Budget Implementation Act, 2006, No. 2 (S.C. 2007, c. 2)
Full Document:
Assented to 2007-02-21
4. (1) Subsection 40(1.1) of the Act is replaced by the following:
Marginal note:Reserve — property disposed of to a child
(1.1) In computing the amount that a taxpayer may claim under subparagraph (1)(a)(iii) in computing the taxpayer’s gain from the disposition of a property, that subparagraph shall be read as if the references in that subparagraph to “1/5” and “4” were references to “1/10” and “9” respectively, if,
(a) the property was disposed of by the taxpayer to the taxpayer’s child,
(b) that child was resident in Canada immediately before the disposition, and
(c) the property was immediately before the disposition,
(i) any land in Canada or depreciable property in Canada of a prescribed class that was used by the taxpayer, the spouse or common-law partner of the taxpayer, a child or a parent of the taxpayer in a farming or fishing business carried on in Canada,
(ii) a share of the capital stock of a family farm corporation of the taxpayer or an interest in a family farm partnership of the taxpayer (such a share or an interest having the meaning assigned by subsection 70(10)),
(iii) a qualified small business corporation share of the taxpayer (within the meaning assigned by subsection 110.6(1)), or
(iv) a share of the capital stock of a family fishing corporation of the taxpayer or an interest in a family fishing partnership (such a share or an interest having the meaning assigned by subsection 70(10)).
(2) Subsection (1) applies to dispositions of property that occur on or after May 2, 2006.
5. (1) Subsection 44(1.1) of the Act is replaced by the following:
Marginal note:Reserve — property disposed of to a child
(1.1) In computing the amount that a taxpayer may claim under subparagraph (1)(e)(iii) in computing the taxpayer’s gain from the disposition of a former property of the taxpayer, that subparagraph shall be read as if the references in that subparagraph to “1/5” and “4” were references to “1/10” and “9” respectively if that former property is real or immovable property in respect of the disposition of which, because of subsection 73(3), the rules in subsection 73(3.1) applied to the taxpayer and a child of the taxpayer.
(2) Subsection (1) applies to dispositions of property that occur on or after May 2, 2006.
6. (1) Paragraph 56(1)(k) of the Act is replaced by the following:
Marginal note:Certain tools of an employee, re proceeds
(k) all amounts received in the year by a person or partnership (in this paragraph referred to as the “vendor”) as consideration for the disposition by the vendor of a property the cost of which was included in computing an amount under paragraph 8(1)(r) or (s) in respect of the vendor or in respect of a person with whom the vendor does not deal at arm’s length, to the extent that the total of those amounts received in respect of the disposition in the year and in preceding taxation years exceeds the total of the cost to the vendor of the property immediately before the disposition and all amounts included in respect of the disposition under this paragraph in computing the vendor’s income for a preceding taxation year, unless the property was acquired by the vendor in circumstances to which subsection 85(5.1) or subsection 97(5) applied;
(2) Subsection 56(1) of the Act is amended by adding the following after paragraph (n):
Marginal note:Apprenticeship incentive grant
(n.1) amounts received by the taxpayer in the year under the Apprenticeship Incentive Grant program administered by the Department of Human Resources and Social Development;
(3) Subsection 56(3) of the Act is replaced by the following:
Marginal note:Exemption for scholarships, fellowships, bursaries and prizes
(3) For the purpose of subparagraph (1)(n)(ii), a taxpayer’s scholarship exemption for a taxation year is the total of
(a) the total of all amounts each of which is the amount included under subparagraph (1)(n)(i) in computing the taxpayer’s income for the taxation year in respect of a scholarship, fellowship or bursary received in connection with the taxpayer’s enrolment in an educational program in respect of which an amount may be deducted under subsection 118.6(2) in computing the taxpayer’s tax payable under this Part for the taxation year,
(b) the total of all amounts each of which is the lesser of
(i) the amount included under subparagraph (1)(n)(i) in computing the taxpayer’s income for the taxation year in respect of a scholarship, fellowship, bursary or prize that is to be used by the taxpayer in the production of a literary, dramatic, musical or artistic work, and
(ii) the total of all amounts each of which is an expense incurred by the taxpayer in the taxation year for the purpose of fulfilling the conditions under which the amount described in subparagraph (i) was received, other than
(A) personal or living expenses of the taxpayer (except expenses in respect of travel, meals and lodging incurred by the taxpayer in the course of fulfilling those conditions and while absent from the taxpayer’s usual place of residence for the period to which the scholarship, fellowship, bursary or prize, as the case may be, relates),
(B) expenses for which the taxpayer is entitled to be reimbursed, and
(C) expenses that are otherwise deductible in computing the taxpayer’s income, and
(c) the lesser of $500 and the amount by which the total described in subparagraph (1)(n)(i) for the taxation year exceeds the total of the amounts determined under paragraphs (a) and (b).
(4) Subsection 56(8) of the Act is replaced by the following:
Marginal note:CPP/QPP and UCCB amounts for previous years
(8) Notwithstanding subsections (1) and (6), if
(a) one or more amounts are received by an individual (other than a trust) in a taxation year as, on account of, in lieu of payment of or in satisfaction of, any benefit under the Universal Child Care Benefit Act, the Canada Pension Plan or a provincial pension plan as defined in section 3 of the Canada Pension Plan, and
(b) a portion, not less than $300, of the total of those amounts relates to one or more preceding taxation years,
that portion shall, at the option of the individual, not be included in the individual’s income.
(5) Subsections (1), (3) and (4) apply to the 2006 and subsequent taxation years.
(6) Subsection (2) applies to the 2007 and subsequent taxation years.
7. (1) Section 60 of the Act is amended by adding the following after paragraph (o.1):
Marginal note:Repayment of apprenticeship incentive grant
(p) the total of all amounts each of which is an amount paid in the taxation year as a repayment under the Apprenticeship Incentive Grant program of an amount that was included because of paragraph 56(1)(n.1) in computing the taxpayer’s income for the taxation year or a preceding taxation year;
(2) Subsection (1) applies to the 2007 and subsequent taxation years.
8. (1) Paragraph (b) of the definition “earned income” in subsection 63(3) of the Act is replaced by the following:
(b) all amounts that are included, or that would, but for paragraph 81(1)(a) or subsection 81(4), be included, because of section 6 or 7 or paragraph 56(1) (n), (n.1), (o) or (r), in computing the taxpayer’s income,
(2) Subsection (1) applies to the 2007 and subsequent taxation years.
9. (1) Clause (ii)(J) of the description of A in paragraph 64(a) of the Act is replaced by the following:
(J) where the taxpayer has an impairment in physical or mental functions, for the cost of attendant care services provided in Canada and to a person who is neither the taxpayer’s spouse or common-law partner nor under 18 years of age, if the taxpayer is a taxpayer in respect of whom an amount may be deducted because of section 118.3, or if the taxpayer has been certified in writing by a medical practitioner to be a person who, because of that impairment is, and is likely to be indefinitely, dependent on others for their personal needs and care and who as a result requires a full-time attendant,
(2) Subsection (1) applies to the 2005 and subsequent taxation years.
10. (1) Subsections 70(9) to (9.3) of the Act are replaced by the following:
Marginal note:When subsection (9.01) applies
(9) Subsection (9.01) applies to a taxpayer and a child of the taxpayer in respect of land in Canada or depreciable property in Canada of a prescribed class of the taxpayer in respect of which subsection (5) would, if this Act were read without reference to this subsection, apply if
(a) the property was, before the death of the taxpayer, used principally in a fishing or farming business carried on in Canada in which the taxpayer, the spouse or common-law partner of the taxpayer or a child or a parent of the taxpayer was actively engaged on a regular and continuous basis (or, in the case of property used in the operation of a woodlot, was engaged to the extent required by a prescribed forest management plan in respect of that woodlot);
(b) the child of the taxpayer was resident in Canada immediately before the day on which the taxpayer died; and
(c) as a consequence of the death of the taxpayer, the property is transferred to and becomes vested indefeasibly in the child within the period ending 36 months after the death of the taxpayer or, if written application has been made to the Minister by the taxpayer’s legal representative within that period, within any longer period that the Minister considers reasonable in the circumstances.
Marginal note:Transfer of farming and fishing property to child
(9.01) If, because of subsection (9), this subsection applies to the taxpayer and a child of the taxpayer in respect of a property of the taxpayer that has been transferred to the child as a consequence of the death of the taxpayer, the following rules apply:
(a) where the taxpayer’s legal representative does not elect in the taxpayer’s return of income under this Part for the year in which the taxpayer died, to have paragraph (b) apply to the taxpayer and the child in respect of the property,
(i) paragraphs (5)(a) and (b) and section 69 do not apply to the taxpayer and the child in respect of the property,
(ii) the taxpayer is deemed to have
(A) disposed of the property immediately before the taxpayer’s death, and
(B) received, at the time of the disposition of the property, proceeds of disposition in respect of that disposition of the property equal to
(I) where the property was depreciable property of a prescribed class, the lesser of
1. the capital cost to the taxpayer of the property, and
2. the amount, determined immediately before the time of the disposition of the property, that is that proportion of the undepreciated capital cost of property of that class to the taxpayer that the capital cost to the taxpayer of the property is of the capital cost to the taxpayer of all property of that class that had not, at or before that time, been disposed of, and
(II) where the property is land (other than land to which subclause (I) applies), the adjusted cost base to the taxpayer of the property immediately before the time of the disposition of the property,
(iii) the child is, immediately after the time of the disposition of the property, deemed to have acquired the property at a cost equal to the taxpayer’s proceeds of disposition in respect of the disposition of the property determined under subparagraph (ii), and
(iv) where the property was depreciable property of a prescribed class, paragraphs (5)(c) and (d) apply to the taxpayer and the child in respect of the property as if the references in those paragraphs to “paragraph (a)” and “paragraph (b)” were read as “subparagraph (9.01)(a)(ii)” and “subparagraph (9.01)(a)(iii)”, respectively; and
(b) where the taxpayer’s legal representative elects, in the taxpayer’s return of income under this Part for the taxation year in which the taxpayer died, to have this paragraph apply to the taxpayer in respect of the property,
(i) paragraphs (5)(a) and (b) and section 69 do not apply to the taxpayer and the child in respect of the property,
(ii) the taxpayer is deemed to have
(A) disposed of the property immediately before the taxpayer’s death, and
(B) received, at the time of the disposition of the property, proceeds of disposition in respect of that disposition of the property equal to
(I) where the property was depreciable property of a prescribed class, the amount that the legal representative designates, which must not be greater than the greater of nor less than the lesser of
1. the fair market value of the property immediately before the time of the disposition of the property, and
2. the lesser of the capital cost to the taxpayer of the property and the amount, determined immediately before the time of the disposition of the property, that is that proportion of the undepreciated capital cost of property of that class to the taxpayer that the capital cost to the taxpayer of the property is of the capital cost to the taxpayer of all property of that class that had not, at or before that time, been disposed of, and
(II) where the property is land (other than land to which subclause (I) applies), the amount that the legal representative designates, which must not be greater than the greater of nor less than the lesser of
1. the fair market value of the property immediately before the time of the disposition of the property, and
2. the adjusted cost base to the taxpayer of the property immediately before the time of the disposition of the property,
(iii) the child is, immediately after the time of the disposition of the property, deemed to have acquired the property at a cost equal to the taxpayer’s proceeds of disposition in respect of the disposition of the property determined under subparagraph (ii),
(iv) where the property was depreciable property of a prescribed class, paragraphs (5)(c) and (d) apply to the taxpayer in respect of the property as if the references in those paragraphs to “paragraph (a)” and “paragraph (b)” were read as “subparagraph (9.01)(b)(ii)” and “subparagraph (9.01)(b)(iii)”, respectively,
(v) except for the purpose of this subparagraph,
(A) where the amount designated by the taxpayer’s legal representative under subclause (ii)(B)(I), exceeds the greater of the amounts determined under sub-subclauses (ii)(B)(I)1 and 2 in respect of the property, the amount designated is deemed to be equal to the greater of those amounts, and
(B) where the amount designated by the taxpayer’s legal representative under subclause (ii)(B)(II) exceeds the greater of the amounts determined under sub-subclauses (ii)(B)(II)1 and 2 in respect of the property, the amount designated is deemed to be equal to the greater of those amounts, and
(vi) except for the purpose of this subparagraph,
(A) where the amount designated by the taxpayer’s legal representative under subclause (ii)(B)(I) is less than the lesser of the amounts determined under sub-subclauses (ii)(B)(I)1 and 2 in respect of the property, the amount designated is deemed to be equal to the lesser of those amounts, and
(B) where the amount designated by the taxpayer’s legal representative under subclause (ii)(B)(II) is less than the lesser of the amounts determined under sub-subclauses (ii)(B)(II)1 and 2 in respect of the property, the amount designated is deemed to be equal to the lesser of those amounts.
Marginal note:When subsection (9.11) applies
(9.1) Subsection (9.11) applies to a trust and a child of the settlor of the trust in respect of a property in respect of which subsection 104(4) or (5) would, if this Act were read without reference to this subsection, apply to the trust as a consequence of the death of the beneficiary under the trust who was a spouse or a common-law partner of the settlor if
(a) the property (or property for which the property was substituted) was transferred to the trust by the settlor;
(b) subsection (6), subsection 73(1) (as that subsection applied to transfers before 2000) or subparagraph 73(1.01)(c)(i) applied to the settlor and the trust in respect of the transfer referred to in paragraph (a);
(c) the property is, immediately before the beneficiary’s death, land or a depreciable property of a prescribed class of the trust that was used in a fishing or farming business carried on in Canada;
(d) the child of the settlor is, immediately before the beneficiary’s death, resident in Canada; and
(e) as a consequence of the beneficiary’s death, the property is transferred to and becomes vested indefeasibly in the child of the settlor within the period ending 36 months after that beneficiary’s death or, if written application has been made to the Minister by the taxpayer’s legal representative within that period, within any longer period that the Minister considers reasonable in the circumstances.
Marginal note:Transfer of farming and fishing property from trust to settlor’s children
(9.11) If, because of subsection (9.1), this subsection applies to the trust and a child of the settlor of the trust in respect of a property of the trust that has been distributed to the child as a consequence of the death of the beneficiary under the trust who was the spouse or common-law partner of the settlor, the following rules apply:
(a) where the trust does not elect, in its return of income under this Part for the taxation year in which the beneficiary died, to have paragraph (b) apply to the trust in respect of the property,
(i) subsections 104(4) and (5) and section 69 do not apply to the trust and the child in respect of the property,
(ii) the trust is deemed to have
(A) disposed of the property immediately before the beneficiary’s death, and
(B) received, at the time of the disposition, proceeds of disposition in respect of that disposition equal to
(I) where the property was depreciable property of a prescribed class, the lesser of
1. the capital cost to the trust of the property, and
2. the amount, determined immediately before the time of the disposition of the property, that is that proportion of the undepreciated capital cost of property of that class to the trust that the capital cost to the trust of the property is of the capital cost to the trust of all property of that class that had not, at or before that time, been disposed of, and
(II) where the property is land (other than land to which subclause (I) applies), the adjusted cost base to the trust of the property immediately before the time of the disposition of the property, and
(iii) the child is, immediately after the time of the disposition of the property, deemed to have acquired the property at a cost equal to the trust’s proceeds of disposition in respect of the disposition of the property determined under subparagraph (ii);
(b) where the trust elects, in the trust’s return of income under this Part for the taxation year in which the beneficiary died, to have this paragraph apply to the trust in respect of the property,
(i) subsections 104(4) and (5) do not apply to the trust in respect of the property,
(ii) the trust is deemed to have
(A) disposed of the property immediately before the beneficiary’s death, and
(B) received, at the time of the disposition of the property, proceeds of disposition in respect of the disposition of the property equal to
(I) where the property was depreciable property of a prescribed class, the amount that the trust designates, which must not be greater than the greater of nor less than the lesser of
1. the fair market value of the property immediately before the time of the disposition of the property, and
2. the lesser of the capital cost to the trust of the property and the amount, determined immediately before the time of the disposition of the property, that is that proportion of the undepreciated capital cost of property of that class to the trust that the capital cost to the trust of the property is of the capital cost to the trust of all property of that class that had not, at or before that time, been disposed of, and
(II) where the property is land (other than land to which subclause (I) applies), the amount that the trust designates, which must not be greater than the greater of nor less than the lesser of
1. the fair market value of the property immediately before the time of the disposition of the property, and
2. the adjusted cost base to the trust of the property immediately before the time of the disposition of the property,
(iii) the child is, immediately after the time of the disposition of the property, deemed to have acquired the property at a cost equal to the trust’s proceeds of disposition in respect of the disposition of the property determined under subparagraph (ii),
(iv) except for the purpose of this subparagraph,
(A) where the amount designated by the trust under subclause (ii)(B)(I) exceeds the greater of the amounts determined under sub-subclauses (ii)(B)(I)1 and 2 in respect of the property, the amount designated is deemed to be equal to the greater of those amounts, and
(B) where the amount designated by the trust under subclause (ii)(B)(II) exceeds the greater of the amounts determined under sub-subclauses (ii)(B)(II)1 and 2 in respect of the property, the amount designated is deemed to be equal to the greater of those amounts, and
(v) except for the purpose of this subparagraph,
(A) where the amount designated by the trust under subclause (ii)(B)(I) is less than the lesser of the amounts determined under sub-subclauses (ii)(B)(I)1 and 2 in respect of the property, the amount designated is deemed to be equal to the lesser of those amounts, and
(B) where the amount designated by the trust under subclause (ii)(B)(II), is less than the lesser of the amounts determined under sub-subclauses (ii)(B)(II)1 and 2 in respect of the property, the amount designated is deemed to be equal to the lesser of those amounts;
(c) where paragraph (a) or (b) (each of which is referred to in this subsection as the “relevant provision”) applied to the trust in respect of a property that was depreciable property of a prescribed class (other than where the trust’s proceeds of disposition of the property under the relevant provision are redetermined under subsection 13(21.1)),
(i) the capital cost to the child of the property, immediately after the time of the disposition, is deemed to be the amount that was the capital cost to the trust of the property, immediately before the time of the disposition, and
(ii) the amount, if any, by which the capital cost to the trust of the property, immediately before the time of the disposition, exceeds the amount determined under the relevant provision to be the cost of the property to the child, immediately after the time of the disposition, is, for the purposes of sections 13 and 20 and any regulations made for the purpose of paragraph 20(1)(a), deemed to have been allowed to the child in respect of the property under regulations made for the purpose of paragraph 20(1)(a) in computing income for taxation years that ended before the child acquired the property; and
(d) where the relevant provision applied to the trust in respect of a property and the trust’s proceeds of disposition in respect of the disposition of the property determined under the relevant provision are redetermined under subsection 13(21.1), notwithstanding the relevant provision,
(i) where the capital cost to the trust of the property, immediately before the time of the disposition, exceeds the amount redetermined under subsection 13(21.1), for the purposes of sections 13 and 20 and any regulations made for the purpose of paragraph 20(1)(a),
(A) the capital cost to the child of the property, immediately after the time of the disposition, is deemed to be the amount that was the capital cost to the trust of the property, immediately before the time of the disposition, and
(B) the amount, if any, by which the capital cost to the trust of the property, immediately before the time of the disposition, exceeds the amount redetermined under subsection 13(21.1) is deemed to have been allowed to the child in respect of the property under regulations made for the purpose of paragraph 20(1)(a) in computing income for taxation years that ended before the child acquired the property, and
(ii) where the property is land, the cost to the child of the property is deemed to be the amount that was the trust’s proceeds of disposition as redetermined under subsection 13(21.1).
Marginal note:When subsection (9.21) applies
(9.2) Subsection (9.21) applies to a taxpayer and a child of the taxpayer in respect of a property of the taxpayer in respect of which subsection (5) would, if this Act were read without reference to this subsection, apply to the taxpayer and the child if
(a) the property was, immediately before the death of the taxpayer, a share of the capital stock of a family fishing corporation of the taxpayer, an interest in a family fishing partnership of the taxpayer, a share of the capital stock of a family farm corporation of the taxpayer or an interest in a family farm partnership of the taxpayer;
(b) the child of the taxpayer was resident in Canada immediately before the day on which taxpayer died; and
(c) as a consequence of the death of the taxpayer, the property is transferred to and becomes vested indefeasibly in the child within the period ending 36 months after the death of the taxpayer or, if written application has been made to the Minister by the taxpayer’s legal representative within that period, within any longer period that the Minister considers reasonable in the circumstances.
Marginal note:Transfer of family farm and fishing corporations and partnerships
(9.21) If, because of subsection (9.2), this subsection applies to the taxpayer and a child of the taxpayer in respect of a property of the taxpayer that has been transferred to the child as a consequence of the death of the taxpayer, the following rules apply:
(a) where the taxpayer’s legal representative does not elect, in the taxpayer’s return of income under this Part for the taxation year in which the taxpayer died, to have paragraph (b) apply to the taxpayer in respect of the property,
(i) paragraphs (5)(a) and (b) and section 69 do not apply to the taxpayer and the child in respect of the property,
(ii) where the property is, immediately before the death of the taxpayer, a share of the capital stock of a family fishing corporation of the taxpayer, or a share of the capital stock of a family farm corporation of the taxpayer,
(A) the taxpayer is deemed to have
(I) disposed of the property immediately before the taxpayer’s death, and
(II) received proceeds of disposition in respect of that disposition equal to the adjusted cost base to the taxpayer, immediately before the time of that disposition, of the property, and
(B) the child is, immediately after the time of the disposition, deemed to have acquired the property at a cost equal to the taxpayer’s proceeds of disposition in respect of that disposition determined under clause (A), and
(iii) where the property is, immediately before the death of the taxpayer, a partnership interest described in paragraph (9.2)(a) (other than a partnership interest to which subsection 100(3) applies),
(A) the taxpayer is, except for the purpose of paragraph 98(5)(g), deemed not to have disposed of the property as a consequence of the taxpayer’s death,
(B) the child is deemed to have acquired the property at the time of the taxpayer’s death at a cost equal to the cost to the taxpayer of the interest immediately before the time that is immediately before the time of the taxpayer’s death, and
(C) each amount required by subsection 53(1) or (2) to be added or deducted in computing the adjusted cost base to the taxpayer, immediately before the time of the taxpayer’s death, of the property is deemed to be an amount required by subsection 53(1) or (2) to be added or deducted in computing, at any time at or after the time of the taxpayer’s death, the adjusted cost base to the child of the property; and
(b) where the taxpayer’s legal representative elects, in the taxpayer’s return of income under this Part for the taxation year in which the taxpayer died, to have this paragraph apply to the taxpayer in respect of the property,
(i) paragraphs (5)(a) and (b) and section 69 do not apply to the taxpayer and the child in respect of the property,
(ii) subject to subparagraph (iii), where the property is, immediately before the taxpayer’s death, a share of the capital stock of a family fishing corporation of the taxpayer, a share of the capital stock of a family farm corporation of the taxpayer, an interest in a family fishing partnership of the taxpayer or an interest in a family farm partnership of the taxpayer,
(A) the taxpayer is deemed to have
(I) disposed of the property immediately before the taxpayer’s death, and
(II) received, at the time of the disposition of the property, proceeds of disposition in respect of the disposition of the property equal to the amount that the taxpayer’s legal representative designates, which must not be greater than the greater of nor less than the lesser of
1. the fair market value of the property immediately before the taxpayer’s death, and
2. the adjusted cost base to the taxpayer of the property immediately before the time of the disposition,
(B) the child is, immediately after the time of the disposition, deemed to have acquired the property at a cost equal to the taxpayer’s proceeds of disposition in respect of the disposition of the property determined under clause (A),
(C) except for the purpose of this clause, where the amount designated by the taxpayer’s legal representative under subclause (A)(II) exceeds the greater of the amounts determined under sub-subclauses (A)(II)1 and 2 in respect of the property, the amount designated is deemed to be equal to the greater of those amounts, and
(D) except for the purpose of this clause, where the amount designated by the taxpayer’s legal representative under subclause (A)(II) is less than the lesser of the amounts determined under sub-subclauses (A)(II)1 and 2 in respect of the property, the amount designated is deemed to be equal to the lesser of those amounts, and
(iii) where the property is, immediately before the death of the taxpayer, a partnership interest described in paragraph (9.2)(a) (other than a partnership interest to which subsection 100(3) applies), and the taxpayer’s legal representative further elects, in the taxpayer’s return of income under this Part for the taxation year in which the taxpayer died, to have this subparagraph apply to the taxpayer in respect of the property,
(A) the taxpayer is, except for the purpose of paragraph 98(5)(g), deemed not to have disposed of the property as a consequence of the taxpayer’s death,
(B) the child is deemed to have acquired the property at the time of the taxpayer’s death at a cost equal to the cost to the taxpayer of the interest immediately before the time that is immediately before the death of the taxpayer, and
(C) each amount required by subsection 53(1) or (2) to be added or deducted in computing the adjusted cost base to the taxpayer, immediately before the time of the taxpayer’s death, of the property is deemed to be an amount required by subsection 53(1) or (2) to be added or deducted in computing, at any time at or after the taxpayer’s death, the adjusted cost base to the child of the property.
Marginal note:When subsection (9.31) applies
(9.3) Subsection (9.31) applies to a trust and a child of the settlor of the trust in respect of a property in respect of which subsection 104(4) would, if this Act were read without reference to this subsection, apply to the trust as a consequence of the death of the beneficiary under the trust who was a spouse or a common-law partner of the settlor of the trust if
(a) the property (or property for which the property was substituted) was transferred to the trust by the settlor and was, immediately before that transfer, a share of the capital stock of a family farm corporation of the settlor, a share of the capital stock of a family fishing corporation of the settlor, an interest in a family farm partnership of the settlor or an interest in a family fishing partnership of the settlor;
(b) subsection (6), subsection 73(1) (as that subsection applied to transfers before 2000) or subparagraph 73(1.01)(c)(i) applied to the settlor and the trust in respect of the transfer referred to in paragraph (a);
(c) the property is, immediately before the beneficiary’s death,
(i) a share of the capital stock of a Canadian corporation that would, immediately before that beneficiary’s death, be a share of the capital stock of a family farm corporation of the settlor, if the settlor owned the share at that time and paragraph (a) of the definition “share of the capital stock of a family farm corporation”, in subsection (10) were read without the words “in which the person or a spouse, common-law partner, child or parent of the person was actively engaged on a regular and continuous basis (or, in the case of property used in the operation of a woodlot, was engaged to the extent required by a prescribed forest management plan in respect of that woodlot)”,
(ii) a share of the capital stock of a Canadian corporation that would, immediately before the beneficiary’s death, be a share of the capital stock of a family fishing corporation of the settlor, if the settlor owned the share at that time and paragraph (a) of the definition “share of the capital stock of a family fishing corporation” in subsection (10) were read without reference to the words “in which the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual was actively engaged on a regular and continuous basis”, or
(iii) a partnership interest in a partnership that carried on the business of farming or fishing in Canada in which it used all or substantially all of the property;
(d) the child of the settlor was, immediately before that beneficiary’s death, resident in Canada; and
(e) as a consequence of that beneficiary’s death, the property is transferred to and becomes vested indefeasibly in the child within the period ending 36 months after that beneficiary’s death or, if written application has been made to the Minister by the taxpayer’s legal representative within that period, within any longer period that the Minister considers reasonable in the circumstances.
Marginal note:Transfer of family farm or fishing corporation or family farm or fishing partnership from trust to children of settlor
(9.31) If, because of subsection (9.3), this subsection applies to the trust and a child of the settlor of the trust in respect of a property of the trust that has been distributed to the child as a consequence of the death of the beneficiary under the trust who was a spouse or common-law partner of the settlor of the trust, the following rules apply:
(a) where the trust does not elect, in its return of income under this Part for the taxation year in which the beneficiary died, to have paragraph (b) apply to the trust in respect of the property
(i) section 69 and subsection 104(4) do not apply to the trust and the child in respect of the property,
(ii) where the property is, immediately before the beneficiary’s death, a share described in subparagraph (9.3)(c)(i) or (ii),
(A) the trust is deemed to have
(I) disposed of the property immediately before the beneficiary’s death, and
(II) received proceeds of disposition in respect of that disposition equal to the adjusted cost base to the trust of the property immediately before the time of that disposition, and
(B) the child is, immediately after the time of the disposition, deemed to have acquired the property at a cost equal to the trust’s proceeds of disposition in respect of that disposition of the property determined under clause (A), and
(iii) where the property is, immediately before the beneficiary’s death, a partnership interest described in subparagraph (9.3)(c)(iii) (other than a partnership interest to which subsection 100(3) applies),
(A) the trust is, except for the purpose of paragraph 98(5)(g), deemed not to have disposed of the property as a consequence of the beneficiary’s death,
(B) the child is deemed to have acquired the property, at the time of the beneficiary’s death, at a cost equal to the cost to the trust of the interest immediately before the time that is immediately before the time of the beneficiary’s death, and
(C) each amount required by subsection 53(1) or (2) to be added or deducted in computing the adjusted cost base to the trust, immediately before the beneficiary’s death, of the property is deemed to be an amount required by subsection 53(1) or (2) to be added or deducted in computing, at or after the time of the beneficiary’s death, the adjusted cost base to the child of the property; and
(b) where the trust elects, in its return of income under this Part for the taxation year in which the beneficiary died, to have this paragraph apply to the trust in respect of the property
(i) subsection 104(4) does not apply to the trust in respect of the property and section 69 does not apply to the trust or the child in respect of the transfer of the property,
(ii) subject to subparagraph (iii), where the property is, immediately before the beneficiary’s death, a share of the capital stock of a corporation described in subparagraph (9.3)(c)(i) or (ii) or a partnership interest described in subparagraph (9.3)(c)(iii),
(A) the trust is deemed to have
(I) disposed of the property immediately before the beneficiary’s death, and
(II) received, at the time of the disposition of property, proceeds of disposition in respect of the disposition of the property equal to the amount that the trust designates, which must not be greater than the greater of nor less than the lesser of
1. the fair market value of the property immediately before the beneficiary’s death, and
2. the adjusted cost base to the trust of the property immediately before the beneficiary’s death, and
(B) the child is, immediately after the time of the disposition of the property, deemed to have acquired the property at a cost equal to the trust’s proceeds of disposition in respect of that disposition of the property determined under clause (A),
(iii) where the property is, immediately before that beneficiary’s death, a partnership interest described in subparagraph (9.3)(c)(iii) (other than a partnership interest to which subsection 100(3) applies), and the trust further elects, in its return of income under this Part for the taxation year in which the beneficiary died, to have this subparagraph apply to the trust in respect of the property,
(A) the trust is, except for the purpose of paragraph 98(5)(g), deemed not to have disposed of the property as a consequence of the beneficiary’s death,
(B) the child is deemed to have acquired the property, at the time of the beneficiary’s death, at a cost equal to the cost to the trust of the property immediately before the time that is immediately before the beneficiary’s death, and
(C) each amount required by subsection 53(1) or (2) to be added or deducted in computing, immediately before the beneficiary’s death, the adjusted cost base to the trust of the property is deemed to be an amount required by subsection 53(1) or (2) to be added or deducted in computing, at or after the time of the beneficiary’s death, the adjusted cost base to the child of the property,
(iv) except for the purpose of this subparagraph, where the amount designated by the trust under subclause (ii)(A)(II) exceeds the greater of the amounts determined under sub-subclauses (ii)(A)(II)1 and 2 in respect of the property, the amount designated is deemed to be equal to the greater of those amounts, and
(v) except for the purpose of this subparagraph, where the amount designated by the trust under subclause (ii)(A)(II) is less than the lesser of the amounts determined under sub-subclauses (ii)(A)(II)1 and 2 in respect of the property, the amount designated is deemed to be equal to the lesser of those amounts.
(2) Subsection 70(9.6) of the Act is replaced by the following:
Marginal note:Transfer to a parent
(9.6) Subsection (9.01) or (9.21), as the case may be, applies in respect of a transfer of a property as if the references in those subsections to “child” were read as references to “parent” if
(a) the property was acquired by a taxpayer in circumstances where any of subsections (9.01), (9.11), (9.21), (9.31) and 73(3.1) and (4.1) applied in respect of the acquisition;
(b) as a consequence of the death of the taxpayer the property is transferred to a parent of the taxpayer; and
(c) the taxpayer’s legal representative has elected, in the taxpayer’s return of income under this Part for the taxation year in which the taxpayer died, that this subsection apply in respect of the transfer.
(3) Subsection 70(9.8) of the Act is replaced by the following:
Marginal note:Leased farm and fishing property
(9.8) For the purposes of subsections (9) and 14(1), paragraph 20(1)(b), subsection 73(3) and paragraph (d) of the definitions “qualified farm property” and “qualified fishing property” in subsection 110.6(1), a property of an individual is, at a particular time, deemed to be used by the individual in a fishing or farming business, as the case may be, carried on in Canada if, at that particular time, the property is being used, principally in the course of carrying on a fishing or farming business in Canada, by
(a) a corporation, a share of the capital stock of which is a share of the capital stock of a family fishing corporation, or a share of the capital stock of a family farm corporation, of the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual; or
(b) a partnership, a partnership interest of which is an interest in a family fishing partnership, or an interest in a family farm partnership, of the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual.
(4) The definition “interest in a family farm partnership” in subsection 70(10) of the Act is replaced by the following:
“interest in a family farm partnership”
« participation dans une société de personnes agricole familiale »
“interest in a family farm partnership” of an individual at any time means a partnership interest owned by the individual at that time if, at that time, all or substantially all of the fair market value of the property of the partnership was attributable to
(a) property that has been used principally in the course of carrying on a farming business in Canada in which the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual was actively engaged on a regular and continuous basis (or, in the case of property used in the operation of a woodlot, was engaged to the extent required by a prescribed forest management plan in respect of that woodlot), by
(i) the partnership,
(ii) a corporation, a share of the capital stock of which is a share of the capital stock of a family farm corporation of the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual,
(iii) a partnership, a partnership interest in which is an interest in a family farm partnership of the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual, or
(iv) the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual,
(b) shares of the capital stock or indebtedness of one or more corporations all or substantially all of the fair market value of the property of which was attributable to property described in paragraph (d),
(c) partnership interests or indebtedness of one or more partnerships all or substantially all of the fair market value of the property of which was attributable to property described in paragraph (d), or
(d) properties described in any of paragraphs (a) to (c);
(5) Subsection 70(10) of the Act is amended by adding the following in alphabetical order:
“interest in a family fishing partnership”
« participation dans une société de personnes de pêche familiale »
“interest in a family fishing partnership” of an individual at any time means a partnership interest owned by the individual at that time if, at that time, all or substantially all of the fair market value of the property of the partnership was attributable to
(a) property that has been used principally in the course of carrying on a fishing business in Canada in which the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual was actively engaged on a regular and continuous basis, by
(i) the partnership,
(ii) a corporation, a share of the capital stock of which is a share of the capital stock of a family fishing corporation of the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual,
(iii) a partnership, a partnership interest in which is an interest in a family fishing partnership of the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual, or
(iv) the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual,
(b) shares of the capital stock or indebtedness of one or more corporations all or substantially all of the fair market value of the property of which was attributable to property described in paragraph (d),
(c) partnership interests or indebtedness of one or more partnerships all or substantially all of the fair market value of the property of which was attributable to property described in paragraph (d), or
(d) properties described in any of paragraphs (a) to (c);
“share of the capital stock of a family fishing corporation”
« action du capital-actions d’une société de pêche familiale »
“share of the capital stock of a family fishing corporation” of an individual at any time means a share of the capital stock of a corporation owned by the individual at that time if, at that time, all or substantially all of the fair market value of the property owned by the corporation was attributable to
(a) property that has been used principally in the course of carrying on a fishing business in Canada in which the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual was actively engaged on a regular and continuous basis, by
(i) the corporation,
(ii) a corporation, a share of the capital stock of which is a share of the capital stock of a family fishing corporation of the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual,
(iii) a corporation controlled by a corporation described in subparagraph (i) or (ii),
(iv) a partnership, a partnership interest in which is an interest in a family fishing partnership of the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual, or
(v) the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual,
(b) shares of the capital stock or indebtedness of one or more corporations all or substantially all of the fair market value of the property of which was attributable to property described in paragraph (d),
(c) partnership interests or indebtedness of one or more partnerships all or substantially all of the fair market value of the property of which was attributable to property described in paragraph (d), or
(d) properties described in any of paragraphs (a) to (c);
(6) Subsections (1) to (5) apply to a disposition, that occurs on or after May 2, 2006, of a property unless the disposition of the property was before 2007 and the taxpayer elects in writing in the taxpayer’s return of income for the taxation year in which the disposition occurred to have subsection 70(9), (9.1), (9.2) or (9.3) of the Act, as that subsection read on May 1, 2006, apply to the disposition of the property.
- Date modified: