Income Tax Act (R.S.C., 1985, c. 1 (5th Supp.))

Marginal note:Amounts designated by mutual fund trust

• 132.1 (1) Where a trust in its return of income under this Part for a taxation year throughout which it was a mutual fund trust designates an amount in respect of a particular unit of the trust owned by a taxpayer at any time in the year equal to the total of

  • (a) such amount as the trust may determine in respect of the particular unit for the year not exceeding the amount, if any, by which

    • (i) the total of all amounts that were determined by the trust under subsection 104(16) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, for taxation years of the trust commencing before 1988

    exceeds

    • (ii) the total of all amounts determined by the trust under this paragraph for the year or a preceding taxation year in respect of all units of the trust, other than amounts determined in respect of the particular unit for the year under this paragraph, and

  • (b) such amount as the trust may determine in respect of the particular unit for the year not exceeding the amount, if any, by which

    • (i) the total of all amounts described in subparagraph 53(2)(h)(i.1) that became payable by the trust after 1987 and before the year

    exceeds

    • (ii) the total of all amounts determined by the trust under this paragraph for the year or a preceding taxation year in respect of all units of the trust, other than amounts determined in respect of the particular unit for the year under this paragraph,

  the amount so designated shall

  • (c) subject to subsection 132.1(3), be deductible in computing the income of the trust for the year, and

  • (d) be included in computing the income of the taxpayer for the taxpayer’s taxation year in which the year of the trust ends, except that where the particular unit was owned by two or more taxpayers during the year, such part of the amount so designated as the trust may determine shall be included in computing the income of each such taxpayer for the taxpayer’s taxation year in which the year of the trust ends if the total of the parts so determined is equal to the amount so designated.

• Marginal note:Adjusted cost base of unit where designation made

  (2) In computing, at any time in a taxation year of a taxpayer, the adjusted cost base to the taxpayer of a unit in a mutual fund trust, there shall be added that part of the amount included under subsection 132.1(1) in computing the taxpayer’s income that is reasonably attributable to the amount determined under paragraph 132.1(1)(b) by the trust for its taxation year ending in the year in respect of the unit owned by the taxpayer.

• Marginal note:Limitation on current year deduction

  (3) The total of amounts deductible by reason of paragraph 132.1(1)(c) in computing the income of a trust for a taxation year shall not exceed the amount that would be the income of the trust for the year if no deductions were made under this section and subsection 104(6).

• Marginal note:Carryover of excess

  (4) The amount, if any, by which the total of all amounts each of which is an amount designated for the year under subsection 132.1(1) exceeds the amount deductible under this section in computing the income of the trust for the year, shall, for the purposes of paragraph 132.1(1)(c) and subsection 132.1(3), be deemed designated under subsection 132.1(1) by the trust for its immediately following taxation year.

• Marginal note:Where designation has no effect

  (5) Where it is reasonable to conclude that an amount determined by a mutual fund trust

  • (a) under paragraph 132.1(1)(a) or 132.1(1)(b) for a taxation year of the trust in respect of a unit owned at any time in the year by a taxpayer who was a person exempt from tax under this Part by reason of subsection 149(1), or

  • (b) under paragraph 132.1(1)(d) for the year in respect of the amount designated under subsection 132.1(1) for the year in respect of the unit

  differs from the amount that would have been so determined for the year in respect of the taxpayer had the taxpayer not been a person exempt from tax under this Part by reason of subsection 149(1), the amount designated for the year in respect of the unit under subsection 132.1(1) shall have no effect for the purposes of paragraph 132.1(1)(c).

Marginal note:Taxation year of mutual fund trust

• 132.11 (1) Notwithstanding any other provision of this Act, where a trust (other than a prescribed trust) that was a mutual fund trust on the 74th day after the end of a particular calendar year so elects in writing filed with the Minister with the trust’s return of income for the trust’s taxation year that includes December 15 of the particular year,

  • (a) the trust’s taxation year that began before December 16 of the particular year and, but for this paragraph, would end at the end of the particular year (or, where the first taxation year of the trust began after December 15 of the preceding calendar year and no return of income was filed for a taxation year of the trust that ended at the end of the preceding calendar year, at the end of the preceding calendar year) is deemed to end at the end of December 15 of the particular year;

  • (b) if the trust’s taxation year ends on December 15 because of paragraph (a), subject to subsection (1.1), each subsequent taxation year of the trust is deemed to be the period that begins at the beginning of December 16 of a calendar year and that ends at the end of December 15 of the following calendar year or at any earlier time that is determined under paragraph 128.1(4)(a), 132.2(3)(b), 142.6(1)(a) or 249(4)(a); and

  • (c) each fiscal period of the trust that begins in a taxation year of the trust that ends on December 15 because of paragraph (a) or that ends in a subsequent taxation year of the trust shall end no later than the end of the year or the subsequent year, as the case may be.

• Marginal note:Revocation of election

  (1.1) Where a particular taxation year of a trust ends on December 15 of a calendar year because of an election made under paragraph (1)(a), the trust applies to the Minister in writing before December 15 of that calendar year (or before a later time that is acceptable to the Minister) to have this subsection apply to the trust, with the concurrence of the Minister

  • (a) the trust’s taxation year following the particular taxation year is deemed to begin immediately after the end of the particular taxation year and end at the end of that calendar year; and

  • (b) each subsequent taxation year of the trust is deemed to be determined as if that election had not been made.

• Marginal note:Electing trust’s share of partnership income and losses

  (2) Where a trust is a member of a partnership a fiscal period of which ends in a calendar year after December 15 of the year and a particular taxation year of the trust ends on December 15 of the year because of subsection (1), each amount otherwise determined under paragraph 96(1)(f) or (g) to be the trust’s income or loss for a subsequent taxation year of the trust is deemed to be the trust’s income or loss determined under paragraph 96(1)(f) or (g) for the particular year and not for the subsequent year.

• Marginal note:Electing trust’s income from other trusts

  (3) Where a particular trust is a beneficiary under another trust a taxation year of which (in this subsection referred to as the “other year”) ends in a calendar year after December 15 of the year and a particular taxation year of the trust ends on December 15 of the year because of subsection (1), each amount determined or designated under subsection 104(13), (19), (21), (22) or (29) for the other year that would otherwise be included, or taken into account, in computing the income of the particular trust for a subsequent taxation year of the trust shall

  • (a) be included, or taken into account, in computing the particular trust’s income for the particular year; and

  • (b) not be included, or taken into account, in computing the particular trust’s income for the subsequent year.

• Marginal note:Amounts paid or payable to beneficiaries

  (4) Notwithstanding subsection 104(24), for the purposes of subsections (5) and (6) and 104(6) and (13) and paragraph (i) of the definition disposition in subsection 248(1) each amount that is paid, or that becomes payable, by a trust to a beneficiary after the end of a particular taxation year of the trust that ends on December 15 of a calendar year because of subsection (1) and before the end of that calendar year, is deemed to have been paid or to have become payable, as the case may be, to the beneficiary at the end of the particular year and not at any other time.

• Marginal note:Special rules where change in status of beneficiary

  (5) Where an amount is deemed by subsection (4) to have been paid or to have become payable at the end of December 15 of a calendar year by a trust to a beneficiary who was not a beneficiary under the trust at that time,

  • (a) notwithstanding any other provision of this Act, where the beneficiary did not exist at that time, except for the purpose of this paragraph, the first taxation year of the beneficiary is deemed to include the period that begins at that time and ends immediately before the beginning of the first taxation year of the beneficiary;

  • (b) the beneficiary is deemed to exist throughout the period described in paragraph (a); and

  • (c) where the beneficiary was not a beneficiary under the trust at that time, the beneficiary is deemed to have been a beneficiary under the trust at that time.

• Marginal note:Additional income of electing trust

  (6) Where a particular amount is designated under this subsection by a trust in its return of income for a particular taxation year that ends on December 15 because of subsection (1) or throughout which the trust was a mutual fund trust and the trust does not designate an amount under subsection 104(13.1) or (13.2) for the particular year,

  • (a) the particular amount shall be added in computing its income for the particular year; and

  • (b) for the purposes of subsections 104(6) and (13), each portion of the particular amount that is allocated under this paragraph to a beneficiary under the trust in the trust’s return of income for the particular year in respect of an amount paid or payable to the beneficiary in the particular year shall be considered to be additional income of the trust for the particular year (determined without reference to subsection 104(6)) that was paid or payable, as the case may be, to the beneficiary at the end of the particular year.

  • (c) [Repealed, 2001, c. 17, s. 130(4)]

• Marginal note:Deduction

  (7) Subject to subsection (8), the lesser of the amount designated under subsection (6) by a trust for a taxation year and the total of all amounts each of which is allocated by the trust under paragraph (6)(b) in respect of the year shall be deducted in computing the trust’s income for the following taxation year.

• Marginal note:Anti-avoidance

  (8) Subsection (7) does not apply in computing the income of a trust for a taxation year where it is reasonable to consider that the designation under subsection (6) for the preceding taxation year was part of a series of transactions or events that includes a change in the composition of beneficiaries under the trust.

Marginal note:Definitions re qualifying exchange of mutual funds

• 132.2 (1) The following definitions apply in this section.

  first post-exchange year

  first post-exchange year, of a fund in respect of a qualifying exchange, means the taxation year of the fund that begins immediately after the acquisition time. (première année suivant l’échange)

  qualifying exchange

  qualifying exchange means a transfer at any time (in this section referred to as the “transfer time”) if

  • (a) the transfer is a transfer of all or substantially all of the property (including an exchange of a unit of a mutual fund trust for another unit of that trust) of

    • (i) a mutual fund corporation (other than a SIFT wind-up corporation) to one or more mutual fund trusts, or

    • (ii) a mutual fund trust to a mutual fund trust;

  • (b) all or substantially all of the shares issued by the mutual fund corporation referred to in subparagraph (a)(i) or the first mutual fund trust referred to in subparagraph (a)(ii) (in this section referred to as the “transferor”) and outstanding immediately before the transfer time are within 60 days after the transfer time disposed of to the transferor;

  • (c) no person disposing of shares of the transferor to the transferor within that 60-day period (otherwise than pursuant to the exercise of a statutory right of dissent) receives any consideration for the shares other than units of one or more mutual fund trusts referred to in subparagraph (a)(i) or the second mutual fund trust referred to in subparagraph (a)(ii) (in this section referred to as a “transferee” and, together with the transferor, as the “funds”);

  • (d) if property of the transferor has been transferred to more than one transferee,

    • (i) all shares of each class of shares, that is recognized under securities legislation as or as part of an investment fund, of the transferor are disposed of to the transferor within 60 days after the transfer time, and

    • (ii) the units received in consideration for a particular share of a class of shares, that is recognized under securities legislation as or as part of an investment fund, of the transferor are units of the transferee to which all or substantially all of the assets that were allocated to that investment fund immediately before the transfer time were transferred; and

  • (e) the funds jointly so elect, by filing a prescribed form with the Minister on or before the election’s due date. (échange admissible)

  share

  share means a share of the capital stock of a mutual fund corporation and a unit of a mutual fund trust. (action)

• Marginal note:Timing

  (2) In respect of a qualifying exchange, a time referred to in the following list immediately follows the time that precedes it in the list

  • (a) the transfer time;

  • (b) the first intervening time;

  • (c) the acquisition time;

  • (d) the beginning of the funds’ first post-exchange years;

  • (e) the depreciables disposition time;

  • (f) the second intervening time; and

  • (g) the depreciables acquisition time.

• Marginal note:General

  (3) In respect of a qualifying exchange,

  • (a) each property of a fund, other than property disposed of by the transferor to a transferee at the transfer time and depreciable property, is deemed to have been disposed of, and to have been reacquired by the fund, at the first intervening time, for an amount equal to the lesser of

    • (i) the fair market value of the property at the transfer time, and

    • (ii) the greater of

      • (A) its cost amount, and

      • (B) the amount that the fund designates in respect of the property in a notification to the Minister accompanying the election in respect of the qualifying exchange;

  • (a.1) in respect of each property transferred by the transferor to a transferee, including an exchange of a unit of a transferee for another unit of that transferee, the transferor is deemed to have disposed of the property to the transferee, and to have received units of the transferee as consideration for the disposition of the property, at the transfer time;

  • (b) subject to paragraph (l), the last taxation years of the funds that began before the transfer time are deemed to have ended at the acquisition time, and their first post-exchange years are deemed to have begun immediately after those last taxation years ended;

  • (c) each depreciable property of a fund (other than property to which subsection (5) applies and property to which paragraph (d) would, if this Act were read without reference to this paragraph, apply) is deemed to have been disposed of, and to have been reacquired, by the fund at the second intervening time for an amount equal to the lesser of

    • (i) the fair market value of the property at the depreciables disposition time, and

    • (ii) the greater of

      • (A) the lesser of its capital cost and its cost amount to the disposing fund at the depreciables disposition time, and

      • (B) the amount that the fund designates in respect of the property in a notification to the Minister accompanying the election in respect of the qualifying exchange;

  • (d) if at the second intervening time the undepreciated capital cost to a fund of depreciable property of a prescribed class exceeds the fair market value of all the property of that class, the excess is to be deducted in computing the fund’s income for the taxation year that includes the transfer time and is deemed to have been allowed in respect of property of that class under regulations made for the purpose of paragraph 20(1)(a);

  • (e) except as provided in paragraph (m), the transferor’s cost of any particular property received by the transferor from a transferee as consideration for the disposition of the property is deemed to be

    • (i) nil, if the particular property is a unit of the transferee, and

    • (ii) the particular property’s fair market value at the transfer time, in any other case;

  • (f) the transferor’s proceeds of disposition of any units of a transferee that were disposed of by the transferor at any particular time that is within 60 days after the transfer time in exchange for shares of the transferor, are deemed to be equal to the cost amount of the units to the transferor immediately before the particular time;

  • (g) if, at any particular time that is within 60 days after the transfer time, a taxpayer disposes of shares of the transferor to the transferor in exchange for units of a transferee

    • (i) the taxpayer’s proceeds of disposition of the shares and the cost to the taxpayer of the units are deemed to be equal to the cost amount to the taxpayer of the shares immediately before the particular time,

    • (ii) for the purposes of applying section 116 in respect of the disposition, the shares are deemed to be excluded property of the taxpayer,

    • (iii) where the qualifying exchange occurs after 2004, for the purposes of applying section 218.3 in respect of that exchange, the payment or crediting of the units to the taxpayer by the transferor is deemed not to be an assessable distribution,

    • (iv) where all of the taxpayer’s shares of the transferor have been so disposed of, for the purpose of applying section 39.1 in respect of the taxpayer after that disposition, the transferee is deemed to be the same entity as the transferor,

    • (v) for the purpose of the definition designated beneficiary in section 210, the units are deemed not to have been held at any time by the transferor, and

    • (vi) if the taxpayer is at the particular time affiliated with the transferor or the transferee,

      • (A) those units are deemed not to be identical to any other units of the transferee,

      • (B) if the taxpayer is the transferee, and the units cease to exist when the taxpayer acquires them (or, for greater certainty, when the taxpayer would but for that cessation have acquired them), the taxpayer is deemed

        • (I) to have acquired those units at the particular time, and

        • (II) to have disposed of those units immediately after the particular time for proceeds of disposition equal to the cost amount to the taxpayer of those units at the particular time, and

      • (C) in any other case, for the purpose of computing any gain or loss of the taxpayer from the taxpayer’s first disposition, after the particular time, of each of those units,

        • (I) if that disposition is a renunciation or surrender of the unit by the taxpayer for no consideration, and is not in favour of any person other than the transferee, the taxpayer’s proceeds of disposition of that unit are deemed to be equal to that unit’s cost amount to the taxpayer immediately before that disposition, and

        • (II) if subclause (I) does not apply, the taxpayer’s proceeds of disposition of that unit are deemed to be equal to the greater of that unit’s fair market value and its cost amount to the taxpayer immediately before that disposition;

  • (h) where a share to which paragraph (g) applies would, if this Act were read without reference to this paragraph, cease to be a qualified investment (within the meaning assigned by subsection 146(1), 146.1(1), 146.3(1) or 146.4(1), section 204 or subsection 207.01(1)) as a consequence of the qualifying exchange, the share is deemed to be a qualified investment until the earlier of the day that is 60 days after the day that includes the transfer time and the time at which it is disposed of in accordance with paragraph (g);

  • (i) there shall be added to the amount determined under the description of A in the definition refundable capital gains tax on hand in subsection 132(4) in respect of a transferee for its taxation years that begin after the transfer time the amount determined by the formula

    (A − B) × C/D

    where

    A

    is the transferor’s refundable capital gains tax on hand (within the meaning assigned by subsection 131(6) or 132(4), as the case may be) at the end of its taxation year that includes the transfer time,

    B

    is the transferor’s capital gains refund (within the meaning assigned by paragraph 131(2)(a) or 132(1)(a), as the case may be) for that year,

    C

    is the total fair market value of property of the transferor disposed of to, net of liabilities assumed by, the transferee on the qualifying exchange, and

    D

    is the total fair market value of property of the transferor disposed of to, net of liabilities assumed by, all transferees on the qualifying exchange;

  • (j) no amount in respect of a non-capital loss, net capital loss, restricted farm loss, farm loss or limited partnership loss of a fund for a taxation year that began before the transfer time is deductible in computing the taxable income of any of the funds for a taxation year that begins after the transfer time;

  • (k) if the transferor is a mutual fund trust, for the purposes of subsections 132.1(1) and (3) to (5), the transferee is deemed after the transfer time to be the same mutual fund trust as, and a continuation of, the transferor;

  • (l) if the transferor is a mutual fund corporation

    • (i) for the purpose of subsection 131(4) but, for greater certainty, without having any effect on the computation of any amount determined under this Part, the transferor is deemed in respect of any share disposed of in accordance with paragraph (g) to be a mutual fund corporation at the time of the disposition,

    • (ii) for the purpose of Part I.3 but, for greater certainty, without having any effect on the computation of any amount determined under this Part, the transferor’s taxation year that, if this Act were read without reference to this paragraph, would have included the transfer time is deemed to have ended immediately before the transfer time, and

    • (iii) for the purpose of subsection 131(1), a dividend that is made payable at a particular time after the acquisition time but within the 60-day period commencing immediately after the transfer time, and paid before the end of that period, by the transferor to taxpayers that held shares of a class of shares of the transferor, that was recognized under securities legislation as or as part of an investment fund, immediately before the transfer time is deemed to have become payable at the first intervening time if the transferor so elects in respect of the full amount of the dividend in prescribed manner on or before the day on which any part of the dividend was paid;

  • (m) for the purpose of determining the funds’ capital gains redemptions (as defined in subsection 131(6) or 132(4), as the case may be), for their taxation years that include the transfer time,

    • (i) the total of the cost amounts to the transferor of all its properties at the end of the year is deemed to be the total of all amounts each of which is

      • (A) the transferor’s proceeds of disposition of a property that was transferred to a transferee on the qualifying exchange, or

      • (B) the cost amount to the transferor at the end of the year of a property that was not transferred on the qualifying exchange,

    • (ii) a transferee is deemed not to have acquired any property that was transferred to it on the qualifying exchange, and

    • (iii) the amounts determined under the descriptions of A and B in the definition capital gains redemptions shall be determined as if the year ended immediately before the transfer time;

  • (n) except as provided in subparagraph (l)(i), the transferor is, notwithstanding subsections 131(8) and (8.01) and 132(6), deemed to be neither a mutual fund corporation nor a mutual fund trust for taxation years that begin after the transfer time; and

  • (o) for the purpose of applying subsection 132(5.31) to a fund for a taxation year that includes the transfer time, the following amounts are to be determined as if the taxation year ended immediately before the transfer time:

    • (i) if paragraph 132(5.31)(a) applies, the amounts determined under the descriptions of B, C and D in that paragraph, and

    • (ii) if paragraph 132(5.31)(b) applies,

      • (A) the amounts determined for B and C in paragraph 132(5.31)(a), for the purpose of subparagraph 132(5.31)(b)(i),

      • (B) the amounts determined for D, E, F and G in clause 132(5.31)(b)(i)(C), and

      • (C) the amounts determined for H, I and J in subparagraph 132(5.31)(b)(ii).

• Marginal note:Qualifying exchange — non-depreciable property

  (4) If a transferor transfers a property, other than a depreciable property, to a transferee in a qualifying exchange,

  • (a) the transferee is deemed to have acquired the property at the acquisition time and not to have acquired the property at the transfer time;

  • (b) the transferor’s proceeds of disposition of the property and the transferee’s cost of the property are deemed to be the lesser of

    • (i) the fair market value of the property at the transfer time, and

    • (ii) the greatest of

      • (A) the cost amount to the transferor of the property at the transfer time,

      • (B) the amount that the transferor and the transferee agree on in respect of the property in their election, and

      • (C) the fair market value at the transfer time of the consideration (other than units of the transferee) received by the transferor for the disposition of the property; and

  • (c) if the property is a unit of the transferee and the unit ceases to exist when the transferee acquires it (or, for greater certainty, when the transferee would but for that cessation have acquired it), paragraphs (a) and (b) do not apply to the transferee.

• Marginal note:Depreciable property

  (5) If a transferor transfers a depreciable property to a transferee in a qualifying exchange,

  • (a) the transferor is deemed to have disposed of the property at the depreciables disposition time, and not to have disposed of the property at the transfer time;

  • (b) the transferee is deemed to have acquired the property at the depreciables acquisition time, and not to have acquired the property at the transfer time;

  • (c) the transferor’s proceeds of disposition of the property and the transferee’s cost of the property are deemed to be the lesser of

    • (i) the fair market value of the property at the transfer time, and

    • (ii) the greatest of

      • (A) the lesser of its capital cost and its cost amount to the transferor immediately before the depreciables disposition time,

      • (B) the amount that the transferor and the transferee agree on in respect of the property in their election, and

      • (C) the fair market value at the transfer time of the consideration (other than units of the transferee) received by the transferor for the disposition of the property;

  • (d) where the capital cost of the property to the transferor exceeds the transferor’s proceeds of disposition of the property under paragraph (c), for the purposes of sections 13 and 20 and any regulations made for the purpose of paragraph 20(1)(a),

    • (i) the property’s capital cost to the transferee is deemed to be the amount that was its capital cost to the transferor, and

    • (ii) the excess is deemed to have been allowed to the transferee in respect of the property under regulations made for the purpose of paragraph 20(1)(a) in computing income for taxation years ending before the transfer time; and

  • (e) where two or more depreciable properties of a prescribed class are disposed of by the transferor to the transferee in the same qualifying exchange, paragraph (c) applies as if each property so disposed of had been separately disposed of in the order designated by the transferor at the time of making the election in respect of the qualifying exchange or, if the transferor does not so designate any such order, in the order designated by the Minister.

• Marginal note:Due date

  (6) The due date of an election referred to in paragraph (c) of the definition qualifying exchange in subsection (1) is

  • (a) the day that is six months after the day that includes the transfer time; and

  • (b) on joint application by the funds, any later day that the Minister accepts.

• Marginal note:Amendment or revocation of election

  (7) The Minister may, on joint application by the funds on or before the due date of an election referred to in paragraph (e) of the definition qualifying exchange in subsection (1), grant permission to amend or revoke the election.