Income Tax Amendments Act, 2000 (S.C. 2001, c. 17)
Full Document:
Assented to 2001-06-14
132. (1) The Act is amended by adding the following after section 134:
Marginal note:NRO — transition
134.1 (1) This section applies to a corporation that
(a) was a non-resident-owned investment corporation in a taxation year;
(b) is not a non-resident-owned investment corporation in the following taxation year (in this section referred to as the corporation’s “first non-NRO year”); and
(c) elects in writing filed with the Minister on or before the corporation’s filing-due date for its first non-NRO year to have this section apply.
Marginal note:Application
(2) A corporation to which this section applies is deemed to be a non-resident-owned investment corporation in its first non-NRO year for the purposes of applying, in respect of dividends paid on shares of its capital stock in its first non-NRO year to a non-resident person or a non-resident-owned investment corporation, subsections 133(6) to (9) (other than the definition “non-resident-owned investment corporation” in subsection 133(8)) and section 212 and any tax treaty.
Marginal note:Revocation
134.2 (1) This section applies to a corporation that
(a) revokes at any time (in this section described as the “revocation time”) its election to be taxed under section 133;
(b) elects to have this section apply, by filing an election in writing with the Minister on or before the corporation’s filing-due date for the taxation year of the corporation (in this section referred to as the “revocation year”) that would have included the revocation time if the corporation had not so elected; and
(c) specifies in the election a time (in this section referred to as the “elected time”) that is in the revocation year and is not after the revocation time.
Marginal note:Consequences
(2) Where this section applies to a corporation,
(a) the corporation’s taxation year that would have included the elected time, if the corporation had not elected to have this section apply, is deemed to end immediately before the elected time;
(b) a new taxation year of the corporation is deemed to begin at the elected time; and
(c) notwithstanding paragraph (f) of the definition “non-resident-owned investment corporation” in subsection 133(8), the corporation is deemed to be a non-resident-owned investment corporation for the period that begins at the beginning of the revocation year and ends immediately before the elected time.
(2) Section 134.1 of the Act, as enacted by subsection (1), applies to a corporation that ceases to be a non-resident-owned investment corporation because of a transaction or event that occurs, or a circumstance that arises, in a taxation year of the corporation that ends after February 27, 2000.
(3) Section 134.2 of the Act, as enacted by subsection (1), applies to revocations made after February 27, 2000.
(4) An election under paragraph 134.1(1)(c) or 134.2(1)(b) of the Act, as enacted by subsection (1), is deemed to have been made in a timely manner if it is made on or before the electing corporation’s filing-due date for its first taxation year that ends after this Act receives royal assent.
133. (1) Subparagraph 138(5)(b)(i) of the Act is replaced by the following:
(i) interest on borrowed money used to acquire designated insurance property for the year, or to acquire property for which designated insurance property for the year was substituted property, for the period in the year during which the designated insurance property was held by the insurer in respect of the business,
(2) Paragraph 138(5)(b) of the Act is amended by adding the word “or” at the end of subparagraph (ii), by striking out the word “or” at the end of subparagraph (iii) and by repealing subparagraph (iv).
(3) The portion of subsection 138(11.3) of the Act after paragraph (b) is replaced by the following:
the following rules apply:
(c) the insurer is deemed to have disposed of the property at the beginning of the year for proceeds of disposition equal to its fair market value at that time and to have reacquired the property immediately after that time at a cost equal to that fair market value,
(d) where paragraph (a) applies, any gain or loss arising from the disposition is deemed not to be a gain or loss from designated insurance property of the insurer in the year, and
(e) where paragraph (b) applies, any gain or loss arising from the disposition is deemed to be a gain or loss from designated insurance property of the insurer in the year.
(4) Paragraph 138(11.5)(b) of the Act is replaced by the following:
(b) the transferor has, at that time or within 60 days after that time, transferred all or substantially all of the property (in this subsection referred to as the “transferred property) that is owned by it at that time and that was designated insurance property in respect of the business for the taxation year that, because of paragraph (h), ended immediately before that time
(i) to a corporation (in this subsection referred to as the “transferee”) that is a qualified related corporation (within the meaning assigned by subsection 219(8)) of the transferor that began immediately after that time to carry on that insurance business in Canada, and
(ii) for consideration that includes shares of the capital stock of the transferee,
(5) Paragraph 138(11.91)(e) of the Act is replaced by the following:
(e) the insurer is deemed to have disposed, immediately before the beginning of the particular taxation year, of each property owned by it at that time that is designated insurance property in respect of the business referred to in paragraph (a) for the particular taxation year, for proceeds of disposition equal to the fair market value at that time and to have reacquired, at the beginning of the particular taxation year, the property at a cost equal to that fair market value, and
(6) Paragraph 138(11.94)(b) of the Act is replaced by the following:
(b) the transferor has, at that time or within 60 days after that time,
(i) in the case of a transferor that is a life insurer and that carries on an insurance business in Canada and in a country other than Canada in the year, transferred all or substantially all of the property (in subsection (11.5) referred to as the “transferred property”) that is owned by it at that time and that was designated insurance property in respect of the business for the taxation year that, because of paragraph (11.5)(h), ended immediately before that time, or
(ii) in any other case, transferred all or substantially all of the property owned by it at that time and used by it in the year in, or held by it in the year in the course of, carrying on that insurance business in Canada in that year (in subsection (11.5) referred to as the “transferred property”)
to a corporation resident in Canada (in this subsection referred to as the “transferee”) that is a subsidiary wholly-owned corporation of the transferor that, immediately after that time, began to carry on that insurance business in Canada for consideration that includes shares of the capital stock of the transferee,
(7) The definition “designated insurance property” in subsection 138(12) of the Act is replaced by the following:
“designated insurance property”
« bien d’assurance désigné »
“designated insurance property” for a taxation year of an insurer (other than an insurer resident in Canada that at no time in the year carried on a life insurance business) that, at any time in the year, carried on an insurance business in Canada and in a country other than Canada, means property determined in accordance with prescribed rules except that, in its application to any taxation year, “designated insurance property” for the 1998 or a preceding taxation year means property that was, under this subsection as it read in its application to taxation years that ended in 1996, property used by it in the year in, or held by it in the year in the course of, carrying on an insurance business in Canada;
(8) Subsections (1) to (3) and (7) apply to the 1997 and subsequent taxation years.
(9) Subsections (4) to (6) apply to the 1999 and subsequent taxation years except that, where a taxpayer or a taxpayer’s legal representative so elects in writing and files with the Minister of National Revenue before 2002 its election in respect of one or more of paragraph 138(11.5)(b) of the Act, as enacted by subsection (4), paragraph 138(11.91)(e) of the Act, as enacted by subsection (5), or paragraph 138(11.94)(b) of the Act, as enacted by subsection (6), each of the subsections in respect of which the election was made applies to the taxpayer’s 1997 and subsequent taxation years.
134. (1) Section 138.1 of the Act is amended by adding the following after subsection (3):
Marginal note:Deemed gains and losses
(3.1) Where an amount is deemed under subsection (3) to be a capital gain or capital loss of a policyholder or other beneficiary (in this subsection referred to as the “taxpayer”) of a related segregated fund trust, in respect of capital gains or losses realized in a taxation year of the related segregated fund trust that includes February 28, 2000 or October 17, 2000, and the related segregated fund trust so elects under this subsection in its return of income for the year,
(a) the portion of the gains and losses that are in respect of capital gains or losses from dispositions of property that occurred before February 28, 2000 is deemed to be that proportion of the gains or losses that the number of days that are in the year and before February 28, 2000 is of the number of days that are in the year;
(b) the portion of the gains and losses that is in respect of capital gains or losses from dispositions of property that occurred in the year and in the period that begins at the beginning of February 28, 2000 and ends at the end of October 17, 2000, is deemed to be that proportion of the gains or losses that the number of days that are in the year and in that period is of the number of days that are in the year; and
(c) the portion of the gains and losses that is in respect of capital gains or losses from dispositions of property that occurred in the year and in the period that begins at the beginning of October 18, 2000 and ends at the end of the year, is deemed to be that proportion of the gains or losses that the number of days that are in the year and in that period is of the number of days that are in the year.
Marginal note:Deemed gains and losses — taxpayer
(3.2) Where a capital gain or a capital loss is deemed by subsection (3) to be a capital gain or a capital loss of a taxpayer and not that of a related segregated fund trust,
(a) if the capital gain or capital loss was in respect of capital gains or capital losses from dispositions of property by the related segregated fund trust that occurred before February 28, 2000 and that taxation year of the taxpayer includes February 27, 2000, the capital gain or the capital loss is deemed to be a capital gain or a capital loss, as the case may be, of the taxpayer from the disposition by the taxpayer of capital property in the taxpayer’s taxation year and before February 28, 2000;
(b) if the capital gain or capital loss was in respect of capital gains or capital losses from dispositions of property by the related segregated fund trust that occurred before February 28, 2000 and the taxation year of the taxpayer began after February 27, 2000 and ended before October 18, 2000, 9/8 of the capital gain or the capital loss is deemed to be a capital gain or a capital loss, as the case may be, of the taxpayer from the disposition by the taxpayer of capital property in the taxpayer’s taxation year;
(c) if the capital gain or capital loss was in respect of capital gains or capital losses from dispositions of property by the related segregated fund trust that occurred before February 28, 2000 and the taxation year of the taxpayer began after February 27, 2000 and ended after October 17, 2000, 9/8 of the capital gain or the capital loss is deemed to be a capital gain or a capital loss, as the case may be, of the taxpayer from the disposition by the taxpayer of capital property in the taxpayer’s taxation year and before October 18, 2000;
(d) if the capital gain or capital loss was in respect of capital gains or capital losses from dispositions of property by the related segregated fund trust that occurred before February 28, 2000 and the taxation year of the taxpayer began after October 17, 2000, 3/2 of the capital gain or the capital loss is deemed to be a capital gain or a capital loss, as the case may be, of the taxpayer from the disposition by the taxpayer of capital property in the taxpayer’s taxation year;
(e) if the capital gain or capital loss was in respect of capital gains or capital losses from dispositions of property by the related segregated fund that occurred after February 27, 2000 and before October 18, 2000 and the taxation year of the taxpayer began after October 17, 2000, 4/3 of the capital gain or capital loss is deemed to be a capital gain or a capital loss, as the case may be, of the taxpayer from the disposition by the taxpayer of capital property in the taxpayer’s taxation year;
(f) if the capital gain or capital loss was in respect of capital gains or capital losses from dispositions of property by the related segregated fund trust that occurred after February 27, 2000 and before October 18, 2000 and the taxation year of the taxpayer includes February 28, 2000 and October 17, 2000, the capital gain or the capital loss is deemed to be a capital gain or a capital loss, as the case may be, of the taxpayer from the disposition by the taxpayer of capital property in the taxpayer’s taxation year and in the period that began after February 27, 2000 and ended before October 18, 2000;
(g) if the capital gain or capital loss was in respect of capital gains or capital losses from dispositions of property by the related segregated fund trust that occurred after February 27, 2000 and before October 17, 2000 and the taxation year of the taxpayer began after February 27, 2000 and ended before October 17, 2000, the capital gain or the capital loss is deemed to be a capital gain or a capital loss, as the case may be, of the taxpayer from the disposition by the taxpayer of capital property in the taxpayer’s taxation year; and
(h) in any other case, the capital gain or the capital loss is deemed to be a capital gain or a capital loss, as the case may be, of the taxpayer from the disposition of capital property by the taxpayer in the taxpayer’s taxation year and after October 17, 2000.
(2) Subsection (1) applies to taxation years that end after February 27, 2000.
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