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

Act current to 2016-05-12 and last amended on 2015-12-31. Previous Versions

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

    beneficiary

    bénéficiaire

    beneficiary has the same meaning as in subsection 251.1(3). (bénéficiaire)

    equity

    capitaux propres

    equity has the same meaning as in subsection 122.1(1) read without reference to paragraph (e) of the definition equity in that subsection. (capitaux propres)

    equity value

    valeur des capitaux propres

    equity value has the same meaning as in subsection 122.1(1). (valeur des capitaux propres)

    fixed interest

    participation fixe

    fixed interest, at any time of a person in a trust, means an interest of the person as a beneficiary (in this definition, determined without reference to subsection 248(25)) under the trust provided that no amount of the income or capital of the trust to be distributed at any time in respect of any interest in the trust depends on the exercise by any person of, or the failure by any person to exercise, any discretionary power, other than a power in respect of which it is reasonable to conclude that

    • (a) the power is consistent with normal commercial practice;

    • (b) the power is consistent with terms that would be acceptable to the beneficiaries under the trust if the beneficiaries were dealing with each other at arm’s length; and

    • (c) the exercise of, or failure to exercise, the power will not materially affect the value of an interest as a beneficiary under the trust relative to the value of other such interests under the trust. (participation fixe)

    investment fund

    fiducie de placement déterminée

    investment fund, at any time, means a trust that

    • (a) is at that time a portfolio investment fund; and

    • (b) is, at all times throughout the period that begins at the later of March 21, 2013 and the time of its creation and that ends at that time,

      • (i) a mutual fund trust, or

      • (ii) a trust

        • (A) that would be a mutual fund trust if section 4801 of the Income Tax Regulations were read without reference to its paragraph (b), and

        • (B) if the only beneficiaries who may for any reason receive directly from the trust any of the income or capital of the trust are beneficiaries whose interests as beneficiaries under the trust are fixed interests. (fiducie de placement déterminée)

    majority-interest beneficiary

    bénéficiaires détenant une participation majoritaire

    majority-interest beneficiary has the same meaning as in subsection 251.1(3). (bénéficiaires détenant une participation majoritaire)

    majority-interest group of beneficiaries

    groupe de bénéficiaires détenant une participation majoritaire

    majority-interest group of beneficiaries has the same meaning as in subsection 251.1(3). (groupe de bénéficiaires détenant une participation majoritaire)

    majority-interest group of partners

    groupe d’associés détenant une participation majoritaire

    majority-interest group of partners has the same meaning as in subsection 251.1(3). (groupe d’associés détenant une participation majoritaire)

    person

    personne

    person includes a partnership. (personne)

    portfolio investment fund

    fonds de placement de portefeuille

    portfolio investment fund, at any time, means an entity that at that time would be a portfolio investment entity as defined in subsection 122.1(1) if

    • (a) the references to “subject entity” in paragraph (a) of the definition non-portfolio property in subsection 122.1(1) were read as references to “entity”;

    • (b) the definition Canadian real, immovable or resource property in subsection 248(1) were read as though

      • (i) its paragraph (a) were read without reference to “situated in Canada”,

      • (ii) its paragraph (b) were read as “a Canadian resource property or a foreign resource property”, and

      • (iii) timber resource property in paragraph (c) were defined as extending to rights in respect of property outside Canada; and

    • (c) paragraph (c) of the definition non-portfolio property in subsection 122.1(1) were read without reference to “in Canada”. (fonds de placement de portefeuille)

    specified right

    droit déterminé

    specified right, held at any time by a person in respect of a trust, means a right under a contract, in equity or otherwise, to acquire, either immediately or in the future and either absolutely or contingently, equity of the trust, or to cause the trust to redeem or cancel equity of the trust, unless the right is not exercisable at that time because its exercise is contingent on the death, bankruptcy or permanent disability of an individual. (droit déterminé)

    subsidiary

    filiale

    subsidiary, of a particular person at any time, means a corporation, partnership or trust (in this definition referred to as the “subject entity”) where

    • (a) the particular person holds at that time property

      • (i) that is equity of the subject entity, or

      • (ii) that derives all or part of its fair market value, directly or indirectly, from equity of the subject entity; and

    • (b) the total of the following amounts is at that time equal to more than 50% of the equity value of the subject entity:

      • (i) each amount that is the fair market value at that time of equity of the subject entity that is held at that time by the particular person or a person with whom the particular person is affiliated, and

      • (ii) each amount (other than an amount described in subparagraph (i)) that is the portion of the fair market value at that time  —  derived directly or indirectly from equity of the subject entity  —  of a property that is held at that time by the particular person or a person with whom the particular person is affiliated. (filiale)

  • Marginal note:Loss restriction event

    (2) For the purposes of this Act, a taxpayer is at any time subject to a loss restriction event if

    • (a) the taxpayer is a corporation and at that time control of the corporation is acquired by a person or group of persons; or

    • (b) the taxpayer is a trust and

      • (i) that time is after March 20, 2013 and after the time at which the trust is created, and

      • (ii) at that time a person becomes a majority-interest beneficiary, or a group of persons becomes a majority-interest group of beneficiaries, of the trust.

  • Marginal note:Trusts  — exceptions

    (3) For the purposes of paragraph (2)(b), a person is deemed not to become a majority-interest beneficiary, and a group of persons is deemed not to become a majority-interest group of beneficiaries, as the case may be, of a particular trust solely because of

    • (a) the acquisition of equity of the particular trust by

      • (i) a particular person from another person with whom the particular person was affiliated immediately before the acquisition,

      • (ii) a particular person who was affiliated with the particular trust immediately before the acquisition,

      • (iii) an estate from an individual, if the estate arose on and as a consequence of the death of the individual and the estate acquired the equity from the individual as a consequence of the death, or

      • (iv) a particular person from an estate that arose on and as a consequence of the death of an individual, if the estate acquired the equity from the individual as a consequence of the death and the individual was affiliated with the particular person immediately before the death;

    • (b) a variation in the terms of the particular trust, the satisfaction of, or failure to satisfy, a condition under the terms of the particular trust, the exercise by any person of, or the failure by any person to exercise, a power, or (without limiting the generality of the foregoing) the redemption, surrender or termination of equity of the particular trust at any time, if each majority-interest beneficiary, and each member of a majority-interest group of beneficiaries, of the particular trust immediately after that time was affiliated with the particular trust immediately before

      • (i) that time, or

      • (ii) in the case of the redemption or surrender of equity of the particular trust that was held, immediately before that time, by an estate and that was acquired by the estate from an individual as described in subparagraph (a)(iii), the individual’s death;

    • (c) the transfer at any time of all the equity of the particular trust to a corporation, partnership or another trust (in this paragraph referred to as the “acquirer”), if

      • (i) the only consideration for the transfer is equity (determined without reference to paragraph (d) of the definition equity in subsection 122.1(1)) of the acquirer,

      • (ii) at all times before that time the acquirer held no property or held only property having a nominal value, and

      • (iii) immediately after that time the acquirer is neither

        • (A) a subsidiary of any person, nor

        • (B) a corporation controlled, directly or indirectly in any manner whatever, by a person or group of persons;

    • (d) the transfer at any time of equity of the particular trust to a corporation, partnership or another trust (in this paragraph referred to as the “acquirer”), if

      • (i) immediately before that time a person was a majority-interest beneficiary, or a group of persons was a majority-interest group of beneficiaries, of the particular trust,

      • (ii) immediately after that time the person, or group of persons, as the case may be, described in subparagraph (i) in respect of the particular trust, and no other person or group of persons, is

        • (A) if the acquirer is a corporation, a person by whom, or a group of persons by which, the corporation is controlled directly or indirectly in any manner whatever,

        • (B) if the acquirer is a partnership, a majority-interest partner, or a majority-interest group of partners, of the partnership, and

        • (C) if the acquirer is a trust, a majority-interest beneficiary, or a majority-interest group of beneficiaries, of the trust, and

      • (iii) at no time during a series of transactions or events that includes the transfer does the person or group of persons, as the case may be, described in subparagraph (i) in respect of the particular trust, cease to be a person or group of persons described in any of clauses (ii)(A) to (C) in respect of the acquirer;

    • (e) a transaction (other than a transaction one or more of the parties to which may be excused from completing as a result of changes to this Act) the parties to which are obligated to complete under the terms of an agreement in writing between the parties entered into before March 21, 2013; or

    • (f) the acquisition of equity of the particular trust by a person or group of persons if

      • (i) immediately before the acquisition, the particular trust is an investment fund, and

      • (ii) the acquisition is not part of a series of transactions or events that includes the particular trust becoming a portfolio investment fund, or ceasing to be an investment fund.

  • Marginal note:Trusts  — additional cases

    (4) For the purposes of paragraph (2)(b) and subject to subsection (3), a person is deemed to become at a particular time a majority-interest beneficiary of a particular trust if

    • (a) a particular person is at and immediately before the particular time a majority-interest beneficiary, or a member of a majority-interest group of beneficiaries, of the particular trust, and the particular person is at the particular time, but is not immediately before the particular time, a subsidiary of another person (in this paragraph referred to as the “acquirer”), unless

      • (i) the acquirer is immediately before the particular time affiliated with the particular trust, or

      • (ii) this paragraph previously applied to deem a person to become a majority-interest beneficiary of the particular trust because the particular person became, as part of a series of transactions or events that includes the particular person becoming at the particular time a subsidiary of the acquirer, a subsidiary of another person that is at the particular time a subsidiary of the acquirer; or

    • (b) at the particular time, as part of a series of transactions or events, two or more persons acquire equity of the particular trust in exchange for or upon a redemption or surrender of equity of, or as a consequence of a distribution from, a corporation, partnership or another trust, unless

      • (i) a person affiliated with the corporation, partnership or other trust was immediately before the particular time a majority-interest beneficiary of the particular trust,

      • (ii) if all the equity of the particular trust that was acquired at or before the particular time as part of the series were acquired by one person, the person would not at the particular time be a majority-interest beneficiary of the particular trust, or

      • (iii) this paragraph previously applied to deem a person to become a majority-interest beneficiary of the particular trust because of an acquisition of equity of the particular trust that was part of the series.

  • Marginal note:Trusts  —  special rules of application

    (5) For the purposes of this section,

    • (a) in determining whether persons are affiliated with each other

      • (i) except for the purposes of paragraph (b) of the definition subsidiary in subsection (1), section 251.1 is to be read without reference to the definition controlled in subsection 251.1(3),

      • (ii) in determining whether an individual (other than a trust) is affiliated with another individual (other than a trust), individuals connected by blood relationship, marriage or common-law partnership or adoption are deemed to be affiliated with one another, and

      • (iii) if, at any time as part of a series of transactions or events a person acquires equity of a corporation, partnership or trust, and it can reasonably be concluded that one of the reasons for the acquisition, or for making any agreement or undertaking in respect of the acquisition, is to cause a condition in paragraph (3)(a) or (b) or subparagraph (4)(a)(i) or (b)(i) regarding affiliation to be satisfied at a particular time, the condition is deemed not to be satisfied at the particular time; and

    • (b) in determining whether a particular person becomes at any time a majority-interest beneficiary, or a particular group of persons becomes at any time a majority-interest group of beneficiaries, of a trust, the fair market value of each person’s equity of the trust is to be determined at and immediately before that time

      • (i) without reference to the portion of that fair market value that is attributable to property acquired if it can reasonably be concluded that one of the reasons for the acquisition is to cause paragraph (2)(b), or any provision that applies by reference to a trust being subject to a loss restriction event at any time, not to apply,

      • (ii) without reference to the portion of that fair market value that is attributable to a change in the fair market value of all or part of any equity of the trust if it can reasonably be concluded that one of the reasons for the change is to cause paragraph (2)(b), or any provision that applies by reference to a trust being subject to a loss restriction event at any time, not to apply, and

      • (iii) as if each specified right held immediately before that time by the particular person, or by a member of the particular group, in respect of the trust is at that time exercised if it can reasonably be concluded that one of the reasons for the acquisition of the right is to cause paragraph (2)(b), or any provision that applies by reference to a trust being subject to a loss restriction event at any time, not to apply.

  • Marginal note:Trusts  —  time of day

    (6) For the purposes of this Act, if a trust is subject to a loss restriction event at a particular time during a day, the trust is deemed to be subject to the loss restriction event at the beginning of that day and not at the particular time unless the trust elects in its return of income under Part I filed for its taxation year that ends immediately before the loss restriction event to have this subsection not apply.

  • Marginal note:Timing of filing

    (7) If a trust is subject to a loss restriction event in a taxation year, subsection 249(4) does not apply to end the year for the purpose of this subsection or to determine the end of that year in applying subsection 132(6.1), paragraph 150(1)(c), paragraph (a) of the definition balance-due day in subsection 248(1) and subsection 204(2) of the Income Tax Regulations to the trust in respect of the year.

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts. 2013, c. 40, s. 92;
  • 2014, c. 39, s. 75.
 
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