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

Act current to 2017-11-20 and last amended on 2017-07-01. Previous Versions

Continuance of the Canadian Wheat Board

Marginal note:Definitions
  •  (1) The following definitions apply in this section.

    application for continuance

    application for continuance means the application for continuance referred to in paragraph (a) of the definition Canadian Wheat Board continuance. (demande de prorogation)

    Canadian Wheat Board

    Canadian Wheat Board means the corporation referred to in subsection 4(1) of the Canadian Wheat Board (Interim Operations) Act, as it read before its repeal, that is continued under the Canada Business Corporations Act pursuant to the application for continuance. (Commission canadienne du blé)

    Canadian Wheat Board continuance

    Canadian Wheat Board continuance means the series of transactions or events that includes

    • (a) the application for continuance under the Canada Business Corporations Act that is

    • (b) the issuance of a promissory note or other evidence of indebtedness by the Canadian Wheat Board to the eligible trust; and

    • (c) the disposition of the eligible debt by the eligible trust, in the same taxation year of the trust in which the eligible debt is issued to it, in exchange for consideration that includes the issuance of shares by the Canadian Wheat Board that have a total fair market value at the time of their issuance that is equal to the amount by which the principal amount of the eligible debt exceeds $10 million. (prorogation de la Commission canadienne du blé)

    eligible debt

    eligible debt means the promissory note or other evidence of indebtedness referred to in paragraph (b) of the definition Canadian Wheat Board continuance. (dette admissible)

    eligible share

    eligible share means a common share of the capital stock of the Canadian Wheat Board that is issued in exchange for the eligible debt, as referred to in paragraph (c) of the definition Canadian Wheat Board continuance. (action admissible)

    eligible trust

    eligible trust, at any time, means a trust that meets the following conditions:

    • (a) it was established in connection with the application for continuance;

    • (b) it is resident in Canada at that time;

    • (c) immediately before it acquired the eligible debt, it held only property of nominal value;

    • (d) it is not exempt because of subsection 149(1) from tax on its taxable income for any period in its taxation year that includes that time;

    • (e) all of the interests of beneficiaries under it at that time are described by reference to units that are eligible units in it;

    • (f) the only persons who have acquired an interest as a beneficiary under the trust from it before that time are persons who were participating farmers at the time they acquired the interest;

    • (g) all or substantially all of the fair market value of its property at that time is based on the value of property that is

      • (i) eligible debt,

      • (ii) shares of the capital stock of the Canadian Wheat Board, or

      • (iii) property described in paragraph (a) or (b) of the definition qualified investment if in section 204 or a deposit with a credit union;

    • (h) the property that it has paid or distributed at or before that time to a beneficiary under the trust in satisfaction of the beneficiary’s eligible unit in the trust is

      • (i) money denominated in Canadian dollars, or

      • (ii) shares distributed as an eligible wind-up distribution of the trust; and

    • (i) at no time in its taxation year that includes that time is any other trust an eligible trust. (fiducie admissible)

    eligible unit

    eligible unit, in a trust at any time, means a unit that describes all or part of an interest as a beneficiary under the trust, if

    • (a) the total of all amounts each of which is the value of a unit at the time it was issued by the trust to a participating farmer does not exceed the amount by which the principal amount of the eligible debt exceeds $10 million; and

    • (b) all of the interests as a beneficiary under the trust are fixed interests if (as defined in subsection 251.2(1)) in the trust. (unité admissible)

    eligible wind-up distribution

    eligible wind-up distribution, of a trust, means a distribution of property by the trust to a person if

    • (a) the distribution includes a share of the capital stock of the Canadian Wheat Board that is listed on a designated stock exchange;

    • (b) the only property (other than a share described in paragraph (a)) distributed by the trust on the distribution is money denominated in Canadian dollars;

    • (c) the distribution results in the disposition of all of the person’s interest as a beneficiary under the trust; and

    • (d) the trust ceases to exist immediately after the distribution or immediately after the last of a series of eligible wind-up distributions (determined without reference to this paragraph) of the trust that includes the distribution. (distribution admissible sur liquidation)

    participating farmer

    participating farmer, in respect of a trust at any time, means a person

    • (a) who is eligible to receive units of the trust pursuant to the plan under which the trust directs its trustees to grant units to persons who have delivered grain under a contract with the Canadian Wheat Board on or after August 1, 2013; and

    • (b) engaged in the production of grain or any person entitled, as landlord, vendor or mortgagee or hypothecary creditor, to grain produced by a person engaged in the production of grain or to any share of that grain. (agriculteur participant)

    person

    person includes a partnership. (personne)

  • Marginal note:Trust acquires an eligible debt

    (2) If, at any time, an eligible trust acquires eligible debt, the principal amount of the eligible debt is deemed not to be included in computing the income of the eligible trust for the taxation year of the eligible trust that includes that time.

  • Marginal note:Disposition of eligible debt

    (3) If, at any time, an eligible trust disposes of eligible debt in exchange for consideration that includes the issuance of eligible shares

    • (a) for the purpose of computing the income of the eligible trust for its taxation year that includes that time

      • (i) an amount, in respect of the disposition of the eligible debt, equal to the fair market value of all property (other than eligible shares) received on the exchange by the trust is included,

      • (ii) no amount in respect of the disposition of the eligible debt is included (other than the amount described in subparagraph (i)), and

      • (iii) no amount in respect of the receipt of the eligible shares is included;

    • (b) the cost to the eligible trust of each eligible share is deemed to be nil;

    • (c) in computing the paid-up capital in respect of the class of the capital stock of the Canadian Wheat Board that includes the eligible shares, at any time after the shares are issued, there shall be deducted an amount equal to the amount of the paid-up capital in respect of that class at the time the shares are issued;

    • (d) subsection 75(2) does not apply to property

      • (i) that is held by the trust in a taxation year that ends at or after that time, and

      • (ii) that is

        • (A) received by the trust on the exchange, or

        • (B) a substitute for property described in subparagraph (i); and

    • (e) subsections 84(2) and (3) and section 85 do not apply at any time to eligible shares.

  • Marginal note:Eligible trust

    (4) The following rules apply in respect of a trust that is an eligible trust at any time in a taxation year of the trust:

    • (a) in computing the trust’s income for the year

      • (i) no deduction may be made by the trust under subsection 104(6), except to the extent of the income of the trust (determined without reference to subsection 104(6)) for the year that is paid in the year, and

      • (ii) no deduction may be made by the trust under subsection 104(6), if the trust ceased to be an eligible trust at the beginning of the following taxation year;

    • (b) for the purposes of applying Part XII.2 in respect of the year

      • (i) the trust’s designated income for the year is deemed to be the trust’s income for the year determined without reference to subsections 104(6) and (30), and

      • (ii) the designated beneficiaries under the trust at any time in the year are deemed to include any beneficiary under the trust that is at that time

        • (A) non-resident,

        • (B) a partnership (other than a partnership that is, throughout its fiscal period that includes that time, a Canadian partnership), or

        • (C) exempt because of subsection 149(1) from tax under this Part on the person’s taxable income;

    • (c) each property held by the trust that is the eligible debt or an eligible share is deemed to have a cost amount to the trust of nil;

    • (d) if the trust disposes of a property,

      • (i) subject to subsection (14), the disposition is deemed to occur for proceeds equal to the fair market value of the property immediately before the disposition,

      • (ii) the gain, if any, of the trust from the disposition is

        • (A) deemed not to be a capital gain, and

        • (B) to be included in computing the trust’s income for the trust’s taxation year that includes the time of disposition, and

      • (iii) the loss, if any, of the trust from the disposition is

        • (A) deemed not to be a capital loss, and

        • (B) to be deducted in computing the trust’s income for the trust’s taxation year that includes the time of disposition;

    • (e) the trust is deemed not to be a

      • (i) personal trust,

      • (ii) unit trust,

      • (iii) trust prescribed for the purpose of subsection 107(2), or

      • (iv) trust any interest in which is an excluded right or interest in applying section 128.1;

    • (f) any security (in this paragraph and paragraph (g), as defined in subsection 122.1(1)) of the trust that is held by a trust governed by a deferred profit sharing plan, RDSP, RESP, RRIF, RRSP or TFSA (referred to in this paragraph and paragraph (g) as the registered plan trust) is deemed not to be a qualified investment for the registered plan trust;

    • (g) if a registered plan trust governed by a TFSA acquires at any time a security of the trust, Part XI.01 applies in respect of the security as though the acquisition is an advantage

      • (i) in relation to the TFSA that is extended at that time to the controlling individual of the TFSA, and

      • (ii) that is a benefit the fair market value of which is the fair market value of the security at that time; and

    • (h) paragraph (h) of the definition disposition in subsection 248(1) does not apply in respect of eligible units of the trust.

  • Marginal note:Participating farmer — acquisition of eligible unit

    (5) If, at any time, a participating farmer acquires an eligible unit in an eligible trust from the trust,

    • (a) no amount in respect of the acquisition of the eligible unit is included in computing the income of the participating farmer; and

    • (b) the cost amount to the participating farmer of the eligible unit is deemed to be nil.

  • Marginal note:Eligible unit issued to estate

    (6) If a participating farmer has, immediately before the participating farmer’s death, not received an eligible unit of an eligible trust for which the participating farmer was eligible — pursuant to the plan under which the eligible trust directs its trustees to grant units to persons who have delivered grain under a contract with the Canadian Wheat Board on or after August 1, 2013 — and the eligible trust issues the unit to the estate that arose on and as a consequence of the death,

    • (a) the participating farmer is deemed to have acquired the unit at the time that is immediately before the time that is immediately before the death, as a participating farmer from the eligible trust, and to own the unit at the time that is immediately before the death;

    • (b) for the purpose of paragraph (f) of the definition eligible trust in subsection (1), the estate is deemed not to have acquired the unit from the trust; and

    • (c) for the purposes of paragraphs (8)(b) and (c), the estate is deemed to have acquired the eligible unit on and as a consequence of the death.

  • Marginal note:Eligible unit — gain (loss)

    (7) If a person disposes of an eligible unit in a trust that is an eligible trust at the time of the disposition

    • (a) the gain, if any, of the person from the disposition is

      • (i) deemed not to be a capital gain, and

      • (ii) to be included in computing the person’s income for the person’s taxation year that includes that time; and

    • (b) the loss, if any, of the person from the disposition is

      • (i) deemed not to be a capital loss, and

      • (ii) to be deducted in computing the person’s income for the person’s taxation year that includes that time.

  • Marginal note:Death of a participating farmer

    (8) If, immediately before an individual’s death, the individual owns an eligible unit that the individual acquired as a participating farmer from an eligible trust

    • (a) the individual is deemed to dispose (referred to in this subsection as the particular disposition) of the eligible unit immediately before death;

    • (b) if paragraph (d) does not apply,

      • (i) the individual’s proceeds from the particular disposition are deemed to be equal to the unit’s fair market value immediately before the particular disposition,

      • (ii) the gain from the particular disposition is deemed to be included, under subsection 70(1) and not under any other provision, in the individual’s income for the individual’s taxation year in which the individual dies,

      • (iii) subsection 159(5) applies in respect of the individual who has died (determined as though a reference in that subsection to subsection 70(5.2) includes a reference to subsection 70(1) in the application of subsection 159(5) to the gain from the particular disposition) in respect of the particular disposition, and

      • (iv) the person who acquires the eligible unit as a consequence of the individual’s death is deemed to have acquired the eligible unit at the time of the death at a cost equal to the individual’s proceeds, described in subparagraph (i), from the particular disposition;

    • (c) paragraph (d) applies if

      • (i) the individual is resident in Canada immediately before the individual’s death,

      • (ii) the individual’s graduated rate estate acquires the eligible unit on and as a consequence of the death,

      • (iii)  the individual’s legal representative elects in prescribed form in the course of administering the individual’s graduated rate estate that paragraph (b) not apply to the individual in respect of the particular disposition,

      • (iv) the election is filed with the individual’s return of income under this Part for the individual’s taxation year in which the death occurred,

      • (v) the estate distributes the eligible unit to the individual’s spouse or common-law partner at a time at which it is the individual’s graduated rate estate,

      • (vi) the individual’s spouse or common-law partner is resident in Canada at the time of the distribution, and

      • (vii) the estate does not dispose of the unit before the distribution; and

    • (d) if this paragraph applies,

      • (i) the individual’s gain from the disposition is deemed to be nil,

      • (ii) the cost amount to the estate of the eligible unit is deemed to be nil,

      • (iii) any amount that is included in the estate’s income (determined without reference to this subparagraph and subsections 104(6) and (12)) for a taxation year from a source that is the eligible unit is, notwithstanding subsection 104(24), deemed

        • (A) to have become payable in that taxation year by the estate to the spouse or common-law partner, and

        • (B) not be have become payable to any other beneficiary,

      • (iv) the distribution is deemed to be a disposition by the estate of the eligible unit for proceeds equal to the cost amount to the estate of the unit,

      • (v) the part of the spouse or common-law partner’s interest as a beneficiary under the estate that is disposed of as a result of the distribution is deemed to be disposed of for proceeds of disposition equal to the cost amount to the spouse or common-law partner of that part immediately before the disposition,

      • (vi) the cost amount to the spouse or common-law partner of the eligible unit is deemed to be nil, and

      • (vii) the spouse or common-law partner is, except for the purposes of paragraph (c), deemed to have acquired the eligible unit as a participating farmer from an eligible trust.

  • Marginal note:Participating farmer — disposition of eligible unit

    (9) If, at any time, an eligible unit of an eligible trust that was acquired by a participating farmer from the eligible trust is disposed of by the participating farmer (other than a disposition described in paragraph (8)(a), (10)(d) or (11)(b)),

    • (a) the participating farmer’s proceeds from the disposition are deemed to be equal to the fair market value of the unit immediately before its disposition;

    • (b) if the disposition results from a distribution of money denominated in Canadian dollars by the trust to the participating farmer in a taxation year of the trust, the money is proceeds from the disposition in that taxation year by the trust of other property and, at the time of the disposition, the participating farmer is not a person described in any of clauses (4)(b)(ii)(A) to (C), the trust’s gain, if any, from the disposition of the other property is reduced to the extent that the proceeds so distributed would, in the absence of this paragraph, be included under subsection 104(13) in the participating farmer’s income for the taxation year of the participating farmer in which the taxation year of the trust ends; and

    • (c) if the participating farmer is a Canadian-controlled private corporation, for the purposes of section 125, the gain from the disposition is deemed to be income from an active business carried on by the corporation.

  • Marginal note:Eligible wind-up distribution

    (10) If, at any time, an eligible trust distributes property as an eligible wind-up distribution of the trust to a person

    • (a) subsection 107(2.1) does not apply in respect of the distribution;

    • (b) the trust is deemed to have disposed of the property for proceeds equal to its fair market value at that time;

    • (c) the trust’s gain from the disposition of the property is, notwithstanding subsection 104(24), deemed

      • (i) to have become payable at that time by the trust to the person, and

      • (ii) not to have become payable to any other beneficiary;

    • (d) the person is deemed to acquire the property at a cost equal to the trust’s proceeds from the disposition;

    • (e) the person’s proceeds from the disposition of the eligible unit, or part of it, that results from the distribution are deemed to be equal to the cost amount of the unit to the person immediately before that time; and

    • (f) for greater certainty, no part of the trust’s gain from the disposition is to be included in the cost to the person of the property, other than as determined by paragraph (d).

  • Marginal note:Ceasing to be an eligible trust

    (11) If a trust ceases to be an eligible trust at a particular time

    • (a) subsection 149(10) applies to the trust as if

      • (i) it ceased at that particular time to be exempt from tax under this Part on its taxable income, and

      • (ii) the list of provisions in paragraph 149(10)(c) included a reference to this section; and

    • (b) each person who holds at the particular time an eligible unit in the trust is deemed to have

      • (i) disposed of, at the time that is immediately before the time that is immediately before the particular time, each of the eligible units for proceeds equal to the cost amount of the unit to the person, and

      • (ii) reacquired the eligible unit at the time that is immediately before the particular time at a cost equal to the fair market value of the unit at the time that is immediately before the particular time.

  • Marginal note:Stock dividends — Canadian Wheat Board shares

    (12) If, at any time, the eligible trust holds an eligible share (or another share of the Canadian Wheat Board acquired before that time as a stock dividend) and the Canadian Wheat Board issues, as a stock dividend paid in respect of such a share, a share of a class of its capital stock, the amount by which the paid-up capital is increased — in respect of the issuance of all shares paid by the Canadian Wheat Board to the eligible trust as the stock dividend or any other stock dividend paid to other shareholders in connection with that stock dividend — for all classes of shares of the Canadian Wheat Board is, for the purposes of this Act, deemed to be no more than $1.

  • Marginal note:Reorganization of capital — Canadian Wheat Board

    (13) Subsection (14) applies in respect of the disposition by an eligible trust of all of the shares (in this subsection and subsection (14) referred to collectively as the old shares and individually as an old share) of a class of the capital stock of the Canadian Wheat Board owned by the eligible trust if

    • (a) the disposition of the old shares results from the acquisition, cancellation or redemption in the course of a reorganization of the capital of the Canadian Wheat Board;

    • (b) the Canadian Wheat Board issues to the eligible trust, in exchange for the old shares, shares (in this subsection and subsection (14) referred to collectively as the new shares and individually as a new share) of a class of the capital stock of the Canadian Wheat Board the terms and conditions of which — including the entitlement to receive an amount on a redemption, acquisition or cancellation — are in all material respects the same as those of the old shares;

    • (c) the amount that is the total fair market value of all of the new shares acquired by the eligible trust on the exchange equals the total fair market value of all of the old shares disposed of by the eligible trust; and

    • (d) the amount that is the total paid-up capital in respect of all of the new shares acquired by the eligible trust on the exchange is equal to the amount that is the total paid-up capital in respect of all of the old shares disposed of on the exchange.

  • Marginal note:Rollover of shares on reorganization

    (14) If this subsection applies in respect of an exchange of an eligible trust’s old share for a new share,

    • (a) the old share is deemed to be disposed of by the eligible trust for proceeds equal to its cost amount to the eligible trust;

    • (b) the new share acquired for the old share referred to in paragraph (a) is deemed to be acquired for a cost equal to the amount referred to in paragraph (a);

    • (c) if the old share was an eligible share, the new share is deemed to be an eligible share; and

    • (d) if new shares are deemed to be eligible shares because of paragraph (c) and those shares are included in a class of shares that also includes other shares that are not eligible shares, those eligible shares are deemed to have been issued in a separate series of the class and the other shares are deemed to have been issued in a separate series of the class.

  • Marginal note:Information filing requirement

    (15) A trust shall file with the Minister a prescribed form in prescribed manner in respect of each taxation year of the trust in which it is an eligible trust on or before the trust’s filing-due date for the year.

  • Marginal note:Failure to file prescribed form

    (16) If a trust fails to file the form required by subsection (15) on or before the day that is the trust’s filing-due date for a taxation year,

    • (a) in addition to any other penalty for which the trust may be liable under this Act in respect of the failure, the trust is liable to a penalty equal to the product obtained when $1,000 is multiplied by the number of days during which the failure continues; and

    • (b) if, within 30 days after the trust is served personally or by registered mail with a demand in writing from the Minister for the form to be filed, the trust has not filed the form with the Minister, the trust is deemed to cease to be an eligible trust at the end of the day on which the demand was served.

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts. 2016, c. 7, s. 38.
 
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