in respect of taxes payable under this Part, except that no interest is payable on an amount assessed in respect of an excess referred to in subsection (1) that can reasonably be considered to arise as a consequence of the operation of section 122.5 or 122.61.

(2) Subsection (1) applies to assessments made after December 20, 2002.

156. (1) The portion of subsection 160.2(1) of the Act after paragraph (b) is replaced by the following:

the taxpayer and the last annuitant under the plan are jointly and severally, or solidarily, liable to pay a part of the annuitant’s tax under this Part for the year of the annuitant’s death equal to that proportion of the amount by which the annuitant’s tax for the year is greater than it would have been if it were not for the operation of subsection 146(8.8) that the total of all amounts each of which is an amount determined under paragraph (b) in respect of the taxpayer is of the amount included in computing the annuitant’s income because of that subsection, but nothing in this subsection limits the liability of the annuitant under any other provision of this Act or of the taxpayer for the interest that the taxpayer is liable to pay under this Act on an assessment in respect of the amount that the taxpayer is liable to pay because of this subsection.

(2) The portion of subsection 160.2(2) of the Act after paragraph (b) is replaced by the following:

the taxpayer and the annuitant are jointly and severally, or solidarily, liable to pay a part of the annuitant’s tax under this Part for the year of the annuitant’s death equal to that proportion of the amount by which the annuitant’s tax for the year is greater than it would have been if it were not for the operation of subsection 146.3(6) that the amount determined under paragraph (b) is of the amount included in computing the annuitant’s income because of that subsection, but nothing in this subsection limits the liability of the annuitant under any other provision of this Act or of the taxpayer for the interest that the taxpayer is liable to pay under this Act on an assessment in respect of the amount that the taxpayer is liable to pay because of this subsection.

(3) Section 160.2 of the Act is amended by adding the following after subsection (2):

(2.1) Where a taxpayer is deemed by section 75.2 to have received at any time an amount out of or under an annuity that is a qualifying trust annuity with respect to the taxpayer, the taxpayer, the annuitant under the annuity and the policyholder are jointly and severally, or solidarily, liable to pay the part of the taxpayer’s tax under this Part for the taxation year of the taxpayer that includes that time that is equal to the amount, if any, determined by the formula

A - B

where

A      is the amount of the taxpayer’s tax under this Part for that taxation year; and

B      is the amount that would be the taxpayer’s tax under this Part for that taxation year if no amount were deemed by section 75.2 to have been received by the taxpayer out of or under the annuity in that taxation year.

(2.2) Subsection (2.1) limits neither

(a) the liability of the taxpayer referred to in that subsection under any other provision of this Act; nor

(b) the liability of an annuitant or policyholder referred to in that subsection for the interest that the annuitant or policyholder is liable to pay under this Act on an assessment in respect of the amount that the annuitant or policyholder is liable to pay because of that subsection.

(4) Subsection 160.2(3) of the Act is replaced by the following:

(3) The Minister may at any time assess a taxpayer in respect of any amount payable because of this section, and the provisions of this Division (including, for greater certainty, the provisions in respect of interest payable) apply, with any modifications that the circumstances require, in respect of an assessment made under this section as though it had been made under section 152 in respect of taxes payable under this Part.

(5) Section 160.2 of the Act is amended by adding the following after subsection (4):

(5) Where an annuitant or policyholder has, because of subsection (2.1), become jointly and severally, or solidarily, liable with a taxpayer in respect of part or all of a liability of the taxpayer under this Act, the following rules apply:

(a) a payment by the annuitant on account of the annuitant’s liability, or by the policyholder on account of the policyholder’s liability, shall to the extent of the payment discharge their liability, but

(b) a payment by the taxpayer on account of the taxpayer’s liability only discharges the annuitant’s and the policyholder’s liability to the extent that the payment operates to reduce the taxpayer’s liability to an amount less than the amount in respect of which the annuitant and the policyholder were, by subsection (2.1), made liable.

(6) Subsections (1), (2) and (4) apply to assessments made after December 20, 2002.

(7) Subsections (3) and (5) apply to assessments made after 2005.

157. (1) Subsections 160.3(1) and (2) of the Act are replaced by the following:

160.3 (1) If an amount required to be included in the income of a taxpayer because of paragraph 56(1)(x) is received by a person with whom the taxpayer is not dealing at arm’s length, that person is jointly and severally, or solidarily, liable with the taxpayer to pay a part of the taxpayer’s tax under this Part for the taxation year in which the amount is received equal to the amount by which the taxpayer’s tax for the year exceeds the amount that would be the taxpayer’s tax for the year if the amount had not been received, but nothing in this subsection limits the liability of the taxpayer under any other provision of this Act or of the person for the interest that the person is liable to pay under this Act on an assessment in respect of the amount that the person is liable to pay because of this subsection.

(2) The Minister may at any time assess a person in respect of any amount payable because of this section, and the provisions of this Division (including, for greater certainty, the provisions in respect of interest payable) apply, with any modifications that the circumstances require, in respect of an assessment made under this section as though it had been made under section 152 in respect of taxes payable under this Part.

(2) Subsection (1) applies to assessments made after December 20, 2002.

158. (1) Subsection 160.4(1) of the Act is replaced by the following:

160.4 (1) If property is transferred at any time by a corporation to a taxpayer with whom the corporation does not deal at arm’s length at that time and the corporation is not entitled because of subsection 61.3(3) to deduct an amount under section 61.3 in computing its income for a taxation year because of the transfer or because of the transfer and one or more other transactions, the taxpayer is jointly and severally, or solidarily, liable with the corporation to pay the lesser of the corporation’s tax payable under this Part for the year and the amount, if any, by which the fair market value of the property at that time exceeds the fair market value at that time of the consideration given for the property, but nothing in this subsection limits the liability of the corporation under any other provision of this Act or of the taxpayer for the interest that the taxpayer is liable to pay under this Act on an assessment in respect of the amount that the taxpayer is liable to pay because of this subsection.

(2) The portion of subsection 160.4(2) of the Act after paragraph (c) is replaced by the following:

the transferee is jointly and severally, or solidarily, liable with the transferor and the debtor to pay an amount of the debtor’s tax under this Part equal to the lesser of the amount of that tax that the transferor was liable to pay at that time and the amount, if any, by which the fair market value of the property at that time exceeds the fair market value at that time of the consideration given for the property, but nothing in this subsection limits the liability of the debtor or the transferor under any provision of this Act or of the transferee for the interest that the transferee is liable to pay under this Act on an assessment in respect of the amount that the transferee is liable to pay because of this subsection.

(3) Subsection 160.4(3) of the Act is replaced by the following:

(3) The Minister may at any time assess a person in respect of any amount payable by the person because of this section, and the provisions of this Division (including, for greater certainty, the provisions in respect of interest payable) apply, with any modifications that the circumstances require, in respect of an assessment made under this section, as though it had been made under section 152 in respect of taxes payable under this Part.

(4) Subsections (1) to (3) apply to assessments made after December 20, 2002.

159. (1) Subsection 162(6) of the French version of the Act is replaced by the following:

(2) Subsection (1) applies after June 18, 1998.

160. (1) Paragraph 163(2)(c.1) of the Act is replaced by the following:

(c.1) the amount, if any, by which

(i) the total of all amounts each of which is an amount that would be deemed by section 122.5 to be paid by that person during a month specified for the year or, where that person is the qualified relation of an individual in relation to that specified month (within the meaning assigned by subsection 122.5(1)), by that individual, if that total were calculated by reference to the information provided in the person’s return of income (within the meaning assigned by subsection 122.5(1)) for the year

exceeds

(ii) the total of all amounts each of which is an amount that is deemed by section 122.5 to be paid by that person or by an individual of whom the person is the qualified relation in relation to a month specified for the year (within the meaning assigned to subsection 122.5(1)),

(2) Subsection (1) applies to amounts deemed to be paid during months specified for the 2001 and subsequent taxation years.

161. (1) Section 164 of the Act is amended by adding the following after subsection (1.5):

(1.51) Subsection (1.52) applies to a taxpayer for a taxation year if, at any time after the beginning of the year

(a) the taxpayer has, in respect of the tax payable by the taxpayer under this Part (and, if the taxpayer is a corporation, Parts I.3, VI, VI.1 and XIII.1) for the year, paid under any of sections 155 to 157 one or more instalments of tax;

(b) it is reasonable to conclude that the total amount of those instalments exceeds the total amount of taxes that will be payable by the taxpayer under those Parts for the year; and

(c) the Minister is satisfied that the payment of the instalments has caused or will cause undue hardship to the taxpayer.

(1.52) If this subsection applies to a taxpayer for a taxation year, the Minister may refund to the taxpayer all or any part of the excess referred to in paragraph (1.51)(b).

(1.53) For the purpose of the calculation of any penalty or interest under this Act, an instalment is deemed not to have been paid to the extent that all or any part of the instalment can reasonably be considered to have been refunded under subsection (1.52).

(2) Subsection 164(1.6) of the Act is repealed.

(3) The portion of subsection 164(3) of the Act before paragraph (a) is replaced by the following:

(3) If, under this section, an amount in respect of a taxation year (other than an amount, or a portion of the amount, that can reasonably be considered to arise from the operation of section 122.5 or 122.61) is refunded or repaid to a taxpayer or applied to another liability of the taxpayer, the Minister shall pay or apply interest on it at the prescribed rate for the period that begins on the day that is the latest of the days referred to in the following paragraphs and that ends on the day on which the amount is refunded, repaid or applied:

(4) Subsection (2) applies after March 20, 2003.

(5) Subsection (3) applies in respect of forms filed after March 20, 2003.

162. (1) Paragraph (g) of the definition “financial institution” in subsection 181(1) of Act is replaced by the following:

(g) a corporation

(i) listed in the schedule, or

(ii) all or substantially all of the assets of which are shares or indebtedness of financial institutions to which the corporation is related;

(2) Subsection (1) applies after December 22, 1997, but in applying paragraph (g) of the definition “financial institution” in subsection 181(1) of the Act, as enacted by subsection (1), in respect of taxation years that end before December 20, 2002, that paragraph is to be read as follows:

(g) prescribed, or listed in the schedule;

163. (1) Subparagraph 181.2(3)(g)(i) of the Act is replaced by the following:

(i) the total of all amounts (other than amounts owing to the member or to other corporations that are members of the partnership) that would, if this paragraph and paragraphs (b) to (d) and (f) applied to partnerships in the same way that they apply to corporations, be determined under those paragraphs in respect of the partnership at the end of its last fiscal period that ends at or before the end of the year

(2) Paragraph 181.2(3)(i) of the Act is replaced by the following:

(i) the amount of any deficit deducted in computing its shareholders’ equity (including, for this purpose, the amount of any provision for the redemption of preferred shares) at the end of the year,

(3) Subsection 181.2(5) of the Act is replaced by the following:

(5) For the purposes of subsection (4) and this subsection, the carrying value at the end of a taxation year of an interest of a corporation or of a partnership (each of which is referred to in this subsection as the “member”) in a particular partnership is deemed to be the member’s specified proportion, for the particular partnership’s last fiscal period that ends at or before the end of the taxation year, of the amount that would, if the particular partnership were a corporation, be the particular partnership’s investment allowance at the end of that fiscal period.

(4) Subsections (1) and (3) apply to taxation years that begin after December 20, 2002.

(5) Subsection (2) applies to taxation years that begin after 1995.

(6) In applying paragraphs 181.2(4)(b), (c) and (d.1) of the Act to a particular corporation in respect of an asset that is a loan or an advance to, or an obligation of, another corporation or partnership that the particular corporation holds at the end of a taxation year of the particular corporation that began before December 20, 2002, those paragraphs are to be read without reference to “(other than a financial institution)” and to “(other than financial institutions)” if, at the end of the taxation year,

(a) the particular corporation deals at arm’s length with the other corporation or the partnership, as the case may be; and

(b) the other corporation is a financial institution, or the partnership is not a partnership described in paragraph 181.2(4)(d.1) of the Act, as the case may be, solely because of section 162 and subsections 195(1) and (3) of this Act.

164. (1) Subparagraph 181.3(3)(a)(v) of the Act is replaced by the following:

(v) the amount of any deficit deducted in computing its shareholders’ equity (including, for this purpose, the amount of any provision for the redemption of preferred shares) at the end of the year, and

(2) Subparagraph 181.3(3)(b)(iv) of the Act is replaced by the following:

(iv) the amount of any deficit deducted in computing its shareholders’ equity (including, for this purpose, the amount of any provision for the redemption of preferred shares) at the end of the year;

(3) Subparagraph 181.3(3)(c)(v) of the Act is replaced by the following:

(v) the amount of any deficit deducted in computing its shareholders’ equity (including, for this purpose, the amount of any provision for the redemption of preferred shares) at the end of the year,

(4) Paragraph 181.3(3)(c) of the Act is amended by striking out the word “and” at the end of subparagraph (v), by adding the word “and” at the end of subparagraph (vi) and by adding the following after subparagraph (vi):

(vii) any amount recoverable through reinsurance, to the extent that it can reasonably be regarded as being included in the amount determined under subparagraph (iii) in respect of a claims reserve;

(5) Subparagraph 181.3(3)(d)(iv) of the Act is amended by striking out the word “and” at the end of clause (D) and by adding the following after clause (E):

(F) the total of all amounts each of which is an amount recoverable through reinsurance, to the extent that it can reasonably be regarded as being included in the amount determined under clause (A) in respect of a claims reserve; and

(6) Subsections (1) to (5) apply to taxation years that begin after 1995.

165. (1) Subsections 184(2) to (5) of the Act are replaced by the following:

(2) If a corporation has elected in accordance with subsection 83(2), 130.1(4) or 131(1) in respect of the full amount of any dividend payable by it on shares of any class of its capital stock (in this section referred to as the “original dividend”) and the full amount of the original dividend exceeds the portion of the original dividend deemed by that subsection to be a capital dividend or capital gains dividend, as the case may be, the corporation shall, at the time of the election, pay a tax under this Part equal to 3/5 of the excess.

(3) If, in respect of an original dividend payable at a particular time, a corporation would, but for this subsection, be required to pay a tax under this Part in respect of an excess referred to in subsection (2), and the corporation elects in prescribed manner on or before the day that is 90 days after the day of mailing of the notice of assessment in respect of the tax that would otherwise be payable under this Part, the following rules apply:

(a) the portion of the original dividend deemed by subsection 83(2), 130.1(4) or 131(1) to be a capital dividend or capital gains dividend, as the case may be, is deemed for the purposes of this Act to be the amount of a separate dividend that became payable at the particular time;

(b) if the corporation identifies in its election any part of the excess, that part is, for the purposes of any election under subsection 83(2), 130.1(4) or 131(1) in respect of that part, and, where the corporation has so elected, for all purposes of this Act, deemed to be the amount of a separate dividend that became payable immediately after the par- ticular time;

(c) the amount by which the excess exceeds any portion deemed by paragraph (b) to be a separate dividend for all purposes of this Act is deemed to be a separate taxable dividend that became payable at the particular time; and

(d) each person who held any of the issued shares of the class of shares of the capital stock of the corporation in respect of which the original dividend was paid is deemed

(i) not to have received any portion of the original dividend, and

(ii) to have received, at the time that any separate dividend determined under any of paragraphs (a) to (c) became payable, the proportion of that dividend that the number of shares of that class held by the person at the particular time is of the number of shares of that class outstanding at the particular time except that, for the purpose of Part ​XIII, the separate dividend is deemed to be paid on the day that the election in respect of this subsection is made.

(4) An election under subsection (3) is valid only if

(a) it is made with the concurrence of the corporation and all its shareholders

(i) who received or were entitled to receive all or any portion of the original dividend, and

(ii) whose addresses were known to the corporation; and

(b) either

(i) it is made on or before the day that is 30 months after the day on which the original dividend became payable, or

(ii) each shareholder described in subparagraph (a)(i) concurs with the election, in which case, notwithstanding subsections 152(4) to (5), any assessment of the tax, interest and penalties payable by each of those shareholders for any taxation year shall be made that is necessary to take the corporation’s election into account.

(5) If each person who, in respect of an election made under subsection (3), is deemed by subsection (3) to have received a dividend at a particular time is also, at the particular time, a person all of whose taxable income is exempt from tax under Part I,

(a) subsection (4) does not apply to the election; and

(b) the election is valid only if it is made on or before the day that is 30 months after the day on which the original dividend became payable.

(2) Subsection (1) applies to original dividends paid by a corporation after its 1999 taxation year except that, for the purpose of subsection 184(5) of the Act, as enacted by subsection (1), an election made before the 90th day after this Act is assented to is deemed to have been made in a timely manner.

166. In applying the description of B in paragraph 188(1)(a) of the Act in respect of gifts made to a charity after December 20, 2002, to the extent that those gifts are relevant in respect of notices of intention to revoke the registration of the charity and certificates under subsection 5(1) of the Charities Registration (Security Information) Act that are issued by the Minister of National Revenue before June 13, 2005, that description is to be read as follows:

B      is the total of all amounts each of which is the eligible amount of a gift for which it issued a receipt described in subsection 110.1(2) or 118.1(2) in the period (in this section referred to as the “winding-up period”) that begins on the valuation day and ends immediately before the payment day, or an amount received by it in the winding-up period from a registered charity,

167. (1) Subparagraph 190.13(a)(v) of the Act is replaced by the following:

(v) the amount of any deficit deducted in computing its shareholders’ equity (including, for this purpose, the amount of any provision for the redemption of preferred shares);

(2) Subparagraph 190.13(b)(iv) of the Act is replaced by the following:

(iv) the amount of any deficit deducted in computing its shareholders’ equity (including, for this purpose, the amount of any provision for the redemption of preferred shares);

(3) Subsections (1) and (2) apply to taxation years that begin after 1995.

168. (1) Section 191 of the Act is amended by adding the following after subsection (5):

(6) If at any time a corporation pays a dividend to a partnership, the corporation is, for the purposes of this subsection and paragraph (a) of the definition “excluded dividend” in subsection (1), deemed to have paid at that time to each member of the partnership a dividend equal to the amount determined by the formula

A × B

where

A      is the amount of the dividend paid to the partnership; and

B      is the member’s specified proportion for the last fiscal period of the partnership that ended before that time (or, if the partnership’s first fiscal period includes that time, for that first fiscal period).

(2) Subsection (1) applies to dividends paid after December 20, 2002.

169. (1) Subparagraph 191.1(1)(a)(i) of the Act is replaced by the following:

(i) 50% of the amount, if any, by which the total of all taxable dividends (other than excluded dividends) paid by the corporation in the year on short-term preferred shares exceeds the corporation’s dividend allowance for the year,

(2) Subsection (1) applies to dividends paid by a corporation in its 2003 and subsequent taxation years.

170. Section 200 of the French version of the Act is replaced by the following:

171. (1) Clause 204.81(1)(c)(v)(E) of the Act is replaced by the following:

(E) the redemption occurs

(I) more than eight years after the day on which the share was issued, or

(II) if the day that is eight years after that issuance is in February or March of a calendar year, in February or on March 1st of that calendar year but not more than 31 days before that day, or

(2) Section 204.81 of the Act is amended by adding the following after subsection (1):

(1.1) In applying clause (1)(c)(v)(E) in relation to any time before 2004 in respect of a corporation incorporated before March 6, 1996, the references in that clause to “eight” are replaced with references to “five” if, at that time, the relevant statements in the corporation’s articles refer to “five”.

(1.2) In applying subsection (1) in relation to any time before 2004, to a corporation incorporated before February 7, 2000, if the articles of the corporation comply with subclause (1)(c)(v)(E)(I) (as modified, where relevant, by subsection (1.1)), those articles are deemed to provide the statement required by subclause (1)(c)(v)(E)(II).

(3) Subsection (1) applies after February 6, 2000 to corporations incorporated at any time.

(4) Subsection (2) applies after February 6, 2000.

172. (1) The portion of subsection 204.9(5) of the French version of the Act before paragraph (b) is replaced by the following:

(2) The portion of paragraph 204.9(5)(c) of the French version of the Act before subparagraph (i) is replaced by the following:

(3) Paragraph 204.9(5)(d) of the French version of the Act is replaced by the following:

173. (1) The definition “specified proportion” in subsection 206(1) of the Act is repealed.

(2) In their application to months that end after December 20, 2002 and before 2005, subparagraphs (b)(i) to (iii) of the definition “cost amount” in subsection 206(1) of the Act shall be read as follows:

(i) after 2000 and at or before the end of the taxation year, by the trust in respect of the interest (otherwise than as proceeds of disposition of the interest), and

(ii) that has not been satisfied at or before that time by the issue of new units of the trust or by a payment of an amount by the trust;

(3) In its application to months that end after October 2003 and before 2005, paragraph (d.1) of the definition “foreign property” in subsection 206(1) of the Act shall be read as follows:

(d.1) any share (other than an excluded share) of the capital stock of, or any debt obligation (other than a debt obligation described in subparagraph (g)(iii)) issued by, a corporation (other than an investment corporation, a mutual fund corporation or a registered investment) that is a Canadian corporation, if shares of the corporation can reasonably be considered to derive their value, directly or indirectly, primarily from foreign property,

(4) In its application to months that end after October 2003 and before 2005, paragraph (g) of the definition “foreign property” in subsection 206(1) of the Act shall be read as follows:

(g) indebtedness of a non-resident person, other than

(i) indebtedness issued by an authorized foreign bank and payable at a branch in Canada of the bank,

(ii) indebtedness issued or guaranteed by

(A) the International Bank for Reconstruction and Development,

(B) the International Finance Corporation,

(C) the Inter-American Development Bank,

(D) the Asian Development Bank,

(E) the Caribbean Development Bank,

(F) the European Bank for Reconstruction and Development,

(G) the African Development Bank, or

(H) a prescribed person, or

(iii) a debt obligation that is fully secured by a mortgage, charge, hypothec or similar instrument in respect of real or immovable property situated in Canada or that would be fully secured were it not for a decline in the fair market value of the property after the debt obligation was issued,

(5) In its application to months that end after 1997 and before 2005, the portion of subsection 206(3.1) of the French version of the Act before paragraph (a) shall be read as follows:

(3.1) Pour ce qui est de l’application du sous-alinéa (2)a)(ii) à un moment donné ou postérieurement, lorsqu’un titre déterminé par rapport à un autre titre est acquis au moment donné par le contribuable mentionné au paragraphe (3.2) relativement au titre et que le titre est un bien étranger à ce moment, les règles suivantes s’appliquent :

(6) Subsection (1) is deemed to have come into force on December 21, 2002.

174. (1) Section 207.31 of the Act is replaced by the following:

207.31 Any charity, municipality or public body performing a function of government in Canada (referred to in this section as the “recipient”) that at any time in a taxation year, without the authorization of the Minister of the Environment or a person designated by that Minister, disposes of or changes the use of a property described in paragraph 110.1(1)(d) or in the definition “total ecological gifts” in subsection 118.1(1) and given to the recipient shall, in respect of the year, pay a tax under this Part equal to 50% of the amount that would be determined for the purposes of section 110.1 or 118.1, if this Act were read without reference to subsections 110.1(3) and 118.1(6), to be the fair market value of the property if the property were given to the recipient immediately before the disposition or change.

(2) Subsection (1) applies in respect of dispositions of or changes of use of property after July 18, 2005.

175. (1) Sections 210 and 210.1 of the Act are replaced by the following:

210. (1) The following definitions apply in this Part.

“designated beneficiary”, under a particular trust at any time, means a beneficiary, under the particular trust, who is at that time

(a) a non-resident person;

(b) a non-resident-owned investment corporation;

(c) a person who is, because of subsection 149(1), exempt from tax under Part I on all or part of their taxable income and who acquired an interest as a beneficiary under the particular trust after October 1, 1987 directly or indirectly from a beneficiary under the particular trust except if

(i) the interest was, at all times after the later of October 1, 1987 and the day on which the interest was created, held by persons who were exempt from tax under Part I on all of their taxable income because of subsection 149(1), or

(ii) the person is a trust, governed by a registered retirement savings plan or a registered retirement income fund, who acquired the interest, directly or indirectly, from an individual or the spouse or common-law partner, or former spouse or common-law partner, of the individual who was, immediately after the interest was acquired, a beneficiary under the trust governed by the fund or plan;

(d) another trust (referred to in this paragraph as the “other trust”) that is not a testamentary trust, a mutual fund trust or a trust that is exempt because of subsection 149(1) from tax under Part I on all or part of its taxable income, if any beneficiary under the other trust is at that time

(i) a non-resident person,

(ii) a non-resident-owned investment corporation,

(iii) a trust that is not

(A) a testamentary trust,

(B) a mutual fund trust,

(C) a trust that is exempt because of subsection 149(1) from tax under Part I on all or part of its taxable income, or

(D) a trust

(I) whose interest, at that time, in the other trust was held, at all times after the day on which the interest was created, either by it or by persons who were exempt because of subsection 149(1) from tax under Part I on all of their taxable income, and

(II) none of the beneficiaries under which is, at that time, a designated beneficiary under it, or

(iv) a person or partnership that

(A) is a designated beneficiary under the other trust because of paragraph (c) or (e), or

(B) would be a designated beneficiary under the particular trust because of paragraph (c) or (e) if, instead of being a beneficiary under the other trust, the person or partnership were at that time a beneficiary, under the particular trust, whose interest as a beneficiary under the particular trust were

(I) identical to its interest (referred to in this clause as the “particular interest”) as a beneficiary under the other trust,

(II) acquired from each person or partnership from whom it acquired the particular interest, and

(III) held, at all times after the later of October 1, 1987 and the day on which the particular interest was created, by the same persons or partnerships that held the particular interest at those times; or

(e) a particular partnership any of the members of which is at that time

(i) another partnership, except if

(A) each such other partnership is a Canadian partnership,

(B) the interest of each such other partnership in the particular partnership is held, at all times after the day on which the interest was created, by the other partnership or by persons who were exempt because of subsection 149(1) from tax under Part I on all of their taxable income,

(C) the interest of each member, of each such other partnership, that is a person exempt because of subsection 149(1) from tax under Part I on all or part of its taxable income was held, at all times after the day on which the interest was created, by that member or by persons who were exempt because of subsection 149(1) from tax under Part I on all of their taxable income, and

(D) the interest of the particular partnership in the particular trust was held, at all times after the day on which the interest was created, by the particular partnership or by persons who were exempt because of subsection 149(1) from tax under Part I on all of their taxable income,

(ii) a non-resident person,

(iii) a non-resident-owned investment corporation,

(iv) another trust that is, under paragraph (d), a designated beneficiary of the par- ticular trust or that would, under paragraph (d), be a designated beneficiary of the particular trust if the other trust were at that time a beneficiary under the particular trust whose interest as a beneficiary under the particular trust were

(A) acquired from each person or partnership from whom the particular partnership acquired its interest as a beneficiary under the particular trust, and

(B) held, at all times after the later of October 1, 1987 and the day on which the particular partnership’s interest as a beneficiary under the particular trust was created, by the same persons or partnerships that held that interest of the particular partnership at those times, or

(v) a person exempt because of subsection 149(1) from tax under Part I on all or part of its taxable income except if the interest of the particular partnership in the par- ticular trust was held, at all times after the day on which the interest was created, by the particular partnership or by persons who were exempt because of subsection 149(1) from tax under Part I on all of their taxable income.

“designated income”, of a trust for a taxation year, means the amount that would be the income of the trust for the year determined under section 3 if

(a) this Act were read without reference to subsections 104(6), (12) and (30);

(b) the trust had no income other than taxable capital gains from dispositions described in paragraph (c) and incomes from

(i) real or immovable properties in Canada (other than Canadian resource properties),

(ii) timber resource properties,

(iii) Canadian resource properties (other than properties acquired by the trust before 1972), and

(iv) businesses carried on in Canada;

(c) the only taxable capital gains and allowable capital losses referred to in paragraph 3(b) were from

(i) dispositions of taxable Canadian property, and

(ii) dispositions of particular property (other than property described in any of subparagraphs 128.1(4)(b)(i) to (iii)), or property for which the particular property is substituted, that was transferred at any particular time to a particular trust in circumstances in which subsection 73(1) or 107.4(3) applied, if

(A) it is reasonable to conclude that the property was so transferred in anticipation that a person beneficially interested at the particular time in the particular trust would subsequently cease to reside in Canada, and a person beneficially interested at the particular time in the particular trust did subsequently cease to reside in Canada, or

(B) when the property was so transferred, the terms of the particular trust satisfied the conditions in subparagraph 73(1.01)(c)(i) or (iii), and it is reasonable to conclude that the transfer was made in connection with the cessation of residence, on or before the transfer, of a person who was, at the time of the transfer, beneficially interested in the particular trust and a spouse or common-law partner, as the case may be, of the transferor of the property to the par- ticular trust; and

(d) the only losses referred to in paragraph 3(d) were losses from sources described in any of subparagraphs (b)(i) to (iv).

(2) No tax is payable under this Part for a taxation year by a trust that was throughout the year

(a) a testamentary trust;

(b) a mutual fund trust;

(c) exempt from tax under Part 1 because of subsection 149(1);

(d) a trust to which paragraph (a), (a.1) or (c) of the definition “trust” in subsection 108(1) applies; or

(e) non-resident.

(2) Subsection (1) applies to the 1996 and subsequent taxation years, except that paragraph (c) of the definition “designated income” in subsection 210(1) of the Act, as enacted by subsection (1), is to be read

(a) in respect of dispositions that occur after October 1, 1996 and before December 21, 2002, as follows:

(c) the only taxable capital gains and allowable capital losses referred to in paragraph 3(b) were from dispositions of taxable Canadian property; and

(b) in respect of dispositions that occur in a 1996 taxation year and before October 2, 1996, as follows:

(c) the only taxable capital gains and allowable capital losses referred to in paragraph 3(b) were from dispositions of property that would have been taxable Canadian property if, at no time in the year, the trust had been resident in Canada; and

176. (1) Subsections 210.2(1.1) and (2) of the Act are replaced by the following:

(2) Notwithstanding subsection 210(2), a trust shall pay a tax under this Part in respect of a particular taxation year of the trust equal to 56.25% of the amount that is required by subsection 143.1(2) to be included in computing the income under Part I for a taxation year of a beneficiary under the trust, if

(a) the beneficiary is at any time in the particular taxation year a designated beneficiary under the trust; and

(b) the particular taxation year ends in that taxation year of the beneficiary.

(2) The portion of subsection 210.2(3) of the French version of the Act before the formula is replaced by the following:

(3) Paragraph 210.2(3)(b) of the English version of the Act is replaced by the following:

(b) the income of a non-resident person (other than a person who, at any time in the year, would be a designated beneficiary under the trust if section 210 were read without reference to paragraph (a) of the definition “designated beneficiary” in that section) that is subject to tax under Part I by reason of subsection 2(3) and is not exempt from tax under Part I by reason of a provision contained in a tax treaty,

(4) Subsections (1) to (3) apply to the 1996 and subsequent taxation years, except that

(a) in applying the portion of subsection 210.2(3) of the French version of the Act before the formula, as enacted by subsection (2), for the 1996 and 1997 taxation years, the reference to “un traité fiscal” is to be read as a reference to “un accord ou une convention fiscale ayant force de loi au Canada et conclue entre le gouvernement du Canada et le gouvernement d’un pays étranger”; and

(b) in applying paragraph 210.2(3)(b) of the English version of the Act, as enacted by subsection (3), for the 1996 and 1997 taxation years the reference to “treaty” is to be read as a reference to “convention or agreement with another country that has the force of law in Canada”.

177. (1) Subsection 211.6(1) of the Act is replaced by the following:

211.6 (1) Every trust that is a qualifying environmental trust at the end of a taxation year (other than a trust that is at that time described by paragraph 149(1)(z.1) or (z.2)) shall pay a tax under this Part for the year equal to 28% of its income under Part I for that taxation year.

(2) Subsection (1) applies to the 1997 and subsequent taxation years.

178. (1) Subparagraph (i) of the description of B in paragraph 211.8(1)(a) of the Act is amended by striking out the word “or” at the end of clause (A) and by replacing clause (B) with the following:

(B) more than five years after its issuance, or

(C) if the day that is five years after its issuance is in February or March of a calendar year, in February or on March 1st of that calendar year but not more than 31 days before that day,

(2) The description of B in paragraph 211.8(1)(a) of the Act is amended by adding the following after subparagraph (i):

(i.1) nil, where the share was issued by a registered labour-sponsored venture capital corporation or a revoked corporation, the original acquisition of the share was after March 5, 1996 and the redemption, acquisition or cancellation is in February or on March 1st of a calendar year but is not more than 31 days before the day that is eight years after the day on which the share was issued,

(3) Subsections (1) and (2) apply to redemptions, acquisitions, cancellations and dispositions that occur after November 15, 1995.

179. (1) Subparagraph 212(1)(b)(iv) of the Act is replaced by the following:

(iv) interest payable to a person with whom the payer is dealing at arm’s length and to whom a certificate of exemption that is in force on the day the amount is paid or credited was issued under subsection (14),

(2) The portion of subparagraph 212(1)(b)(xii) of the Act before clause (A) is replaced by the following:

(xii) interest payable by a lender under a securities lending arrangement, if the lender and the borrower deal with each other at arm’s length and the lender is a financial institution prescribed for the purpose of clause (iii)(D), or a registered securities dealer resident in Canada, on money provided to the lender either as collateral or as consideration for the particular security lent or transferred under the arrangement where

(3) Paragraph 212(1)(b) of the Act is amended by striking out the word “and” at the end of subparagraph (xi), by adding the word “and” at the end of subparagraph (xii) and by adding the following after subparagraph (xii):

(xiii) an amount paid or credited under a securities lending arrangement that is deemed by subparagraph 260(8)(c)(i) to be a payment made by a borrower to a lender of interest if

(A) the securities lending arrangement was entered into by the borrower in the course of carrying on a business outside Canada, and

(B) the security that is transferred or lent to the borrower under the securities lending arrangement is described in paragraph (b) or (c) of the definition “qualified security” in subsection 260(1) and issued by a non-resident issuer;

(4) Subparagraph 212(1)(c)(ii) of the French version of the Act is replaced by the following:

(5) Subparagraph 212(1)(d)(iv) of the Act is replaced by the following:

(iv) unless paragraph (i) applies to the amount, made pursuant to an agreement between a person resident in Canada and a non-resident person under which the non-resident person agrees not to use or not to permit any other person to use any thing referred to in subparagraph (i) or any information referred to in subparagraph (ii), or

(6) Subparagraph 212(1)(d)(xi) of the Act is amended by striking out the word “or” at the end of clause (B), by adding the word “or” at the end of clause (C) and by adding the following after clause (C):

(D) air navigation equipment utilized in the provision of services under the Civil Air Navigation Services Commercialization Act or computer software the use of which is necessary for the operation of that equipment that is used by the payer for no other purpose;

(7) Paragraph 212(1)(d) of the Act is amended by striking out the word “or” at the end of subparagraph (x), by adding the word “or” at the end of subparagraph (xi) and by adding the following after subparagraph (xi):

(xii) an amount to which subsection (5) would apply if that subsection were read without reference to “to the extent that the amount relates to that use or reproduction”;

(8) Subsection 212(1) of the Act is amended by adding the following after paragraph (h):

(i) an amount that would, if the non-resident person had been resident in Canada throughout the taxation year in which the amount was received or receivable, be required by paragraph 56(1)(m) or subsection 56.4(2) to be included in computing the non-resident person’s income for the taxation year;

(9) Section 212 of the Act is amended by adding the following after subsection (2):

(2.1) Subsection (2) does not apply to an amount paid or credited, by a borrower, under a securities lending arrangement if

(a) the amount is deemed by subparagraph 260(8)(c)(i) to be a dividend;

(b) the securities lending arrangement was entered into by the borrower in the course of carrying on a business outside Canada; and

(c) the security that is transferred or lent to the borrower under the securities lending arrangement is a share of a class of the capital stock of a non-resident corporation.

(10) Subsection 212(3) of the Act is amended by adding the word “and” at the end of paragraph (a) and by repealing paragraph (b).

(11) Subsection 212(5) of the French version of the Act is replaced by the following:

(12) The portion of subsection 212(5) of the English version of the Act after paragraph (b) is replaced by the following:

that has been, or is to be, used or reproduced in Canada to the extent that the amount relates to that use or reproduction.

(13) Subsection 212(9) of the Act is amended by striking out the word “or” at the end of paragraph (b), by adding the word “or” at the end of paragraph (c) and by adding the following after paragraph (c):

(d) a dividend or interest is received by a trust created under a reinsurance trust agreement, to which the Superintendent of Financial Institutions is a party, established in accordance with guidelines issued by the Superintendent relating to reinsurance arrangements with unregistered insurers

(14) Subsection 212(13) of the Act is amended by striking out the word “or” at the end of paragraph (e), by adding the word “or” at the end of paragraph (f) and by adding the following after paragraph (f):

(g) an amount to which paragraph (1)(i) applies if that amount affects, or is intended to affect, in any way whatever,

(i) the acquisition or provision of property or services in Canada,

(ii) the acquisition or provision of property or services outside Canada by a person resident in Canada, or

(iii) the acquisition or provision outside Canada of a taxable Canadian property,

(15) Subsection 212(13.2) of the Act is replaced by the following:

(13.2) For the purposes of this Part, a particular non-resident person, who in a taxation year pays or credits to another non-resident person an amount other than an amount to which subsection (13) applies, is deemed to be a person resident in Canada in respect of the portion of the amount that is deductible in computing the particular non-resident person’s taxable income earned in Canada for any taxation year from a source that is neither a treaty-protected business nor a treaty-protected property.

(16) Subparagraph (b)(i) of the description of B in subsection 212(19) of the Act is replaced by the following:

(i) 10 times the greatest amount determined, under the laws of the province or provinces in which the taxpayer is a registered securities dealer, to be the capital employed by the taxpayer at the end of the day, and

(17) Subsection (1) applies to the 1998 and subsequent taxation years.

(18) Subsection (2) applies to arrangements made after 2002.

(19) Subsections (3) and (9) apply to securities lending arrangements entered into after May 1995, except that, in their application to arrangements made before 2002, each reference to “subparagraph 260(8)(c)(i)” in subparagraph 212(1)(b)(xiii) and paragraph 212(2.1)(a) of the Act, as enacted by subsections (3) and (9), is to be read as a reference to “subparagraph 260(8)(a)(i)”.

(20) Subsection (5) applies to amounts paid or credited after October 7, 2003.

(21) Subsection (6) applies to payments made after July 2003.

(22) Subsections (7), (11) and (12) apply to the 2000 and subsequent taxation years.

(23) Subsections (8) and (14) apply to amounts paid or credited after October 7, 2003.

(24) Subsection (10) applies to replacement obligations issued after 2000.

(25) Subsection (13) applies to amounts paid or credited after 2000 to non-resident persons.

(26) Subsection (15) applies to amounts paid or credited under obligations entered into after December 20, 2002.

(27) Subsection (16) applies to securities lending arrangements entered into after May 28, 1993.

180. Paragraph 214(3)(k) of the French version of the Act is replaced by the following:

181. (1) The portion of subsection 216(1) of the Act before paragraph (a) is replaced by the following:

216. (1) If an amount has been paid during a taxation year to a non-resident person or to a partnership of which that person was a member as, on account of, in lieu of payment of or in satisfaction of, rent on real or immovable property in Canada or a timber royalty, that person may, within two years (or, if that person has filed an undertaking described in subsection (4) in respect of the year, within six months) after the end of the year, file a return of income under Part I for that year in prescribed form. On so filing and without affecting the liability of the non-resident person for tax otherwise payable under Part I, the non-resident person is, in lieu of paying tax under this Part on that amount, liable to pay tax under Part I for the year as though

(2) The portion of subsection 216(5) of the Act before paragraph (a) is replaced with the following:

(5) If a person or a trust under which a person is a beneficiary has filed a return of income under Part I for a taxation year as permitted by this section or as required by section 150 and, in computing the amount of the person’s income under Part I an amount has been deducted under paragraph 20(1)(a), or is deemed by subsection 107(2) to have been allowed under that paragraph, in respect of property that is real property in Canada — or an interest therein — or an immovable in Canada — or a real right therein —, a timber resource property or a timber limit in Canada, the person shall file a return of income under Part I in prescribed form on or before the person’s filing-due date for any subsequent taxation year in which the person is non-resident and in which the person, or a partnership of which the person is a member, disposes of that property or any interest, or for civil law any right, in it. On so filing and without affecting the person’s liability for tax otherwise payable under Part I, the person is, in lieu of paying tax under this Part on any amount paid, or deemed by this Part to have been paid, in that subsequent taxation year in respect of any interest in, or for civil law any right in, that property to the person or to a partnership of which the person is a member, liable to pay tax under Part I for that subsequent taxation year as though

(3) Subsection 216(7) of the Act is repealed.

(4) Subsections (1) and (2) apply to taxation years that end after December 20, 2002.

182. (1) Section 220 of the Act is amended by adding the following after subsection 220(2.1):

(2.2) Subsection (2.1) does not apply in respect of a prescribed form, receipt or document, or prescribed information, that is filed with the Minister on or after the day specified, in respect of the form, receipt, document or information, in subsection 37(11) or paragraph (m) of the definition “investment tax credit” in subsection 127(9).

(2) Paragraph 220(4.6)(a) of the French version of the Act is replaced by the following:

(3) Paragraph 220(4.6)(c) of the French version of the Act is replaced by the following:

(4) The portion of subsection 220(4.61) of the French version of the Act before paragraph (a) is replaced by the following:

(5) Paragraph 220(4.61)(b) of the French version of the Act is replaced by the following:

(6) Subsection (1) applies in respect of a prescribed form, receipt and document, and prescribed information, filed with the Minister of National Revenue on or after November 17, 2005 other than a prescribed form, receipt or document, or prescribed information, in respect of which the Minister of National Revenue has received, before November 17, 2005, a request made in writing with the Minister that the Minister waive the filing requirements in subsection 37(11) of the Act and paragraph (m) of the definition “investment tax credit” in subsection 127(9) of the Act that apply, but for any waiver, to the expenditures to which the prescribed form, receipt or document, or prescribed information, relates.

183. (1) Paragraph 230(2)(a) of the French version of the Act is replaced by the following:

(2) Subsection 230(3) of the French version of the Act is replaced by the following:

184. The portion of subsection 231.2(1) of the Act before paragraph (a) is replaced by the following:

231.2 (1) Notwithstanding any other provision of this Act, the Minister may, subject to subsection (2), for any purpose related to the administration or enforcement of this Act (including the collection of any amount payable under this Act by any person), of a listed international agreement or, for greater certainty, of a tax treaty with another country, by notice served personally or by registered or certified mail, require that any person provide, within such reasonable time as is stipulated in the notice,

185. (1) Paragraph (b) of the definition “gifting arrangement” in subsection 237.1(1) of the Act is replaced by the following:

(b) incur a limited-recourse debt, determined under subsection 143.2(6.1), that can reasonably be considered to relate to a gift to a qualified donee or a monetary contribution referred to in subsection 127(4.1);

(2) Subsection (1) applies in respect of gifts and monetary contributions made after 6:00 p.m. (Eastern Standard Time) on December 5, 2003.

186. (1) Paragraph 241(3.2)(h) of the Act is replaced by the following:

(h) an application by the charity, and information filed in support of the application, for a designation, determination or decision by the Minister under subsection 149.1(5), (6.3), (7), (8) or (13).

(2) Section 241 of the Act is amended by adding the following after subsection (3.2):

(3.3) The Minister of Canadian Heritage may communicate or otherwise make available to the public, in any manner that that Minister considers appropriate, the following taxpayer information in respect of a Canadian film or video production certificate (as defined under subsection 125.4(1)) that has been issued or revoked:

(a) the title of the production for which the Canadian film or video production certificate was issued;

(b) the name of the taxpayer to whom the Canadian film or video production certificate was issued;

(c) the names of the producers of the production;

(d) the names of the individuals in respect of whom and places in respect of which that Minister has allotted points in respect of the production in accordance with regulations made for the purpose of section 125.4;

(e) the total number of points so allotted; and

(f) any revocation of the Canadian film or video production certificate.

(3) Paragraph 241(4)(d) of the Act is amended by striking out the word “or” at the end of subparagraph (xiii) and by adding the following after subparagraph (xiv):

(xv) to a person employed or engaged in the service of an office or agency, of the Government of Canada or of a province, whose mandate includes the provision of assistance (as defined in subsection 125.4(1) or 125.5(1)) in respect of film or video productions or film or video production services, solely for the purpose of the administration or enforcement of the program under which the assistance is offered, or

(xvi) to an official of the Canadian Radio-television and Telecommunications Commission, solely for the purpose of the administration or enforcement of a regulatory function of that Commission;

(4) Subparagraph 241(4)(e)(xii) of the Act is replaced by the following:

(xii) a provision contained in a tax treaty or in a listed international agreement;

(5) Subsection (1) applies to documents that are sent by the Minister of National Revenue, or that are filed or required to be filed with that Minister, after May 13, 2005.

187. (1) The definition “common-law partner” in subsection 248(1) of the Act is replaced by the following:

“common-law partner”, with respect to a taxpayer at any time, means a person who cohabits at that time in a conjugal relationship with the taxpayer and

(a) has so cohabited throughout the 12-month period that ends at that time, or

(b) would be the parent of a child of whom the taxpayer is a parent, if this Act were read without reference to paragraphs 252(1)(c) and (e) and subparagraph 252(2)(a)(iii),

and, for the purpose of this definition, where at any time the taxpayer and the person cohabit in a conjugal relationship, they are, at any particular time after that time, deemed to be cohabiting in a conjugal relationship unless they were living separate and apart at the particular time for a period of at least 90 days that includes the particular time because of a breakdown of their conjugal relationship;

(2) The definition “dividend rental arrangement” in subsection 248(1) of the Act is replaced by the following:

“dividend rental arrangement”, of a person or a partnership (each of which is referred to in this definition as the “person”),

(a) means any arrangement entered into by the person where it can reasonably be considered that

(i) the main reason for the person entering into the arrangement was to enable the person to receive a dividend on a share of the capital stock of a corporation, other than a dividend on a prescribed share or on a share described in paragraph (e) of the definition “term preferred share” in this subsection or an amount deemed by subsection 15(3) to be received as a dividend on a share of the capital stock of a corporation, and

(ii) under the arrangement someone other than that person bears the risk of loss or enjoys the opportunity for gain or profit with respect to the share in any material respect, and

(b) includes, for greater certainty, any arrangement under which

(i) a corporation at any time receives on a particular share a taxable dividend that would, if this Act were read without reference to subsection 112(2.3), be deductible in computing its taxable income or taxable income earned in Canada for the taxation year that includes that time, and

(ii) the corporation or a partnership of which the corporation is a member is obligated to pay to another person or partnership an amount

(A) that is compensation for

(I) the dividend described in subparagraph (i),

(II) a dividend on a share that is identical to the particular share, or

(III) a dividend on a share that, during the term of the arrangement, can reasonably be expected to provide to a holder of the share the same or substantially the same proportionate risk of loss or opportunity for gain as the particular share, and

(B) that, if paid, would be deemed by subsection 260(5.1) to have been received by that other person or partnership, as the case may be, as a taxable dividend;

(3) Subparagraph (b)(i) of the definition “disposition” in subsection 248(1) of the Act is replaced by the following:

(i) where the property is a share, bond, debenture, note, certificate, mortgage, hypothecary claim, agreement of sale or similar property, or an interest, or for civil law a right, in it, the property is in whole or in part redeemed, acquired or cancelled,

(4) Subparagraphs (f)(i) and (ii) of the definition “disposition” in subsection 248(1) of the Act are replaced by the following:

(i) the transferor and the transferee are trusts that are, at the time of the transfer, resident in Canada,

(5) The definition “disposition” in subsection 248(1) of the Act is amended by striking out the word “and” at the end of paragraph (l), by adding the word “and” at the end of paragraph (m) and by adding the following after paragraph (m):

(n) a redemption, an acquisition or a cancellation of a share or of a right to acquire a share (which share or which right, as the case may be, is referred to in this paragraph as the “security”) of the capital stock of a corporation (referred to in this paragraph as the “issuing corporation”) held by another corporation (referred to in this paragraph as the “disposing corporation”) if

(i) the redemption, acquisition or cancellation occurs as part of a merger or combination of two or more corporations (including the issuing corporation and the disposing corporation) to form one corporate entity (referred to in this paragraph as the “new corporation”),

(ii) the merger or combination

(A) is an amalgamation (within the meaning assigned by subsection 87(1)) to which subsection 87(11) does not apply,

(B) is an amalgamation (within the meaning assigned by subsection 87(1)) to which subsection 87(11) applies, if the issuing corporation and the disposing corporation are described by subsection 87(11) as the parent and the subsidiary, respectively,

(C) is a foreign merger (within the meaning assigned by subsection 87(8.1)), or

(D) would be a foreign merger (within the meaning assigned by subsection 87(8.1)) if subparagraph 87(8.1)(c)(ii) were read without reference to the words “that was resident in a country other than Canada”, and

(iii) either

(A) the disposing corporation receives no consideration for the security, or

(B) in the case where the merger or combination is described by clause (ii)(C) or (D), the disposing corporation receives no consideration for the secu- rity other than property that was, immediately before the merger or combination, owned by the issuing corporation and that, on the merger or combination, becomes property of the new corporation;

(6) Paragraphs (d) and (e) of the definition “foreign resource property” in subsection 248(1) of the Act are replaced by the following:

(d) any right to a rental or royalty computed by reference to the amount or value of production from an oil or gas well in that country, or from a natural accumulation of petroleum or natural gas in that country, if the payer of the rental or royalty has an interest in, or for civil law a right in, the well or accumulation, as the case may be, and 90% or more of the rental or royalty is payable out of, or from the proceeds of, the production from the well or accumulation,

(e) any right to a rental or royalty computed by reference to the amount or value of production from a mineral resource in that country, if the payer of the rental or royalty has an interest in, or for civil law a right in, the mineral resource and 90% or more of the rental or royalty is payable out of, or from the proceeds of, the production from the mineral resource,

(7) The portion of the definition “former business property” in subsection 248(1) of the Act before paragraph (a) is replaced by the following:

“former business property”, in respect of a taxpayer, means a capital property of the taxpayer that was used by the taxpayer or a person related to the taxpayer primarily for the purpose of gaining or producing income from a business, and that was real or immovable property of the taxpayer, an interest of the taxpayer in real property, a right of the taxpayer in an immovable or a property that is the subject of a valid election under subsection 13(4.2), but does not include

(8) Paragraph (d) of the definition “activités de recherche scientifique et de développement expérimental” in subsection 248(1) of the French version of the Act is replaced by the following:

(9) Paragraph (g) of the definition “fiducie pour l’environnement admissible” in subsection 248(1) of the French version of the Act is replaced by the following:

(10) Subparagraph (h)(ii) of the definition “fiducie pour l’environnement admissible” in subsection 248(1) of the French version of the Act is replaced by the following:

(11) Subsection 248(1) of the Act is amended by adding the following in alphabetical order:

“listed international agreement” means

(a) the Convention on Mutual Administrative Assistance in Tax Matters, concluded at Strasbourg on January 25, 1988, and

(b) the Convention between the Government of Canada and the Government of the United Mexican States for the Exchange of Information with Respect to Taxes, signed at Mexico City on March 16, 1990;

“qualifying trust annuity” has the meaning assigned by subsection 60.011(2);

“specified proportion”, of a member of a partnership for a fiscal period of the partnership, means the proportion that the member’s share of the total income or loss of the partnership for the partnership’s fiscal period is of the partnership’s total income or loss for that period and, for the purpose of this definition, where that income or loss for a period is nil, that proportion shall be computed as if the partnership had income for that period in the amount of $1,000,000;

(12) Section 248 of the Act is amended by adding the following after subsection (1):

(1.1) A redemption, an acquisition or a cancellation, at any particular time after 1971 and before December 24, 1998, of a share or of a right to acquire a share (which share or which right, as the case may be, is referred to in this subsection as the “security”) of the capital stock of a corporation (referred to in this subsection as the “issuing corporation”) held by another corporation (referred to in this subsection as the “disposing corporation”) is not a disposition (within the meaning of the definition “disposition” in section 54 as that section read in its application to transactions and events that occurred at the particular time) of the security if

(a) the redemption, acquisition or cancellation occurred as part of a merger or combination of two or more corporations (including the issuing corporation and the disposing corporation) to form one corporate entity (referred to in this subsection as the “new corporation”);

(b) the merger or combination

(i) is an amalgamation (within the meaning assigned by subsection 87(1) as it read at the particular time) to which subsection 87(11) if in force, and as it read, at the particular time did not apply,

(ii) is an amalgamation (within the meaning assigned by subsection 87(1) as it read at the particular time) to which subsection 87(11) if in force, and as it read, at the particular time applies, if the issuing corporation and the disposing corporation are described by subsection 87(11) (if in force, and as it read, at the particular time) as the parent and the subsidiary, respectively,

(iii) occurred before November 13, 1981 and is a merger of corporations that is described by subsection 87(8) (as it read in respect of the merger or combination), or

(iv) occurred after November 12, 1981 and

(A) is a foreign merger (within the meaning assigned by subsection 87(8.1) as it read in respect of the merger or combination), or

(B) all of the following conditions are met, namely

(I) the merger or combination is not a foreign merger (within the meaning assigned by subsection 87(8.1) as it read in respect of the merger or combination),

(II) subsection 87(8.1), as it read in respect of the merger or combination, contained a subparagraph (c)(ii), and

(III) the merger or combination would be a foreign merger (within the meaning of subsection 87(8.1), as it read in respect of the merger or combination) if that subparagraph 87(8.1)(c)(ii) were read as follows:

“(ii) if, immediately after the merger, the new foreign corporation was controlled by another foreign corporation (in this subsection referred to as the “parent corporation”), shares of the capital stock of the parent corporation,”;

and

(c) either

(i) the disposing corporation received no consideration for the security, or

(ii) in the case where the merger or combination is described by subparagraph (b)(iv), the disposing corporation received no consideration for the security other than property that was, immediately before the merger or combination, owned by the issuing corporation and that, on the merger or combination, became property of the new corporation.

(13) Section 248 of the Act is amended by adding the following after subsection (3):

(3.1) Subsection (3) does not apply in respect of a usufruct or a right of use of an immovable in circumstances where a taxpayer disposes of the bare ownership of the immovable by way of a gift to a donee described in the definition “total charitable gifts”, “total Crown gifts” or “total ecological gifts” in subsection 118.1(1) and retains, for life, the usufruct or the right of use.

(14) Paragraphs 248(8)(a) and (b) of the French version of the Act are replaced by the following:

(15) Subsection 248(16) of the Act is replaced by the following:

(16) For the purposes of this Act, other than this subsection and subsection 6(8), an amount claimed by a taxpayer as an input tax credit or rebate with respect to the goods and services tax in respect of a property or service is deemed to be assistance from a government in respect of the property or service that is received by the taxpayer

(a) where the amount was claimed by the taxpayer as an input tax credit in a return under Part IX of the Excise Tax Act for a reporting period under that Act,

(i) at the particular time that is the earlier of the time that the goods and services tax in respect of the input tax credit was paid and the time that it became payable,

(A) if the particular time is in the reporting period, or

(B) if,

(I) the taxpayer’s threshold amount, determined in accordance with subsection 249(1) of the Excise Tax Act, is greater than $500,000 for the taxpayer’s fiscal year (within the meaning assigned by that Act) that includes the particular time, and

(II) the taxpayer claimed the input tax credit at least 120 days before the end of the normal reassessment period, as determined under subsection 152(3.1), for the taxpayer in respect of the taxation year that includes the particular time,

(ii) at the end of the reporting period, if

(A) subparagraph (i) does not apply, and

(B) the taxpayer’s threshold amount, determined in accordance with subsection 249(1) of the Excise Tax Act, is $500,000 or less for the fiscal year (within the meaning assigned by that Act) of the taxpayer that includes the particular time, and

(iii) in any other case, on the last day of the taxpayer’s earliest taxation year

(A) that begins after the taxation year that includes the particular time, and

(B) for which the normal reassessment period, as determined under subsection 152(3.1), for the taxpayer ends at least 120 days after the time that the input tax credit was claimed; or

(b) where the amount was claimed as a rebate with respect to the goods and services tax, at the time the amount was received or credited.

(16) Section 248 of the Act is amended by adding the following after subsection (16):

(16.1) For the purpose of this Act, other than this subsection and subsection 6(8), an amount claimed by a taxpayer as an input tax refund or a rebate with respect to the Quebec sales tax in respect of a property or service is deemed to be assistance from a government in respect of the property or service that is received by the taxpayer

(a) where the amount was claimed by the taxpayer as an input tax refund in a return under An Act respecting the Québec sales tax, R.S.Q., c. T-0.1, for a reporting period under that Act,

(i) at the particular time that is the earlier of the time that the Quebec sales tax in respect of the input tax refund was paid and the time that it became payable,

(A) if the particular time is in the reporting period, or

(B) if,

(I) the taxpayer’s threshold amount, determined in accordance with section 462 of that Act is greater than $500,000 for the taxpayer’s fiscal year (within the meaning assigned by that Act) that includes the par- ticular time, and

(II) the taxpayer claimed the input tax refund at least 120 days before the end of the normal reassessment period, as determined under subsection 152(3.1), for the taxpayer in respect of the taxation year that includes the particular time,

(ii) at the end of the reporting period, if

(A) subparagraph (i) does not apply, and

(B) the taxpayer’s threshold amount, determined in accordance with section 462 of that Act is $500,000 or less for the fiscal year (within the meaning assigned by that Act) of the taxpayer that includes the particular time, and

(iii) in any other case, on the last day of the taxpayer’s earliest taxation year

(A) that begins after the taxation year that includes the particular time, and

(B) for which the normal reassessment period, as determined under subsection 152(3.1), for the taxpayer ends at least 120 days after the time that the input tax refund was claimed; or

(b) where the amount was claimed as a rebate with respect to the Quebec sales tax, at the time the amount was received or credited.

(17) The portion of subsection 248(17) of the Act before the portion enclosed by quotation marks is replaced by the following:

(17) If the input tax credit of a taxpayer under Part IX of the Excise Tax Act in respect of a passenger vehicle or aircraft is determined with reference to subsection 202(4) of that Act, subparagraphs (16)(a)(i) to (iii) are to be read as they apply in respect of the passenger vehicle or aircraft, as the case may be, as follows:

(18) Section 248 of the Act is amended by adding the following after subsection (17):

(17.1) If the input tax refund of a taxpayer under An Act respecting the Québec sales tax, R.S.Q., c. T-0.1, in respect of a passenger vehicle or aircraft is determined with reference to section 252 of that Act, subparagraphs (16.1)(a)(i) to (iii) are to be read as they apply in respect of the passenger vehicle or aircraft, as the case may be, as follows:

“(i) at the beginning of the first taxation year or fiscal period of the taxpayer that begins after the end of the taxation year or fiscal period, as the case may be, in which the Quebec sales tax in respect of such property was considered for the purposes of determining the input tax refund to be payable, if the tax was considered for the purposes of determining the input tax refund to have become payable in the reporting period, or

(ii) if no such tax was considered for the purposes of determining the input tax refund to have become payable in the reporting period, at the end of the reporting period; or”.

(17.2) An amount in respect of an input tax credit that is deemed by subsection 296(5) of the Excise Tax Act to have been claimed in a return or application filed under Part IX of that Act is deemed to have been so claimed for the reporting period under that Act that includes the time when the Minister makes the assessment referred to in that subsection.

(17.3) An amount in respect of an input tax refund that is deemed by section 30.5 of An Act respecting the Ministère du Revenu, R.S.Q., c. M-31, to have been claimed is deemed to have been so claimed for the reporting period under An Act respecting the Québec sales tax, R.S.Q., c. T- 0.1, that includes the day on which an assessment is issued to the taxpayer indicating that the refund has been allocated under that section 30.5.

(19) Section 248 of the Act is amended by adding the following after subsection (18).

(18.1) For the purposes of this Act, if an amount is added at a particular time in determining the net tax of a taxpayer under An Act respecting the Québec sales tax, R.S.Q., c. T-0.1, in respect of an input tax refund relating to property or service that had been previously deducted in determining the net tax of the taxpayer, that amount is deemed to be assistance repaid at the particular time in respect of the property or service under a legal obligation to repay all or part of that assistance.

(20) Paragraphs 248(23.1)(a) and (b) of the French version of the Act are replaced by the following:

(21) Subsection 248(25.1) of the Act is replaced by the following:

(25.1) Where at any time a particular trust transfers property to another trust (other than a trust governed by a registered retirement savings plan or by a registered retirement income fund) in circumstances to which paragraph (f) of the definition “disposition” in subsection (1) applies, without affecting the personal liabilities under this Act of the trustees of either trust or the application of subsection 104(5.8) and paragraph 122(2)(f), the other trust is deemed to be after that time the same trust as, and a continuation of, the particular trust, and, for greater certainty, if the property was deemed to be taxable Canadian property of the particular trust by paragraph 51(1)(f), 85(1)(i) or 85.1(1)(a), subsection 85.1(5) or 87(4) or (5) or paragraph 97(2)(c) or 107(2)(d.1), the property is deemed to be taxable Canadian property of the other trust.

(22) Subparagraph 248(25.3)(c)(i) of the Act is replaced by the following:

(i) the particular unit is capital property and the amount is not proceeds of disposition of a capital interest in the trust, or

(23) Section 248 of the Act is amended by adding the following after subsection (29):

(30) The existence of an amount of an advantage in respect of a transfer of property does not in and by itself disqualify the transfer from being a gift to a qualified donee if

(a) the amount of the advantage does not exceed 80% of the fair market value of the transferred property; or

(b) the transferor of the property establishes to the satisfaction of the Minister that the transfer was made with the intention to make a gift.

(31) The eligible amount of a gift or monetary contribution is the amount by which the fair market value of the property that is the subject of the gift or monetary contribution exceeds the amount of the advantage, if any, in respect of the gift or monetary contribution.

(32) The amount of the advantage in respect of a gift or monetary contribution by a taxpayer is the total of

(a) the total of all amounts, other than an amount referred to in paragraph (b), each of which is the value, at the time the gift or monetary contribution is made, of any property, service, compensation, use or other benefit that the taxpayer, or a person or partnership who does not deal at arm’s length with the taxpayer, has received, obtained or enjoyed, or is entitled, either immediately or in the future and either absolutely or contingently, to receive, obtain, or enjoy

(i) that is consideration for the gift or monetary contribution,

(ii) that is in gratitude for the gift or monetary contribution, or

(iii) that is in any other way related to the gift or monetary contribution, and

(b) the limited-recourse debt, determined under subsection 143.2(6.1), in respect of the gift or monetary contribution at the time the gift or monetary contribution is made.

(33) The cost to a taxpayer of a property, acquired by the taxpayer in circumstances where subsection (32) applies to include the value of the property in computing the amount of the advantage in respect of a gift or monetary contribution, is equal to the fair market value of the property at the time the gift or monetary contribution is made.

(34) If at any time in a taxation year a taxpayer has paid an amount (in this subsection referred to as the “repaid amount”) on account of the principal amount of an indebtedness which was, before that time, an unpaid principal amount that was a limited-recourse debt referred to in subsection 143.2(6.1) (in this subsection referred to as the “former limited-recourse debt”) in respect of a gift or monetary contribution (in this subsection referred to as the “original gift” or “original monetary contribution”, respectively, as the case may be) of the taxpayer (otherwise than by way of an assignment or transfer of a guarantee, security or similar indemnity or covenant, or by way of a payment in respect of which any taxpayer referred to in subsection 143.2(6.1) has incurred an indebtedness that would be a limited-recourse debt referred to in that subsection if that indebtedness were in respect of a gift or monetary contribution made at the time that that indebtedness was incurred), the following rules apply:

(a) if the former limited-recourse debt is in respect of the original gift, for the purposes of sections 110.1 and 118.1, the taxpayer is deemed to have made in the taxation year a gift to a qualified donee, the eligible amount of which deemed gift is the amount, if any, by which

(i) the amount that would have been the eligible amount of the original gift, if the total of all such repaid amounts paid at or before that time were paid immediately before the original gift was made,

exceeds

(ii) the total of

(A) the eligible amount of the original gift, and

(B) the eligible amount of all other gifts deemed by this paragraph to have been made before that time in respect of the original gift; and

(b) if the former limited-recourse debt is in respect of the original monetary contribution, for the purposes of subsection 127(3), the taxpayer is deemed to have made in the taxation year a monetary contribution referred to in that subsection, the eligible amount of which is the amount, if any, by which

(i) the amount that would have been the eligible amount of the original monetary contribution, if the total of all such repaid amounts paid at or before that time were paid immediately before the original monetary contribution was made,

exceeds

(ii) the total of

(A) the eligible amount of the original monetary contribution, and

(B) the eligible amount of all other monetary contributions deemed by this paragraph to have been made before that time in respect of the original monetary contribution.

(35) For the purposes of subsection (31), paragraph 69(1)(b) and subsections 110.1(2.1) and (3) and 118.1(5.4) and (6), the fair market value of a property that is the subject of a gift made by a taxpayer to a qualified donee is deemed to be the lesser of the fair market value of the property otherwise determined and the cost, or in the case of capital property, the adjusted cost base, of the property to the taxpayer immediately before the gift is made if

(a) the taxpayer acquired the property under a gifting arrangement that is a tax shelter as defined in subsection 237.1(1); or

(b) except where the gift is made as a consequence of the taxpayer’s death,

(i) the taxpayer acquired the property less than 3 years before the day that the gift is made, or

(ii) the taxpayer acquired the property less than 10 years before the day that the gift is made and it is reasonable to conclude that, at the time the taxpayer acquired the property, one of the main reasons for the acquisition was to make a gift of the property to a qualified donee.

(36) If a taxpayer acquired a property that is the subject of a gift to which subsection (35) applies because of subparagraph (35)(b)(i) or (ii) and the property was, at any time within the 3-year or 10-year period, respectively, that ends when the gift was made, acquired by a person or partnership with whom the taxpayer does not deal at arm’s length, for the purpose of applying subsection (35) to the taxpayer, the cost, or in the case of capital property, the adjusted cost base, of the property to the taxpayer immediately before the gift is made is deemed to be equal to the lowest amount that is the cost, or in the case of capital property, the adjusted cost base, to the taxpayer or any of those persons or partnerships immediately before the property was disposed of by that person or partnership.

(37) Subsection (35) does not apply to a gift

(a) of inventory;

(b) of real property or an immovable situated in Canada;

(c) of an object referred to in subparagraph 39(1)(a)(i.1);

(d) of property to which paragraph 38(a.1) or (a.2) would apply, if those paragraphs were read without reference to “other than a private foundation”;

(e) of a share of the capital stock of a corporation if

(i) the share was issued by the corporation to the donor,

(ii) immediately before the gift, the corporation was controlled by the donor, a person related to the donor or a group of persons each of whom is related to the donor, and

(iii) subsection (35) would not have applied in respect of the consideration for which the share was issued had that consideration been donated by the donor to the qualified donee when the share was so donated;

(f) by a corporation of property if

(i) the property was acquired by the corporation in circumstances to which subsection 85(1) or (2) applied,

(ii) immediately before the gift, the shareholder from whom the corporation acquired the property controlled the corporation or was related to a person or each member of a group of persons that controlled the corporation, and

(iii) subsection (35) would not have applied in respect of the property had the property not been transferred to the corporation and had the shareholder made the gift to the qualified donee when the corporation so made the gift; or

(g) of a property that was acquired in circumstances where subsection 70(6) or (9) or 73(1), (3) or (4) applied, unless subsection (36) would have applied if this subsection were read without reference to this paragraph.

(38) The eligible amount of a particular gift of property by a taxpayer is nil if it can reasonably be concluded that the particular gift relates to a transaction or series of transactions

(a) one of the purposes of which is to avoid the application of subsection (35) to a gift of any property; or

(b) that would, if this Act were read without reference to this paragraph, result in a tax benefit to which subsection 245(2) applies.

(39) If a taxpayer disposes of a property (in this subsection referred to as the “substantive gift”) that is a capital property or an eligible capital property of the taxpayer, to a recipient that is a registered party, a provincial division of a registered party, a registered association or a candidate, as those terms are defined in the Canada Elections Act, or that is a qualified donee, subsection (35) would have applied in respect of the substantive gift if it had been the subject of a gift by the taxpayer to a qualified donee, and all or a part of the proceeds of disposition of the substantive gift are (or are substituted, directly or indirectly in any manner whatever, for) property that is the subject of a gift or monetary contribution by the taxpayer to the recipient or any person dealing not at arm’s length with the recipient, the following rules apply:

(a) for the purpose of subsection (31), the fair market value of the property that is the subject of the gift or monetary contribution made by the taxpayer is deemed to be that proportion of the lesser of the fair market value of the substantive gift and the cost, or if the substantive gift is capital property of the taxpayer, the adjusted cost base, of the substantive gift to the taxpayer immediately before the disposition to the recipient, that the fair market value otherwise determined of the property that is the subject of the gift or monetary contribution is of the proceeds of disposition of the substantive gift;

(b) if the substantive gift is capital property of the taxpayer, for the purpose of the definitions “proceeds of disposition” of property in subsection 13(21) and section 54, the sale price of the substantive gift is to be reduced by the amount by which the fair market value of the property that is the subject of the gift (determined without reference to this section) exceeds the fair market value determined under paragraph (a); and

(c) if the substantive gift is eligible capital property of the taxpayer, the amount determined under paragraph (a) in the description of E in the definition “cumulative eligible capital” in subsection 14(5) in respect of the substantive gift is to be reduced by the amount by which the fair market value of the property that is the subject of the gift (determined without reference to this section) exceeds the fair market value determined under paragraph (a).

(40) Subsection (30) does not apply in respect of a gift received by a qualified donee from a registered charity.

(41) Notwithstanding subsection (31), the eligible amount of a gift or monetary contribution made by a taxpayer is nil if the taxpayer does not — before a receipt referred to in subsection 110.1(2), 118.1(2) or 127(3), as the case may be, is issued in respect of the gift or monetary contribution — inform the qualified donee or the recipient, as the case may be, of any circumstances in respect of which subsection (31), (35), (36), (38) or (39) requires that the eligible amount of the gift or monetary contribution be less than the fair market value, determined without reference to subsection (35) and subsections 110.1(3) and 118.1(6), of the property that is the subject of the gift or monetary contribution.

(24) Subsection (1) applies in determining whether a person is, for the 2001 and subsequent taxation years, a common-law partner of a taxpayer, except that subsection does not apply to so determine whether a person is a common-law partner of a taxpayer for a taxation year to which a valid election, made under section 144 of the Modernization of Benefits and Obligations Act, applied before February 27, 2004. However, on and after February 27, 2004, no such election may be made to affect a current or subsequent taxation year.

(25) Subsection (2) applies

(a) to arrangements made after December 20, 2002; and

(b) to an arrangement made after November 2, 1998 and before December 21, 2002 if the parties to the arrangement jointly so elect in writing and file the election with the Minister of National Revenue within 90 days after the day on which this Act is assented to, except that the reference to “subsection 260(5.1)” in clause (b)(ii)(B) of the definition “dividend rental arrangement” in subsection 248(1) of the Act, as enacted by subsection (2), is to be, in the application of that definition to any of those arrangements made before 2002, read as a reference to “subsection 260(5)”.

(26) For arrangements made after 2001 and before December 21, 2002, other than an arrangement to which paragraph (25)(b) applies, the portion of paragraph (d) of the definition “dividend rental arrangement” in subsection 248(1) of the Act after subparagraph (iii) is to be read as follows:

that, if paid, would be deemed by subsection 260(5.1) to have been received by that other person as a taxable dividend;

(27) Subsections (3) and (5) apply to redemptions, acquisitions and cancellations that occur after December 23, 1998 and, where a particular redemption, acquisition or cancellation occurs before December 21, 2002, any assessment of a taxpayer’s tax, interest and penalties payable under the Act for a taxation year that includes the time at which the particular redemption, acquisition or cancellation occurred shall, notwithstanding subsections 152(4) to (5) of the Act, be made that is necessary to take into account the application of subsections (3) and (5).

(28) Subsection (4) applies to transfers that occur after February 27, 2004.

(29) Subsection (6) applies to property acquired after December 20, 2002.

(30) Subsection (7) applies in respect of dispositions and terminations that occur after December 20, 2002.

(31) The definition “qualifying trust annuity” in subsection 248(1) of the Act, as enacted by subsection (11), applies after 1988.

(32) The definition “specified proportion” in subsection 248(1) of the Act, as enacted by subsection (11), applies after December 20, 2002.

(33) In applying subsection 248(1.1) of the Act, as enacted by subsection (12), to a particular redemption, acquisition or cancellation, any assessment of a taxpayer’s tax, interest and penalties payable under the Act for a taxation year that includes the time at which the particular redemption, acquisition or cancellation occurred shall, notwithstanding subsections 152(4) to (5) of the Act, be made that is necessary to take into account the application of subsection (12).

(34) Subsection (13) applies to dispositions that occur after July 18, 2005.

(35) Subsections (15) and (17), and subsection 248(17.2) of the Act, as enacted by subsection (18), apply in respect of input tax credits that become eligible to be claimed in taxation years that begin after December 20, 2002.

(36) Subsection (16) and subsections 248(17.1) and (17.3) of the Act, as enacted by subsection (18), apply in respect of input tax refunds and rebates that become eligible to be claimed in taxation years that begin after February 27, 2004.

(37) Subsection (19) applies after February 27, 2004.

(38) Subsection (21) applies in respect of transfers that occur after December 23, 1998.

(39) Subsection (22) applies to units issued after December 20, 2002.

(40) Subsection (23) applies in respect of gifts and monetary contributions made after December 20, 2002, except that

(a) subsection 248(32) of the Act, as enacted by subsection (23), is to be read without reference to

(i) its paragraph (b) in respect of gifts and monetary contributions made before February 19, 2003, and

(ii) its subparagraph (a)(iii) in respect of gifts and monetary contributions made before 6:00 p.m. (Eastern Standard Time) on December 5, 2003;

(b) subsection 248(34) of the Act, as enacted by subsection (23), does not apply in respect of gifts and monetary contributions made before February 19, 2003;

(c) subsections 248(35), (37) and (38) of the Act, as enacted by subsection (23), do not apply in respect of gifts made before 6:00 p.m. (Eastern Standard Time) on December 5, 2003 and, in respect of gifts made after that time but before July 18, 2005, that subsection 248(38) of the Act is to be read as follows:

(38) If it can reasonably be concluded that one of the reasons for a series of transactions, that includes a disposition or acquisition of a property of a taxpayer that is the subject of a gift by the taxpayer, is to increase the amount that would be deemed by subsection (35) to be the fair market value of the property, the cost of the property for the purpose of that subsection is deemed to be the lowest cost to the taxpayer to acquire that property or an identical property at any time.

(d) subsection 248(36) of the Act, as enacted by subsection (23), does not apply in respect of gifts or monetary contributions made before July 18, 2005;

(e) subsection 248(39) of the Act, as enacted by subsection (23), does not apply in respect of gifts or monetary contributions made before February 27, 2004;

(f) subsection 248(40) of the Act, as enacted by subsection (23), does not apply in respect of gifts made before November 9, 2006; and

(g) subsection 248(41) of the Act, as enacted by subsection (23), does not apply in respect of gifts and monetary contributions made before 2006.

188. (1) Subsection 249(1) of the Act is replaced by the following:

249. (1) Except as expressly otherwise provided in this Act, a “taxation year” is

(a) in the case of a corporation, a fiscal period;

(b) in the case of an individual (other than a testamentary trust), a calendar year; and

(c) in the case of a testamentary trust, the period for which the accounts of the trust are made up for purposes of assessment under this Act.

(1.1) When a taxation year is referred to by reference to a calendar year, the reference is to the taxation year or taxation years that coincide with, or that end in, that calendar year.

(2) Section 249 of the Act is amended by adding the following after subsection (4):

(5) The period for which the accounts of a testamentary trust are made up for the purposes of an assessment under this Act may not exceed 12 months, and no change in the time when such a period ends may be made for the purposes of this Act without the concurrence of the Minister.

(6) If at a particular time after December 20, 2002 a transaction or event, described in any of paragraphs (b) to (d) of the definition “testamentary trust” in subsection 108(1), occurs and as a result of that occurrence a trust or estate is not a testamentary trust, the following rules apply:

(a) the fiscal period for a business or property of the trust or estate that would, if this Act were read without reference to this subsection and those paragraphs, have included the particular time is deemed to have ended immediately before the particular time;

(b) the taxation year of the trust or estate that would, if this Act were read without reference to this subsection and those paragraphs, have included the particular time is deemed to have ended immediately before the particular time;

(c) a new taxation year of the trust or estate is deemed to have started at the particular time; and

(d) in determining the fiscal period for a business or property of the trust or estate after the particular time, the trust or estate is deemed not to have established a fiscal period before that time.

(3) Subsection (1), and subsection 249(5) of the Act, as enacted by subsection (2), apply after December 20, 2002.

(4) Subsection 249(6) of the Act, as enacted by subsection (2), applies after July 18, 2005 and, if a trust or estate so elects in writing by filing the election with the Minister of National Revenue on or before its filing-due date for its taxation year in which this Act is assented to, it also applies to that trust or estate, as the case may be, after December 20, 2002.

189. (1) Paragraph 251(1)(c) of the Act is replaced by the following:

(c) in any other case, it is a question of fact whether persons not related to each other are, at a particular time, dealing with each other at arm’s length.

(2) Subsection (1) applies after December 23, 1998.

190. (1) Subsection 252(3) of the Act is amended by replacing the expression “subparagraph 210(c)(ii) and subsections 248(22) and (23)” with the expression “subsections 210(1) and 248(22) and (23)”.

(2) Subsection (1) applies to the 1996 and subsequent taxation years.

191. (1) Section 253.1 of the Act is replaced by the following:

253.1 For the purposes of subparagraph 108(2)(b)(ii), paragraphs 130.1(6)(b), 131(8)(b), 132(6)(b), 146.1(2.1)(c) and 149(1)(o.2), the definition “private holding corporation” in subsection 191(1) and regulations made for the purposes of paragraphs 149(1)(o.3) and (o.4), if a trust or corporation holds an interest as a member of a partnership and, 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, the member shall not, solely because of its acquisition and holding of that interest, be considered to carry on any business or other activity of the partnership.

(2) Subsection (1) applies after 1997 except that, for taxation years that end after December 16, 1999 and before 2003, section 253.1 of the Act, as enacted by subsection (1), is to be read as follows:

253.1 For the purposes of subparagraph 108(2)(b)(ii), paragraphs 130.1(6)(b), 131(8)(b), 132(6)(b), 146.1(2.1)(c) and 149(1)(o.2), the definition “private holding corporation” in subsection 191(1) and regulations made for the purposes of paragraphs 149(1)(o.3) and (o.4), if a trust or corporation is a member of a partnership and, 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, the member is deemed

(a) to undertake an investing of its funds because of its acquisition and holding of its interest as a member of the partnership; and

(b) not to carry on any business or other activity of the partnership.

192. (1) Subparagraph 256(6)(b)(ii) of the French version of the Act is replaced by the following:

(2) Subparagraph 256(7)(a)(i) of the Act is amended by striking out the word “or” at the end of clause (C) and by adding the following after clause (D):

(E) a corporation on a distribution (within the meaning assigned by subsection 55(1)) by a specified corporation (within the meaning assigned by that subsection) if a dividend, to which subsection 55(2) does not apply because of paragraph 55(3)(b), is received in the course of the reorganization in which the distribution occurs,

(3) Paragraph 256(7)(a) of the Act is amended by adding the word “or” at the end of subparagraph (ii) and by adding the following after subparagraph (ii):

(iii) the acquisition at any time of shares of the particular corporation if

(A) the acquisition of those shares would otherwise result in the acquisition of control of the particular corporation at that time by a related group of persons, and

(B) each member of each group of persons that controls the particular corporation at that time was related (otherwise than because of a right referred to in paragraph 251(5)(b)) to the particular corporation immediately before that time;

(4) Paragraph 256(7)(e) of the Act is replaced by the following:

(e) control of a particular corporation and of each corporation controlled by it immediately before a particular time is deemed not to have been acquired at the particular time by a corporation (in this paragraph referred to as the “acquiring corporation”) if at the partic- ular time, the acquiring corporation acquires shares of the particular corporation’s capital stock for consideration that consists solely of shares of the acquiring corporation’s capital stock, and if

(i) immediately after the particular time

(A) the acquiring corporation owns all the shares of each class of the particular corporation’s capital stock (determined without reference to shares of a specified class, within the meaning assigned by paragraph 88(1)(c.8)),

(B) the acquiring corporation is not controlled by any person or group of persons, and

(C) the fair market value of the shares of the particular corporation’s capital stock that are owned by the acquiring corporation is not less than 95% of the fair market value of all of the assets of the acquiring corporation, or

(ii) any of clauses (i)(A) to (C) do not apply and the acquisition occurs as part of a plan of arrangement that, on completion, results in

(A) the acquiring corporation (or a new corporation that is formed on an amalgamation of the acquiring corporation and a subsidiary wholly-owned corporation of the acquiring corporation) owning all the shares of each class of the particular corporation’s capital stock (determined without reference to shares of a specified class, within the meaning assigned by paragraph 88(1)(c.8)),

(B) the acquiring corporation (or the new corporation) not being controlled by any person or group of persons, and

(C) the fair market value of the shares of the particular corporation’s capital stock that are owned by the acquiring corporation (or the new corporation) being not less than 95% of the fair market value of all of the assets of the acquiring corporation (or the new corporation).

(5) Subsections (2) and (3) apply to acquisitions of shares that occur after 2000.

(6) Subsection (4) applies in respect of shares acquired after 1999.

193. (1) The portion of subsection 259(1) of the Act before paragraph (a) is replaced by the following:

259. (1) For the purposes of subsections 146(6), (10) and (10.1), 146.1(2.1) and 146.3(7), (8) and (9) and Parts X, X.2 and XI.1, if at any time a taxpayer that is a registered investment or that is described in paragraph 149(1)(r), (s), (u) or (x) acquires, holds or disposes of a particular unit in a qualified trust and the qualified trust elects for any period that includes that time to have this subsection apply,

(2) Subsection (1) applies to the 2000 and subsequent taxation years, except that, in its application to taxation years that begin before 2005, the portion of subsection 259(1) of the Act before paragraph (a), as enacted by subsection (1), is to be read as follows:

259. (1) For the purposes of subsections 146(6), (10) and (10.1), 146.1(2.1) and 146.3(7), (8) and (9) and Parts X, X.2, XI and XI.1, if at any time a taxpayer described in section 205 acquires, holds or disposes of a particular unit in a qualified trust and the qualified trust elects for any period that includes that time to have this subsection apply,

194. (1) The definition “qualified secu- rity” in subsection 260(1) of the Act is amended by striking out the word “or” at the end of paragraph (c), by adding the word “or” at the end of paragraph (d) and by adding the following after paragraph (d):

(e) a qualified trust unit;

(2) Paragraph (a) of the definition “securities lending arrangement” in subsection 260(1) of the Act is replaced by the following:

(a) a person (in this section referred to as the “lender”) transfers or lends at any particular time a qualified security to another person (in this section referred to as the “borrower”),

(3) Paragraph (c) of the definition “securities lending arrangement” in subsection 260(1) of the Act is replaced by the following:

(c) the borrower is obligated to pay to the lender amounts equal to and as compensation for all amounts, if any, paid on the security that would have been received by the borrower if the borrower had held the security throughout the period that begins after the particular time and that ends at the time an identical security is transferred or returned to the lender,

(4) The definition “securities lending arrangement” in subsection 260(1) of the Act is amended by adding the word “and” at the end of paragraph (d) and by adding the following after paragraph (d):

(e) if the lender and the borrower do not deal with each other at arm’s length, it is intended that neither the arrangement nor any series of securities lending arrangements, loans or other transactions of which the arrangement is a part be in effect for more than 270 days,

(5) Subsection 260(1) of the Act is amended by adding the following in alphabetical order:

“dealer compensation payment” means an amount received by a taxpayer as compensation, for an underlying payment,

(a) from a registered securities dealer resident in Canada who paid the amount in the ordinary course of a business of trading in securities, or

(b) in the ordinary course of the taxpayer’s business of trading in securities, where the taxpayer is a registered securities dealer resident in Canada;

“qualified trust unit” means a unit of a mutual fund trust that is listed on a prescribed stock exchange;

“security distribution” means an amount that is

(a) an underlying payment, or

(b) an SLA compensation payment, or a dealer compensation payment, that is deemed by subsection (5.1) to be an amount received as an amount described by any of paragraphs (5.1)(a) to (c);

“SLA compensation payment” means an amount paid pursuant to a securities lending arrangement as compensation for an underlying payment;

“underlying payment” means an amount paid on a qualified security by the issuer of the security.

(6) Subsections 260(5) and (6) of the Act are replaced by the following:

(5) Subsection (5.1) applies to a taxpayer for a taxation year in respect of a particular amount (other than an amount received as proceeds of disposition or an amount received by a person under an arrangement where it may reasonably be considered that one of the main reasons for the person entering into the arrangement was to enable the person to receive an SLA compensation payment or a dealer compensation payment that would be deductible in computing the taxable income, or not included in computing the income, for any taxation year of the person) received by the taxpayer in the taxation year

(a) as an SLA compensation payment,

(i) from a person resident in Canada, or

(ii) from a non-resident person who paid the particular amount in the course of carrying on business in Canada through a permanent establishment as defined by regulation; or

(b) as a dealer compensation payment.

(5.1) If this subsection applies in respect of a particular amount received by a taxpayer in a taxation year as an SLA compensation payment or as a dealer compensation payment, the particular amount is deemed, to the extent of the underlying payment to which the amount relates, to have been received by the taxpayer in the taxation year as,

(a) where the underlying payment is a taxable dividend paid on a share of the capital stock of a public corporation (other than an underlying payment to which paragraph (b) applies), a taxable dividend on the share;

(b) where the underlying payment is paid by a trust on a qualified trust unit issued by the trust,

(i) an amount of the trust’s income that was, to the extent that subsection 104(13) applied to the underlying payment,

(A) paid by the trust to the taxpayer as a beneficiary under the trust, and

(B) designated by the trust in respect of the taxpayer to the extent of a valid designation, if any, by the trust under this Act in respect of the recipient of the underlying payment, and

(ii) to the extent that the underlying payment is a distribution of a property from the trust, a distribution of that property from the trust; or

(c) in any other case, interest.

(6) In computing the income of a taxpayer under Part I from a business or property for a taxation year, there may be deducted a particular amount, paid by the taxpayer in the year as an SLA compensation payment or as a dealer compensation payment, that is equal to

(a) if the taxpayer is a registered securities dealer and the particular amount is deemed by subsection (5.1) to have been received as a taxable dividend, no more than 2/3 of the particular amount; or

(b) if the particular amount is in respect of an amount other than an amount that is, or is deemed by subsection (5.1) to have been, received as a taxable dividend,

(i) where the taxpayer disposes of the borrowed security and includes the gain or loss, if any, from the disposition in computing its income from a business, the particular amount, or

(ii) in any other case, the lesser of

(A) the particular amount, and

(B) the amount, if any, in respect of the security distribution to which the SLA compensation payment or dealer compensation payment relates that is included in computing the income, and not deducted in computing the taxable income, for any taxation year of the taxpayer or of any person to whom the taxpayer is related.

(7) Paragraph 260(6.1)(a) of the Act is replaced by the following:

(a) the total of all amounts each of which is an amount that the corporation becomes obligated in the taxation year to pay to another person under an arrangement described in paragraph (b) of the definition “dividend rental arrangement” in subsection 248(1) that, if paid, would be deemed by subsection (5.1) to have been received by another person as a taxable dividend, and

(8) Subsections 260(7) and (8) of the Act are replaced by the following:

(7) For the purpose of section 129, if a corporation pays an amount for which no deduction in computing the corporation’s income may be claimed under subsection (6.1) and subsection (5.1) deems the amount to have been received by another person as a taxable dividend,

(a) the corporation is deemed to have paid the amount as a taxable dividend, where the corporation is not a registered securities dealer; and

(b) the corporation is deemed to have paid 1/3 of the amount as a taxable dividend, where the corporation is a registered securities dealer.

(8) For the purpose of Part XIII, any amount paid or credited under a securities lending arrangement by or on behalf of the borrower to the lender

(a) as an SLA compensation payment is, subject to paragraph (b) or (c), deemed to be a payment of interest made by the borrower to the lender;

(b) as an SLA compensation payment in respect of a security that is a qualified trust unit, is deemed, to the extent of the amount of the underlying payment to which the SLA compensation payment relates, to be an amount paid by the trust and having the same character and composition as the underlying payment;

(c) as an SLA compensation payment, if the security is not a qualified trust unit and throughout the term of the securities lending arrangement, the borrower has provided the lender under the arrangement with money in an amount of, or securities described in paragraph (c) of the definition “qualified security” in subsection (1) that have a fair market value of, not less than 95% of the fair market value of the security and the borrower is entitled to enjoy, directly or indirectly, the benefits of all or substantially all income derived from, and opportunity for gain with respect of, the money or securities,

(i) is, to the extent of the amount of the interest or dividend paid in respect of the security, deemed to be a payment made by the borrower to the lender of interest or a dividend, as the case may be, payable on the security, and

(ii) is, to the extent of the amount of the interest, if any, paid in respect of the security, deemed

(A) for the purpose of subparagraph 212(1)(b)(vii) to have been payable by the issuer of the security, and

(B) to have been payable on a security that is a security described in subparagraph 212(1)(b)(ii) where the security is a security described in paragraph (c) of the definition “qualified security” in subsection (1); and

(d) as, on account of, in lieu of payment of or in satisfaction of, a fee for the use of the security is deemed to be a payment of interest made by the borrower to the lender.

(8.1) For the purpose of paragraph (8)(d), if under a securities lending arrangement the borrower has at any time provided the lender with money, either as collateral or consideration for the security, and the borrower does not, under the arrangement, pay or credit a reasonable amount to the lender as, on account of, in lieu of payment of or in satisfaction of, a fee for the use of the security, the borrower is deemed to have, at the time that an identical security is or can reasonably be expected to be transferred or returned to the lender, paid to the lender under the arrangement an amount as a fee for the use of the security equal to the amount, if any, by which

(a) the interest on the money computed at the prescribed rates in effect during the term of the arrangement

exceeds

(b) the amount, if any, by which any amount that the lender pays or credits to the borrower under the arrangement exceeds the amount of the money.

(8.2) In applying subsection (8), any amount, paid or credited under a securities lending arrangement by or on behalf of the borrower to the lender, that is deemed by paragraph (8)(a), (b) or (d) to be a payment of interest, is deemed for the purposes of any tax treaty not to be payable on or in respect of the security.

(9) Section 260 of the Act is amended by adding the following after subsection (9):

(10) For the purpose of this section,

(a) a person includes a partnership; and

(b) a partnership is deemed to be a registered securities dealer if each member of the partnership is a registered securities dealer.

(11) A corporation that is, in a taxation year, a member of a partnership is deemed

(a) for the purpose of applying subsection (5) in respect of the taxation year,

(i) to receive its specified proportion, for each fiscal period of the partnership that ends in the taxation year, of each amount received by the partnership in that fiscal period, and

(ii) in respect of the receipt of its specified proportion of that amount, to be the same person as the partnership;

(b) for the purpose of applying paragraph (6.1)(a) in respect of the taxation year, to become obligated to pay its specified proportion, for each fiscal period of the partnership that ends in the taxation year, of the amount the partnership becomes, in that fiscal period, obligated to pay to another person under the arrangement described in that paragraph; and

(c) for the purpose of applying section 129 in respect of the taxation year, to have paid

(i) if the partnership is not a registered securities dealer, the corporation’s specified proportion, for each fiscal period of the partnership that ends in the taxation year, of each amount paid by the partnership (other than an amount for which a deduction in computing income may be claimed under subsection (6.1) by the corporation), and

(ii) if the partnership is a registered securities dealer, 1/3 of the corporation’s specified proportion, for each fiscal period of the partnership that ends in the taxation year, of each amount paid by the partnership (other than an amount for which a deduction in computing income may be claimed under subsection (6.1) by the corporation).

(12) An individual that is, in a taxation year, a member of a partnership is deemed

(a) for the purpose of applying subsection (5) in respect of the taxation year,

(i) to receive the individual’s specified proportion, for each fiscal period of the partnership that ends in the taxation year, of each amount received by the partnership in that fiscal period, and

(ii) in respect of the receipt of the individual’s specified proportion of that amount, to be the same person as the partnership; and

(b) for the purpose of subsection 82(1), to have paid the individual’s specified proportion, for each fiscal period of the partnership that ends in the year, of each amount paid by the partnership in that fiscal period that is deemed by subsection (5.1) to have been received by another person as a taxable dividend.

(10) Subsections (1), (3), (5), (6) and (8) apply to arrangements made after 2001, except that, if the parties to an arrangement jointly so elect in writing and file the election with the Minister of National Revenue within 90 days after the day on which this Act is assented to, subsection 260(5.1) of the Act, as enacted by subsection (6), is to be read, in its application to SLA compensation payments or dealer compensation payments received under the arrangement before February 28, 2004, without reference to paragraph 260(5.1)(b) or (c), or to both of those paragraphs, as specified by the parties in the election.

(11) Subsections (2) and (4) apply to arrangements made after 2002.

(12) Subsection (7) applies to

(a) arrangements made after December 20, 2002;

(b) an arrangement made after November 2, 1998 and before December 21, 2002 if the parties to the arrangement have made the election referred to in paragraph 187(25)(b) of this Act, except that, in its application to an arrangement made before 2002, the reference to “subsection (5.1)” in paragraph 260(6.1)(a) of the Act, as enacted by subsection (7), is to be read as a reference to “subsection (5)”; and

(c) an arrangement, other than an arrangement to which paragraph (b) applies, made after 2001 and before December 21, 2002, except that, in its application before December 21, 2002, paragraph 260(6.1)(a) of the Act, as enacted by subsection (7), is to be read as follows:

(a) the amount that the corporation is obligated to pay to another person under an arrangement described in paragraphs (c) and (d) of the definition “dividend rental arrangement” in subsection 248(1) that, if paid, would be deemed by subsection (5.1) to have been received by another person as a taxable dividend, and

(13) Subsection (9) applies to

(a) arrangements made after December 20, 2002; and

(b) an arrangement made after November 2, 1998 and before December 21, 2002 if the parties to the arrangement have made the election referred to in paragraph 187(25)(b) of this Act, except that, in its application to an arrangement made before 2002, the reference to “subsection (5.1)” in paragraph 260(12)(b) of the Act, as enacted by subsection (9), is to be read as a reference to “subsection (5)”.

195. (1) The Act is amended by adding, after section 260, the schedule set out in the schedule to this Act.

(2) Subject to subsection (3), subsection (1) is deemed to have come into force on December 20, 2002.

(3) Subsection (1) is deemed to have come into force to enact the schedule set out in that subsection so as to, as of the dates set out below, list each of the following corporations in the schedule:

(a) 2419726 Canada Inc., January 1, 1998, except that, in its application

(i) after May 1999 and before April 2002, the reference in the schedule to that corporation is to be read as a reference to “CitiFinancial Canada, Inc./CitiFinancière Canada, Inc.”, and

(ii) after 1997 and before June 1999, the reference in the schedule to that corporation is to be read as a reference to “Commercial Credit Corporation CCC Limited/Corporation De Credit Commerciale CCC Limitee”;

(b) AmeriCredit Financial Services of Canada Ltd., June 30, 2001;

(c) Canaccord Capital Credit Corporation/Corporation de crédit Canaccord capital, September 25, 2000;

(d) Citibank Canada Investment Funds Limited, December 31, 2001;

(e) Citicapital Commercial Corporation/Citicapital Corporation Commerciale, January 1, 2000, except that, in its application after 1999 and before July 2001, the reference in the schedule to that corporation is to be read as a reference to “Associates Commercial Corporation of Canada Ltd./Les Associés, Corporation Commerciale du Canada Ltee”;

(f) Citi Cards Canada Inc./Cartes Citi Canada Inc., September 25, 2003;

(g) Citi Commerce Solutions of Canada Ltd., January 1, 2003;

(h) CitiFinancial Canada East Company/CitiFinancière, corporation du Canada Est, December 23, 1997, except that, in its application

(i) after April 2001 and before April 2002, the reference in the schedule to that corporation is to be read as a reference to “CitiFinancial Services of Canada East Company/CitiFinancière, compagnie de services du Canada Est”,

(ii) after September 26, 1999 and before May 2001, the reference in the schedule to that corporation is to be read as a reference to “Associates Financial Serv- ices of Canada East Company/Les Associés, Compagnie de Services Financiers du Canada Est”,

(iii) after February 12, 1998 and before September 27, 1999, the reference in the schedule to that corporation is to be read as a reference to “Avco Financial Serv- ices Canada East Company/Compagnie Services Financiers Avco Canada Est”,

(iv) after December 29, 1997 and before February 13, 1998, the reference in the schedule to that corporation is to be read as a reference to “Avco Financial Serv- ices Canada East Company/Services Financiers Avco Canada Est Compagnie”, and

(v) after December 22, 1997 and before December 30, 1997, the reference in the schedule to that corporation is to be read as a reference to “Avco Financial Serv- ices Canada East Company”;

(i) CitiFinancial Canada, Inc./CitiFinancière Canada, Inc., March 2, 1998, except that, in its application

(i) after April 2001 and before April 2002, the reference in the schedule to that corporation is to be read as a reference to “CitiFinancial Services of Canada, Ltd./CitiFinancière, services du Canada, Ltée”, and

(ii) after March 1, 1998 and before May 2001, the reference in the schedule to that corporation is to be read as a reference to “Associates Financial Serv- ices of Canada Ltd./Les Associés, Serv- ices Financières du Canada Ltée”;

(j) CitiFinancial Mortgage Corporation/CitiFinancière, corporation de prêts hypothécaires, March 2, 1998, except that, in its application after March 1, 1998 and before May 2001, the reference in the schedule to that corporation is to be read as a reference to “Associates Mortgage Corporation/Les Associés, Corporation de Prêts Hypothécaires”;

(k) CitiFinancial Mortgage East Corporation/CitiFinancière, corporation de prêts hypothécaires de l’Est, December 23, 1997, except that, in its application

(i) after November 2, 1999 and before May 2001, the reference in the schedule to that corporation is to be read as a reference to “Associates Mortgage East Corporation/Les Associés, Corporation de Prêts Hypothécaires de l’Est”,

(ii) after September 27, 1999 and before November 3, 1999, the reference in the schedule to that corporation is to be read as a reference to “Associates Mortgage East Corporation/Les Associés, Corporation de Financiers du Prêts Hypothécaires de l’Est”,

(iii) after February 12, 1998 and before September 28, 1999, the reference in the schedule to that corporation is to be read as a reference to “Avco Financial Serv- ices Realty East Company/Compagnie Services Financiers Immobiliers Avco Est”,

(iv) after December 29, 1997 and before February 13, 1998, the reference in the schedule to that corporation is to be read as a reference to “Avco Financial Serv- ices Realty East Company/Services Financiers Immobiliers Avco Est Compagnie”, and

(v) after December 22, 1997 and before December 30, 1997, the reference in the schedule to that corporation is to be read as a reference to “Avco Financial Serv- ices Realty East Company”;

(l) Citigroup Finance Canada Inc., January 1, 1998, except that, in its application after 1997 and before June 11, 2003, the reference in the schedule to that corporation is to be read as a reference to “Associates Capital Corporation of Canada/Corporation de capital associés du Canada”;

(m) Ford Credit Canada Limited, December 23, 1997;

(n) GE Card Services Canada Inc./GE Services de Cartes du Canada Inc., August 2, 2000;

(o) GMAC Residential Funding of Canada, Limited, January 1, 2003;

(p) John Deere Credit Inc./Crédit John Deere Inc., January 1, 1999;

(q) PACCAR Financial Ltd./Compagnie Financière Paccar Ltée, January 1, 2003;

(r) Paradigm Fund Inc./Le Fonds Paradigm Inc., January 1, 2002;

(s) Prêts étudiants Atlantique Inc./Atlantic Student Loans Inc., January 1, 1998, except that, in its application after 1997 and before June 13, 2002, the reference in the schedule to that corporation is to be read as a reference to “Prêts étudiants Acadie Inc./Acadia Student Loans Inc.”;

(t) State Farm Finance Corporation of Canada/ Corporation de Crédit State Farm du Canada, January 1, 2002, except that, in its application after 2001 and before May 2002, the reference in the schedule to that corporation is to be read as a reference to “VNB Financial Services Inc./Services financiers VNB, Inc.”;

(u) Trans Canada Retail Services Company/Société de services de détails trans Canada, January 1, 1999, except that, in its application after 1998 and before January 15, 2002, the reference in the schedule to that corporation is to be read as a reference to “National Retail Credit Services Company/Société de services de crédit aux détaillants national”; and

(v) Wells Fargo Financial Canada Corporation, January 1, 1999, except that, in its application after 1998 and before September 7, 2001, the reference in the schedule to that corporation is to be read as a reference to “Norwest Financial Canada Company”.

(4) Ford Credit Canada Limited is deemed to have been, from July 1, 1989 to December 22, 1997, prescribed by a regulation made under paragraph 181(1)(g) of the Act.

(5) The schedule, as enacted by subsection (1), is amended by removing from the list, as of the dates set out below, the following corporations:

(a) GE Card Services Canada Inc./ GE Services Cartes du Canada Inc., January 1, 2003;

(b) 2419726 Canada Inc., March 31, 2002;

(c) CitiFinancial Mortgage Corporation/CitiFinancière, corporation de prêts hypothécaires, March 31, 2002; and

(d) CitiFinancial Mortgage East Corporation/CitiFinancière, corporation de prêts hypothécaires de l’Est, April 1, 2002.