SHORT TITLE

Marginal note:Short title

1. This Act may be cited as the Budget Implementation Act, 2009.

PART 1AMENDMENTS IN RESPECT OF INCOME TAX

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

• 2. (1) Subparagraph 6(1)(g)(ii) of the Income Tax Act is replaced by the following:

  • (ii) a return of amounts contributed to the plan by the taxpayer or a deceased employee of whom the taxpayer is an heir or legal representative, to the extent that the amounts were not deducted in computing the taxable income of the taxpayer or the deceased employee for any taxation year, or

• (2) Subsection (1) applies to the 2009 and subsequent taxation years.

• 3. (1) Paragraph 7(1.4)(b) of the Act is amended by striking out “or” at the end of subparagraph (iv), by adding “or” at the end of subparagraph (v) and by adding the following after subparagraph (v):

  • (vi) if the disposition is before 2013 and the old securities were equity in a SIFT wind-up entity that was at the time of the disposition a mutual fund trust, a SIFT wind-up corporation in respect of the SIFT wind-up entity

• (2) Subsection (1) applies after December 19, 2007.

• 4. (1) Subsection 12(1) of the Act is amended by adding the following after paragraph (z.4):

  • Marginal note:Former TFSA

    (z.5) any amount required because of subsection 146.2(9) to be included in computing the taxpayer’s income for the year; and

• (2) The definition “investment contract” in subsection 12(11) of the Act is amended by adding the following after paragraph (d):

  • (d.1) a TFSA,

• (3) Subsections (1) and (2) apply to the 2009 and subsequent taxation years.

• 5. (1) The Act is amended by adding the following after section 12.4:

  Marginal note:Definitions

  • 12.5 (1) The definitions in this section apply for the purposes of this section and section 20.4.

    “base year”

    « année de base »

    “base year” of an insurer means the insurer’s taxation year that immediately precedes its transition year.

    “insurance business”

    « entreprise d’assurance »

    “insurance business” of an insurer, is an insurance business carried on by the insurer, other than a life insurance business.

    “reserve transition amount”

    « montant transitoire »

    “reserve transition amount” of an insurer, in respect of an insurance business carried on by it in Canada in its transition year, is the positive or negative amount determined by the formula

    A – B

    where

    A

    is the maximum amount that the insurer would be permitted to claim under paragraph 20(7)(c) (and that would be prescribed by section 1400 of the Regulations for the purpose of paragraph 20(7)(c)) as a policy reserve for its base year in respect of its insurance policies if

    • (a) the generally accepted accounting principles that applied to the insurer in valuing its assets and liabilities for its transition year had applied to it for its base year, and

    • (b) section 1400 of the Regulations were read in respect of the insurer’s base year as it reads in respect of its transition year; and

    B

    is the maximum amount that the insurer is permitted to claim under paragraph 20(7)(c) as a policy reserve for its base year.

    “transition year”

    « année transitoire »

    “transition year” of an insurer means the insurer’s first taxation year that begins after September 2006.

  • Marginal note:Transition year income inclusion

    (2) There shall be included in computing an insurer’s income for its transition year from an insurance business carried on by it in Canada in the transition year, the positive amount, if any, of the insurer’s reserve transition amount in respect of that insurance business.

  • Marginal note:Transition year income deduction reversal

    (3) If an amount has been deducted under subsection 20.4(2) in computing an insurer’s income for its transition year from an insurance business carried on by it in Canada, there shall be included in computing the insurer’s income, for each particular taxation year of the insurer that ends after the beginning of the transition year, from that insurance business, the amount determined by the formula

    A × B/1825

    where

    A

    is the amount deducted under subsection 20.4(2) in computing the insurer’s income for the transition year from that insurance business; and

    B

    is the number of days in the particular taxation year that are before the day that is 1825 days after the first day of the transition year.

  • Marginal note:Winding-up

    (4) If an insurer has, in a winding-up to which subsection 88(1) has applied, been wound-up into another corporation (referred to in this subsection as the “parent”), and immediately after the winding-up the parent carries on an insurance business, in applying subsections (3) and 20.4(3) in computing the incomes of the insurer and of the parent for particular taxation years that end on or after the first day (referred to in this subsection as the “start day”) on which assets of the insurer were distributed to the parent on the winding-up,

    • (a) the parent is, on and after the start day, deemed to be the same corporation as and a continuation of the insurer in respect of

      • (i) any amount included under subsection (2) or deducted under subsection 20.4(2) in computing the insurer’s income from an insurance business for its transition year,

      • (ii) any amount included under subsection (3) or deducted under subsection 20.4(3) in computing the insurer’s income from an insurance business for a taxation year of the insurer that begins before the start day, and

      • (iii) any amount that would — in the absence of this subsection and if the insurer existed and carried on an insurance business on each day that is the start day or a subsequent day and on which the parent carries on an insurance business — be required to be included or deducted, in respect of any of those days, under subsection (3) or 20.4(3) in computing the insurer’s income from an insurance business; and

    • (b) the insurer is, in respect of each of its particular taxation years, to determine the value for B in the formulas in subsections (3) and 20.4(3) without reference to the start day and days after the start day.

  • Marginal note:Amalgamations

    (5) If there is an amalgamation (within the meaning assigned by subsection 87(1)) of an insurer with one or more other corporations to form one corporation (referred to in this subsection as the “new corporation”), and immediately after the amalgamation the new corporation carries on an insurance business, in applying subsections (3) and 20.4(3) in computing the new corporation’s income for particular taxation years that begin on or after the day on which the amalgamation occurred, the new corporation is, on and after that day, deemed to be the same corporation as and a continuation of the insurer in respect of

    • (a) any amount included under subsection (2) or deducted under subsection 20.4(2) in computing the insurer’s income from an insurance business for its transition year;

    • (b) any amount included under subsection (3) or deducted under subsection 20.4(3) in computing the insurer’s income from an insurance business for a taxation year of the insurer that begins before the day on which the amalgamation occurred; and

    • (c) any amount that would — in the absence of this subsection and if the insurer existed and carried on an insurance business on each day that is the day on which the amalgamation occurred or a subsequent day and on which the new corporation carries on an insurance business — be required to be included or deducted, in respect of any of those days, under subsection (3) or 20.4(3) in computing the insurer’s income from an insurance business.

  • Marginal note:Application of subsection (7)

    (6) Subsection (7) applies if, at any time, an insurer (referred to in this subsection and subsection (7) as the “transferor”) transfers, to a corporation (referred to in this subsection and subsection (7) as the “transferee”) that is related to the transferor, property in respect of an insurance business carried on by the transferor in Canada (referred to in this subsection and subsection (7) as the “transferred business”) and

    • (a) subsection 138(11.5) or (11.94) applies to the transfer; or

    • (b) subsection 85(1) applies to the transfer, the transfer includes all or substantially all of the property and liabilities of the transferred business and, immediately after the transfer, the transferee carries on an insurance business.

  • Marginal note:Transfer of insurance business

    (7) If this subsection applies in respect of the transfer, at any time, of property

    • (a) the transferee is, at and after that time, deemed to be the same corporation as and a continuation of the transferor in respect of

      • (i) any amount included under subsection (2) or deducted under subsection 20.4(2) in computing the transferor’s income for its transition year that can reasonably be attributed to the transferred business,

      • (ii) any amount included under subsection (3) or deducted under subsection 20.4(3) in computing the transferor’s income for a taxation year of the transferor that begins before that time that can reasonably be attributed to the transferred business,

      • (iii) any amount that would — in the absence of this subsection and if the transferor existed and carried on an insurance business on each day that includes that time or is a subsequent day and on which the transferee carries on an insurance business — be required to be included or deducted, in respect of any of those days, under subsection (3) or 20.4(3) in computing the transferor’s income that can reasonably be attributed to the transferred business; and

    • (b) in determining, in respect of the day that includes that time or any subsequent day, any amount that is required under subsection (3) or 20.4(3) to be included or deducted in computing the transferor’s income for each particular taxation year from the transferred business, the description of A in the formulas in those subsections is deemed to be nil.

  • Marginal note:Ceasing to carry on business

    (8) If at any time an insurer ceases to carry on all or substantially all of an insurance business (referred to in this subsection as the “discontinued business”), and none of subsections (4) to (6) apply, there shall be included in computing the insurer’s income from the discontinued business for the insurer’s taxation year that includes the time that is immediately before that time, the amount determined by the formula

    A – B

    where

    A

    is the amount deducted under subsection 20.4(2) in computing the insurer’s income from the discontinued business for its transition year; and

    B

    is the total of all amounts each of which is an amount included under subsection (3) in computing the insurer’s income from the discontinued business for a taxation year that began before that time.

  • Marginal note:Ceasing to exist

    (9) If at any time an insurer that carried on an insurance business ceases to exist (otherwise than as a result of a winding-up or amalgamation described in subsection (4) or (5)), for the purposes of subsections (8) and 20.4(4), the insurer is deemed to have ceased to carry on the insurance business at the earlier of

    • (a) the time (determined without reference to this subsection) at which the insurer ceased to carry on the insurance business, and

    • (b) the time that is immediately before the end of the last taxation year of the insurer that ended at or before the time at which the insurer ceased to exist.

• (2) Subsection (1) applies to taxation years that begin after September 2006.

• 6. (1) Section 18.2 of the Act is repealed.

• (2) Subsection (1) applies in respect of interest and other borrowing costs paid or payable in respect of a period or periods that begin after 2011.

• 7. (1) Subsection 20(3) of the Act is replaced by the following:

  • Marginal note:Borrowed money

    (3) For greater certainty, if a taxpayer uses borrowed money to repay money previously borrowed, or to pay an amount payable for property described in subparagraph (1)(c)(ii) previously acquired (which previously borrowed money or amount payable in respect of previously acquired property is, in this subsection, referred to as the “previous indebtedness”), subject to subsection 20.1(6), for the purposes of paragraphs (1)(c), (e) and (e.1), subsections 20.1(1) and (2), section 21 and subparagraph 95(2)(a)(ii), and for the purpose of paragraph 20(1)(k) of the Income Tax Act, Chapter 148 of the Revised Statutes of Canada, 1952, the borrowed money is deemed to be used for the purpose for which the previous indebtedness was used or incurred, or was deemed by this subsection to have been used or incurred.

• (2) Subsection (1) applies in respect of interest paid or payable in respect of a period or periods that begin after January 27, 2009.

• 8. (1) The Act is amended by adding the following after section 20.3:

  Marginal note:Definitions

  • 20.4 (1) The definitions in section 12.5 apply for the purposes of this section.

  • Marginal note:Transition year income deduction

    (2) There shall be deducted in computing an insurer’s income for its transition year from an insurance business carried on by it in Canada in the transition year the absolute value of the negative amount, if any, of the insurer’s reserve transition amount in respect of that insurance business.

  • Marginal note:Transition year income inclusion reversal

    (3) If an amount has been included under subsection 12.5(2) in computing an insurer’s income for its transition year from an insurance business carried on by it in Canada, there shall be deducted in computing the insurer’s income, for each particular taxation year of the insurer that ends after the beginning of the transition year, from that insurance business, the amount determined by the formula

    A × B/1825

    where

    A

    is the amount included under subsection 12.5(2) in computing the insurer’s income for the transition year from that insurance business; and

    B

    is the number of days in the particular taxation year that are before the day that is 1825 days after the first day of the transition year.

  • Marginal note:Ceasing to carry on business

    (4) If at any time an insurer ceases to carry on all or substantially all of an insurance business (referred to in this subsection as the “discontinued business”), and none of subsections 12.5(4) to (6) apply, there shall be deducted in computing the insurer’s income from the discontinued business for the insurer’s taxation year that includes the time that is immediately before that time, the amount determined by the formula

    A – B

    where

    A

    is any amount included under subsection 12.5(2) in computing the insurer’s income from the discontinued business for its transition year; and

    B

    is the total of all amounts each of which is an amount deducted under subsection (3) in computing the insurer’s income from the discontinued business for a taxation year that began before that time.

• (2) Subsection (1) applies to taxation years that begin after September 2006.

• 9. (1) Subparagraph 39(1)(a)(ii.2) of the Act is replaced by the following:

  • (ii.2) a property if the disposition is a disposition to which subsection 142.4(4) or (5) or 142.5(1) applies,

• (2) Subsection (1) applies to taxation years that begin after September 2006.

• 10. (1) Subsection 40(3.5) of the Act is amended by adding the following after paragraph (b):

  • (b.1) a share of the capital stock of a SIFT wind-up corporation in respect of a SIFT wind-up entity is, if the share was acquired before 2013, deemed to be a property that is identical to equity in the SIFT wind-up entity;

• (2) Section 40 of the Act is amended by adding the following after subsection (9):

  • Marginal note:Application

    (10) Subsection (11) applies in computing at any particular time a corporation’s gain or loss (in this subsection and subsection (11) referred to as the “new gain” or “new loss”, as the case may be), in respect of any part (which in this subsection and subsection (11) is referred to as the “relevant part” and which may for greater certainty be the whole) of a foreign currency debt of the corporation, arising from a fluctuation in the value of the currency of the foreign currency debt (other than, for greater certainty, a gain or a capital loss that arises because of the application of subsection 111(12)), if at any time before the particular time the corporation realized a capital loss or gain in respect of the foreign currency debt because of subsection 111(12).

  • Marginal note:Gain or loss on foreign currency debt

    (11) If this subsection applies, the new gain is the positive amount, or the new loss is the negative amount, as the case may be, determined by the formula

    A + B – C

    where

    A

    is

    • (a) if the corporation would, but for any application of subsection 111(12), recognize a new gain, the amount of the new gain, determined without reference to this subsection, or

    • (b) if the corporation would, but for any application of subsection 111(12), recognize a new loss, the amount of the new loss, determined without reference to this subsection, multiplied by (-1);

    B

    is the total of all amounts each of which is that portion of the amount of a capital loss realized by the corporation at any time before the particular time, in respect of the foreign currency debt and because of subsection 111(12), that is reasonably attributable to

    • (a) the relevant part of the foreign currency debt at the particular time, or

    • (b) the forgiven amount, if any, (within the meaning assigned by subsection 80(1)) in respect of the foreign currency debt at the particular time; and

    C

    is the total of all amounts each of which is that portion of the amount of a gain realized by the corporation at any time before the particular time, in respect of the foreign currency debt and because of subsection 111(12), that is reasonably attributable to

    • (a) the relevant part of the foreign currency debt at the particular time, or

    • (b) the forgiven amount, if any, (within the meaning assigned by subsection 80(1)) in respect of the foreign currency debt at the particular time.

• (3) Subsection (1) applies to dispositions that occur on or after November 28, 2008.

• (4) Subsection (2) applies after 2005.

• 11. (1) Paragraph 53(1)(e) of the Act is amended by adding “and” at the end of subparagraph (xii), by striking out “and” at the end of subparagraph (xiii) and by repealing subparagraph (xiv).

• (2) Paragraph 53(2)(c) of the Act is amended by adding “and” at the end of subparagraph (xi), by striking out “and” at the end of subparagraph (xii) and by repealing subparagraph (xiii).

• (3) Subsections (1) and (2) apply after 2011.

• 12. (1) Paragraph (c) of the definition “superficial loss” in section 54 of the Act is replaced by the following:

  • (c) a disposition deemed to have been made by paragraph 33.1(11)(a), subsection 45(1), section 48 as it read in its application before 1993, section 50 or 70, subsection 104(4), section 128.1, paragraph 132.2(1)(f), subsection 138(11.3) or 142.5(2), section 142.6, or any of subsections 144(4.1) and (4.2) and 149(10),

• (2) The portion of the definition “superficial loss” in section 54 of the Act after paragraph (h) is replaced by the following:

  and, for the purpose of this definition,

  • (i) a right to acquire a property (other than a right, as security only, derived from a mortgage, hypothec, agreement for sale or similar obligation) is deemed to be a property that is identical to the property, and

  • (j) a share of the capital stock of a SIFT wind-up corporation in respect of a SIFT wind-up entity is, if the share was acquired before 2013, deemed to be a property that is identical to equity in the SIFT wind-up entity.

• (3) Subsection (1) applies to taxation years that begin after September 2006.

• (4) Subsection (2) applies to dispositions that occur after February 2, 2009.

• 13. (1) Paragraph 56(1)(d) of the Act is amended by striking out “or” at the end of subparagraph (i), by adding “or” at the end of subparagraph (ii) and by adding the following after subparagraph (ii):

  • (iii) received out of or under an annuity contract issued or effected as a TFSA;

• (2) Paragraph 56(1)(r) of the Act is amended by striking out “or” at the end of subparagraph (ii) and by adding the following after subparagraph (iii):

  • (iv) financial assistance provided under a program established by a government, or government agency, in Canada that provides income replacement benefits similar to income replacement benefits provided under a program established under the Employment Insurance Act, or

  • (v) amounts received by the taxpayer in the year under the Wage Earner Protection Program Act in respect of wages (within the meaning of that Act);

• (3) Subsection (1) applies to the 2009 and subsequent taxation years.

• (4) Subsection (2) applies to the 2003 and subsequent taxation years except that, in its application to the 2003 to 2007 taxation years, paragraph 56(1)(r) of the Act, as amended by subsection (2), is to be read without reference to its subparagraph (v).

• 14. (1) Paragraph 60(i) of the Act is replaced by the following:

  • Marginal note:Premium or payment under RRSP or RRIF

    (i) any amount that is deductible under section 146 or 146.3 or subsection 147.3(13.1) in computing the income of the taxpayer for the year;

• (2) Subsection (1) applies in respect of a registered retirement income fund in respect of which the last payment out of the fund is made after 2008.

• 15. (1) The Act is amended by adding the following after section 60.02:

  Marginal note:Additions to clause 60(l)(v)(B.2) for 2008

  • 60.021 (1) In determining the amount that may be deducted because of paragraph 60(l) in computing a taxpayer’s income for the 2008 taxation year, clause 60(l)(v)(B.2) shall be read as follows:

    • (B.2) the total of all amounts each of which is

      • (I) the taxpayer’s eligible amount (within the meaning assigned by subsection 146.3(6.11)) for the year in respect of a registered retirement income fund,

      • (II) the taxpayer’s eligible RRIF withdrawal amount (within the meaning assigned by subsection 60.021(2)) for the year in respect of a registered retirement income fund, or

      • (III) the taxpayer’s eligible variable benefit withdrawal amount (within the meaning assigned by subsection 60.021(3)) for the year in respect of an account of the taxpayer under a money purchase provision of a registered pension plan,

  • Marginal note:Meaning of eligible RRIF withdrawal amount

    (2) A taxpayer’s eligible RRIF withdrawal amount for a taxation year in respect of a registered retirement income fund under which the taxpayer is the annuitant at the beginning of the taxation year is

    • (a) except where paragraph (b) applies, the amount determined by the formula

      A – B

      where

      A

      is the lesser of

      • (i) the total of all amounts included, because of subsection 146.3(5), in computing the income of the taxpayer for the taxation year in respect of amounts received out of or under the fund (other than an amount paid by direct transfer from the fund to another fund or to a registered retirement savings plan), and

      • (ii) the amount that would, in the absence of subsection 146.3(1.1), be the minimum amount under the fund for the taxation year, and

      B

      is the minimum amount under the fund for the taxation year; and

    • (b) if the taxpayer attained 70 years of age in 2007, nil.

  • Marginal note:Meaning of eligible variable benefit withdrawal amount

    (3) A taxpayer’s eligible variable benefit withdrawal amount for a taxation year in respect of an account of the taxpayer under a money purchase provision of a registered pension plan is the amount determined by the formula

    A – B – C

    where

    A

    is the lesser of

    • (a) the total of all amounts each of which is the amount of a retirement benefit (other than a retirement benefit permissible under any of paragraphs 8506(1)(a) to (e) of the Regulations) paid from the plan in the taxation year in respect of the account and included, because of paragraph 56(1)(a), in computing the taxpayer’s income for the taxation year, and

    • (b) the amount that would, in the absence of paragraph 8506(7)(b) of the Regulations, be the minimum amount for the account for the taxation year;

    B

    is the minimum amount for the account for the taxation year; and

    C

    is the total of all contributions made by the taxpayer under the provision and designated for the purposes of subsection 8506(10) of the Regulations.

  • Marginal note:Expressions used in this section

    (4) For the purposes of this section,

    • (a) the term “money purchase provision” has the meaning assigned by subsection 147.1(1);

    • (b) the term “retirement benefit” has the meaning assigned by subsection 8500(1) of the Regulations; and

    • (c) the minimum amount for an account of a taxpayer under a money purchase provision of a registered pension plan is the amount determined in accordance with subsection 8506(5) of the Regulations.

• (2) Amounts paid by a taxpayer, to a registered retirement savings plan or registered retirement income fund under which the taxpayer is the annuitant, during the period that begins on March 2, 2009 and that ends on the day that is 30 days after the day on which this Act is assented to, are deemed for the purpose of paragraph 60(l) of the Act to have been made on March 1, 2009, and not when they were actually made, except that the amounts so deemed shall not exceed the total of all amounts each of which is

  • (a) the taxpayer’s eligible RRIF withdrawal amount for 2008 in respect of a registered retirement income fund, or

  • (b) the taxpayer’s eligible variable benefit withdrawal amount for 2008 in respect of an account of the taxpayer under a money purchase provision of a registered pension plan.

• 16. (1) Subparagraph 62(1)(c)(i) of the Act is replaced by the following:

  • (i) in any case described in subparagraph (a)(i) of the definition “eligible relocation” in subsection 248(1), the total of all amounts, each of which is an amount included in computing the taxpayer’s income for the taxation year from the taxpayer’s employment at a new work location or from carrying on the business at the new work location, or because of subparagraph 56(1)(r)(v) in respect of the taxpayer’s employment at the new work location, and

• (2) Subsection (1) applies to the 2008 and subsequent taxation years.

• 17. (1) Section 80.01 of the Act is amended by adding the following after subsection (5):

  • Marginal note:Deemed settlement on SIFT trust wind-up event

    (5.1) If a trust that is a SIFT wind-up entity is the only beneficiary under another trust (in this subsection referred to as the “subsidiary trust”), and a capital property that is a debt or other obligation (in this subsection referred to as the “subsidiary trust’s obligation”) of the subsidiary trust to pay an amount to the SIFT wind-up entity is, as a consequence of a distribution from the subsidiary trust that is a SIFT trust wind-up event, settled at a particular time without any payment of an amount or by the payment of an amount that is less than the principal amount of the subsidiary trust’s obligation

    • (a) paragraph (b) applies if

      • (i) the payment is less than the amount that would have been the adjusted cost base to the SIFT wind-up entity of the subsidiary trust’s obligation immediately before the particular time, and

      • (ii) the SIFT wind-up entity elects, in prescribed form on or before the SIFT wind-up entity’s filing-due date for the taxation year that includes the particular time, to have paragraph (b) apply;

    • (b) if this paragraph applies, the amount paid at the particular time in satisfaction of the principal amount of the subsidiary trust’s obligation is deemed to be equal to the amount that would be the adjusted cost base to the SIFT wind-up entity of the subsidiary trust’s obligation immediately before the particular time if that adjusted cost base included amounts added in computing the SIFT wind-up entity’s income in respect of the portion of the indebtedness representing unpaid interest, to the extent that the SIFT wind-up entity has not deducted any amounts as bad debts in respect of that unpaid interest; and

    • (c) for the purposes of applying section 80 to the subsidiary trust’s obligation, the subsidiary trust’s obligation is deemed to have been settled immediately before the time that is immediately before the distribution.

• (2) Subsection (1) applies after July 14, 2008.

• 18. (1) Section 85.1 of the Act is amended by adding the following after subsection (6):

  • Marginal note:Application of subsection (8)

    (7) Subsection (8) applies in respect of the disposition before 2013 by a taxpayer of SIFT wind-up entity equity (referred to subsection (8) as the “particular unit”) to a taxable Canadian corporation if

    • (a) the disposition occurs during a period (referred to in this subsection and subsection (8) as the “exchange period”) of no more than 60 days at the end of which all of the equity in the SIFT wind-up entity is owned by the corporation;

    • (b) the taxpayer receives no consideration for the disposition other than a share (referred to in this subsection and subsection (8) as the “exchange share”) of the capital stock of the corporation that is issued during the exchange period to the taxpayer by the corporation;

    • (c) neither of subsections 85(1) and (2) applies to the disposition; and

    • (d) all of the exchange shares issued to holders of equity in the SIFT wind-up entity are shares of a single class of the capital stock of the corporation.

  • Marginal note:Rollover on SIFT unit for share exchange

    (8) If this subsection applies in respect of a disposition by a taxpayer of a particular unit of a SIFT wind-up entity to a corporation for consideration that is an exchange share, the following rules apply:

    • (a) the taxpayer’s proceeds of disposition of the particular unit, and cost of the exchange share, are deemed to be equal to the cost amount to the taxpayer of the particular unit immediately before the disposition;

    • (b) if the particular unit was immediately before the disposition taxable Canadian property of the taxpayer, the exchange share is deemed to be taxable Canadian property of the taxpayer;

    • (c) if the exchange share’s fair market value immediately after the disposition exceeds the particular unit’s fair market value at the time of the disposition, the excess is deemed to be an amount that section 15 requires to be included in computing the taxpayer’s income for the taxpayer’s taxation year in which the disposition occurs;

    • (d) if the particular unit’s fair market value at the time of the disposition exceeds the exchange share’s fair market value immediately after the disposition, and it is reasonable to regard any part of the excess as a benefit that the taxpayer desired to have conferred on a person, or partnership, with whom the taxpayer does not deal at arm’s length, the excess is deemed to be an amount that section 15 requires to be included in computing the taxpayer’s income for the taxpayer’s taxation year in which the disposition occurs;

    • (e) the cost to the corporation of the particular unit is deemed to be the lesser of

      • (i) the fair market value of the particular unit immediately before the disposition, and

      • (ii) the amount determined for B in the formula in paragraph (f) in respect of the particular unit; and

    • (f) in computing the paid up capital in respect of each class of shares of the capital stock of the corporation at any time after the disposition there shall be deducted the amount determined by the formula

      (A – B) × C/A

      where

      A

      is the increase, if any, as a result of the disposition, in the paid-up capital in respect of all the shares of the capital stock of the corporation, computed without reference to this paragraph as it applies to the disposition,

      B

      is the amount determined by the formula

      D – E

      where

      D

      is

      • (i) unless subparagraph (ii) applies, the total of all amounts each of which is

        • (A) if the SIFT wind-up entity is a trust, the fair market value of property received by the SIFT wind-up entity on the issuance of the particular unit, or

        • (B) if the SIFT wind-up entity is a partnership,

          • (I) an amount that has at any time been added, in computing the adjusted cost base to any taxpayer of the particular unit on or before the disposition, because of subparagraph 53(1)(e)(iv) or (x), or

          • (II) an amount that would at any time have been added, in computing the adjusted cost base to any taxpayer of the particular unit on or before the disposition, because of subparagraph 53(1)(e)(i) if subsection 96(1) were read without reference to its paragraph (d) and the partnership deducted all amounts otherwise deductible because of that paragraph, and

      • (ii) if the SIFT wind-up entity has on or after the end of the exchange period issued a unit, nil, and

      E

      is the total of all amounts each of which

      • (i) if the SIFT wind-up entity is a trust, has become payable by the SIFT wind-up entity, in respect of the particular unit, to any holder of the unit on or before the disposition, other than an amount that has become payable out of its income (determined without reference to subsection 104(6)) or capital gains, and

      • (ii) if the SIFT wind-up entity is a partnership,

        • (A) has at any time been deducted, in computing the adjusted cost base to any taxpayer of the particular unit on or before the disposition, because of subparagraph 53(2)(c)(iv) or (v), or

        • (B) would have at any time been deducted, in computing the adjusted cost base to any taxpayer of the particular unit on or before the disposition, because of subparagraph 53(2)(c)(i) if subsection 96(1) were read without reference to its paragraph (d) and the partnership deducted all amounts otherwise deductible because of that paragraph, and

      C

      is the increase, if any, as a result of the disposition, in the paid-up capital in respect of the class of shares, computed without reference to this paragraph as it applies to the disposition.

• (2) Subsection (1) applies to

  • (a) dispositions that occur on or after July 14, 2008; and

  • (b) a disposition, by a taxpayer to a corporation, that occurs on or after December 20, 2007 and before July 14, 2008, if the corporation (jointly with the taxpayer, if the taxpayer and the corporation have validly elected that subsection 85(1) or (2) of the Act apply to the disposition) elects in writing, filed with the Minister of National Revenue on or before the corporation’s filing-due date for its taxation year that includes the day on which this Act is assented to, that this subsection apply to the disposition.

• 19. (1) Paragraph 87(2)(g.2) of the Act is replaced by the following:

  • Marginal note:Financial institution rules

    (g.2) for the purposes of paragraphs 142.4(4)(c) and (d) and subsections 142.5(5) and (7), 142.51(11) and 142.6(1), the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;

• (2) Subsection 87(2) of the Act is amended by adding the following after paragraph (s):

  • Marginal note:Deemed SIFT wind-up corporation

    (s.1) if a predecessor corporation was a SIFT wind-up corporation immediately before the amalgamation, the new corporation is deemed to be a SIFT wind-up corporation;

• (3) Subsection 87(2.2) of the Act is replaced by the following:

  • Marginal note:Amalgamation of insurers

    (2.2) Where there has been an amalgamation and one or more of the predecessor corporations was an insurer, the new corporation is, notwithstanding subsection (2), deemed, for the purposes of paragraphs 12(1)(d), (e), (e.1), (i) and (s), subsection 12.5(8), paragraphs 20(1)(l), (l.1), (p) and (jj) and 20(7)(c), subsections 20(22) and 20.4(4), sections 138, 138.1, 140, 142 and 148 and Part XII.3, to be the same corporation as, and a continuation of, each of those predecessor corporations.

• (4) Subsections (1) and (3) apply to taxation years that begin after September 2006.

• (5) Subsection (2) applies after December 19, 2007.

• 20. (1) Subparagraph 88(1)(g)(i) of the Act is replaced by the following:

  • (i) for the purposes of paragraphs 12(1)(d), (e), (e.1), (i) and (s), subsection 12.5(8), paragraphs 20(1)(l), (l.1), (p) and (jj) and 20(7)(c), subsections 20(22) and 20.4(4), sections 138, 138.1, 140, 142 and 148 and Part XII.3, the parent is deemed to be the same corporation as, and a continuation of, the subsidiary, and

• (2) Subsection (1) applies to taxation years that begin after September 2006.

• 21. (1) The Act is amended by adding the following after section 88:

  Marginal note:Application

  • 88.1 (1) Subsection (2) applies to a trust’s distribution of property to a taxpayer if

    • (a) the distribution is a SIFT trust wind-up event;

    • (b) the trust is

      • (i) a SIFT wind-up entity whose only beneficiary, at all times at which the trust makes a distribution that is a SIFT trust wind-up event, is a taxable Canadian corporation, or

      • (ii) a trust whose only beneficiary, at all times at which the trust makes a distribution that is a SIFT trust wind-up event, is another trust described by subparagraph (i);

    • (c) where the trust is a SIFT wind-up entity, the distribution occurs no more than 60 days after the earlier of

      • (i) the first SIFT trust wind-up event of the trust, and

      • (ii) the first distribution to the trust that is a SIFT trust wind-up event of another trust; and

    • (d) if the property is shares of the capital stock of a taxable Canadian corporation,

      • (i) the property was not acquired by the trust on a distribution to which subsection 107(3.1) applies, and

      • (ii) the trust elects in writing, filed with the Minister on or before the trust’s filing-due date for its taxation year that includes the time of the distribution, that this section apply to the distribution.

  • Marginal note:SIFT trust wind-up event

    (2) If this subsection applies to a trust’s distribution of property to a taxpayer, subsections 88(1) to (1.7), and section 87 and paragraphs 256(7)(a) to (e) as they apply for the purposes of those subsections, apply, with any modifications that the circumstances require, as if

    • (a) the trust were a taxable Canadian corporation (in this subsection referred to as the “subsidiary”) that is not a private corporation;

    • (b) where the taxpayer is a SIFT wind-up entity, the taxpayer were a taxable Canadian corporation that is not a private corporation;

    • (c) the distribution were a winding-up of the subsidiary;

    • (d) the taxpayer’s interest as a beneficiary under the trust were shares of a single class of shares of the capital stock of the subsidiary owned by the taxpayer;

    • (e) paragraph 88(1)(b) deemed the taxpayer’s proceeds of disposition of the shares described in paragraph (d) and owned by the taxpayer immediately before the distribution to be equal to the adjusted cost base to the taxpayer of the taxpayer’s interest as a beneficiary under the trust immediately before the distribution;

    • (f) each trust, a majority-interest beneficiary (in this subsection, within the meaning assigned by section 251.1) of which is another trust that is by operation of this subsection treated as if it were a corporation, were a corporation; and

    • (g) except for the purposes of subsections 88(1.1) and (1.2), the taxpayer last acquired control of the subsidiary and of each corporation (including a trust that is by operation of this subsection treated as if it were a corporation) controlled by the subsidiary at the time, if any, at which the taxpayer last became a majority-interest beneficiary of the trust.

• (2) Subsection (1) applies after July 14, 2008, except that subsection 88.1(1) of the Act, as enacted by subsection (1), is to be read without reference to its paragraph (c) in its application to a trust’s distribution of property, if the distribution occurs no more than 60 days after the day on which this Act is assented to.

• 22. (1) The definition “general rate income pool” in subsection 89(1) of the Act is replaced by the following:

  “general rate income pool”

  « compte de revenu à taux général »

  “general rate income pool” at the end of a particular taxation year, of a taxable Canadian corporation that is a Canadian-controlled private corporation or a deposit insurance corporation in the particular taxation year, is the positive or negative amount determined by the formula

  A – B

  where

  A

  is the positive or negative amount that would, before taking into consideration the specified future tax consequences for the particular taxation year, be determined by the formula

  C + D + E + F – G

  where

  C

  is the corporation’s general rate income pool at the end of its preceding taxation year,

  D

  is the amount, if any, that is the product of the corporation’s general rate factor for the particular taxation year multiplied by its adjusted taxable income for the particular taxation year,

  E

  is the total of all amounts each of which is

  • (a) an eligible dividend received by the corporation in the particular taxation year, or

  • (b) an amount deductible under section 113 in computing the taxable income of the corporation for the particular taxation year,

  F

  is the total of all amounts determined under subsections (4) to (6) in respect of the corporation for the particular taxation year, and

  G

  is

  • (a) unless paragraph (b) applies, the amount, if any, by which

    • (i) the total of all amounts each of which is the amount of an eligible dividend paid by the corporation in its preceding taxation year

    exceeds

    • (ii) the total of all amounts each of which is an excessive eligible dividend designation made by the corporation in its preceding taxation year, or

  • (b) if subsection (4) applies to the corporation in the particular taxation year, nil, and

  B

  is the amount determined by the formula

  H × (I – J)

  where

  H

  is the corporation’s general rate factor for the particular taxation year,

  I

  is the total of the corporation’s full rate taxable incomes (as would be defined in the definition “full rate taxable income” in subsection 123.4(1), if that definition were read without reference to its subparagraphs (a)(i) to (iii)) for the corporation’s preceding three taxation years, determined without taking into consideration the specified future tax consequences, for those preceding taxation years, that arise in respect of the particular taxation year, and

  J

  is the total of the corporation’s full rate taxable incomes (as would be defined in the definition “full rate taxable income” in subsection 123.4(1), if that definition were read without reference to its subparagraphs (a)(i) to (iii)) for those preceding taxation years;

• (2) Subparagraph (b)(iii) of the definition “paid-up capital” in subsection 89(1) of the Act is replaced by the following:

  • (iii) where the particular time is after March 31, 1977, an amount equal to the paid-up capital in respect of that class of shares at the particular time, computed without reference to the provisions of this Act except subsections 51(3) and 66.3(2) and (4), sections 84.1 and 84.2, subsections 85(2.1), 85.1(2.1) and (8), 86(2.1), 87(3) and (9), 128.1(2) and (3), 138(11.7), 139.1(6) and (7), 192(4.1) and 194(4.1) and section 212.1,

• (3) Subsection 89(1) of the Act is amended by adding the following in alphabetical order:

  “adjusted taxable income”

  « revenu imposable rajusté »

  “adjusted taxable income” of a corporation for a taxation year is the amount determined by the formula

  A – B – C

  where

  A

  is

  • (a) unless paragraph (b) applies, the corporation’s taxable income for the taxation year, and

  • (b) if the corporation is a deposit insurance corporation in the taxation year, nil,

  B

  is the amount determined by multiplying the amount, if any, deducted by the corporation under subsection 125(1) for the taxation year by the quotient obtained by dividing 100 by the rate of the deduction provided under that subsection for the taxation year, and

  C

  is

  • (a) if the corporation is a Canadian-controlled private corporation in the taxation year, the lesser of the corporation’s aggregate investment income for the taxation year and the corporation’s taxable income for the taxation year, and

  • (b) in any other case, nil;

  “general rate factor”

  « facteur du taux géneral »

  “general rate factor” of a corporation for a taxation year is the total of

  • (a) that proportion of 0.68 that the number of days in the taxation year that are before 2010 is of the number of days in the taxation year,

  • (b) that proportion of 0.69 that the number of days in the taxation year that are in 2010 is of the number of days in the taxation year,

  • (c) that proportion of 0.70 that the number of days in the taxation year that are in 2011 is of the number of days in the taxation year, and

  • (d) that proportion of 0.72 that the number of days in the taxation year that are after 2011 is of the number of days in the taxation year;

• (4) Subsections (1) and (3) apply to the 2006 and subsequent taxation years.

• (5) Subsection (2) applies after December 19, 2007.

• 23. (1) Subsections 91(5.1) to (5.3) of the Act are repealed.

• (2) Subsection (1) applies after 2011.

• 24. (1) Subsection 92(1) of the Act is replaced by the following:

  Marginal note:Adjusted cost base of share of foreign affiliate

  • 92. (1) In computing, at any time in a taxation year, the adjusted cost base to a taxpayer resident in Canada of any share owned by the taxpayer of the capital stock of a foreign affiliate of the taxpayer,

    • (a) there shall be added in respect of that share any amount included in respect of that share under subsection 91(1) or (3) in computing the taxpayer’s income for the year or any preceding taxation year (or that would have been required to have been so included in computing the taxpayer’s income but for subsection 56(4.1) and sections 74.1 to 75 of this Act and section 74 of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952); and

    • (b) there shall be deducted in respect of that share

      • (i) any amount deducted by the taxpayer under subsection 91(2) or (4), and

      • (ii) any dividend received by the taxpayer before that time, to the extent of the amount deducted by the taxpayer, in respect of the dividend, under subsection 91(5)

      in computing the taxpayer’s income for the year or any preceding taxation year (or that would have been deductible by the taxpayer but for subsection 56(4.1) and sections 74.1 to 75 of this Act and section 74 of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952).

• (2) Subsection (1) applies after 2011.

• 25. (1) Subsection 95(1) of the Act is amended by adding the following in alphabetical order:

  “antecedent corporation”

  « société antécédente »

  “antecedent corporation” of a particular corporation means

  • (a) a predecessor corporation (within the meaning assigned by subsection 87(1)) in respect of an amalgamation to which subsection 87(11) applied and by which the particular corporation was formed,

  • (b) a predecessor corporation (within the meaning of subsection 87(1)) of the corporation (referred to in this definition as the “first amalco”) that was formed on an amalgamation of the predecessor corporation and another corporation, where

    • (i) shares of the capital stock of the predecessor corporation that were not owned by the other corporation, or by a corporation of which the other corporation is a subsidiary wholly-owned corporation, were exchanged on the amalgamation for shares of the capital stock of the first amalco that were, during the series of transactions or events that includes the amalgamation, redeemed, acquired or cancelled by the first amalco for money,

    • (ii) the first amalco was a predecessor corporation (within the meaning assigned by subsection 87(1)) in respect of an amalgamation to which subsection 87(11) applied and by which the particular corporation was formed, and

    • (iii) the amalgamation referred to in subparagraph (i) occurred in a series of transactions or events that included the amalgamation referred to in subparagraph (ii),

  • (c) a corporation that was wound-up into the particular corporation in a winding-up to which subsection 88(1) applied, or

  • (d) an antecedent corporation of an antecedent corporation of the particular corporation;

  “calculating currency”

  « monnaie de calcul »

  “calculating currency” for a taxation year of a foreign affiliate of a taxpayer means

  • (a) the currency of the country in which the foreign affiliate is resident at the end of the taxation year, or

  • (b) any currency that the taxpayer demonstrates to be reasonable in the circumstances;

  “designated acquired corporation”

  « société acquise désignée »

  “designated acquired corporation” of a taxpayer means a particular antecedent corporation of the taxpayer if

  • (a) the taxpayer or another antecedent corporation of the taxpayer acquired control of

    • (i) the particular antecedent corporation, or

    • (ii) a corporation (referred to in this definition as a “successor corporation”) of which the particular antecedent corporation is an antecedent corporation, and

  • (b) immediately before the acquisition of control or a series of transactions or events that includes the acquisition of control, the taxpayer, the other antecedent corporation or a corporation resident in Canada of which the taxpayer or the other antecedent corporation is a subsidiary wholly-owned corporation, as the case may be, dealt at arm’s length (otherwise than because of a right referred to in paragraph 251(5)(b)) with the particular antecedent corporation or the successor corporation, as the case may be;

  “specified person or partnership”

  « personne ou société de personnes déterminée »

  “specified person or partnership”, in respect of a taxpayer, at any time means the taxpayer or a person (other than a designated acquired corporation of the taxpayer), or a partnership, that is at that time

  • (a) a person (other than a partnership) that is resident in Canada and does not, at that time, deal at arm’s length with the taxpayer,

  • (b) a specified predecessor corporation of the taxpayer or of a specified person or partnership in respect of the taxpayer,

  • (c) a foreign affiliate of

    • (i) the taxpayer,

    • (ii) a person that is at that time a specified person or partnership in respect of the taxpayer under this definition because of paragraph (a) or (b), or

    • (iii) a partnership that is at that time a specified person or partnership in respect of the taxpayer under this definition because of paragraph (d), or

  • (d) a partnership a member of which is at that time a specified person or partnership in respect of the taxpayer under this definition;

  “specified predecessor corporation”

  « société remplacée déterminée »

  “specified predecessor corporation” of a particular corporation means

  • (a) an antecedent corporation of the particular corporation,

  • (b) a predecessor corporation (within the meaning assigned by subsection 87(1)) in respect of an amalgamation by which the particular corporation was formed, or

  • (c) a specified predecessor corporation of a specified predecessor corporation of the particular corporation;

• (2) Paragraph 95(2)(f) of the Act is replaced by the following:

  • (f) except as otherwise provided in this subdivision and except to the extent that the context otherwise requires, a foreign affiliate of a taxpayer is deemed to be at all times resident in Canada for the purposes of determining, in respect of the taxpayer for a taxation year of the foreign affiliate, each amount that is the foreign affiliate’s

    • (i) capital gain, capital loss, taxable capital gain or allowable capital loss from a disposition of a property, or

    • (ii) income or loss from a property, from a business other than an active business or from a non-qualifying business;

  • (f.1) in computing an amount described in paragraph (f) in respect of a property or a business, there is not to be included any portion of that amount that can reasonably be considered to have accrued, in respect of the property (including for the purposes of this paragraph any property for which the property was substituted) or the business, while no person or partnership that held the property or carried on the business was a specified person or partnership in respect of the taxpayer referred to in paragraph (f);

  • (f.11) in determining an amount described in paragraph (f) for a taxation year of a foreign affiliate of a taxpayer,

    • (i) if the amount is described in subparagraph (f)(i), this Act is to be read without reference to section 26 of the Income Tax Application Rules, and

    • (ii) if the amount is described in subparagraph (f)(ii),

      • (A) this Act is to be read without reference to subsections 14(1.01) to (1.03), 17(1) and 18(4) and section 91, except that, where the foreign affiliate is a member of a partnership, section 91 is to be applied to determine the income or loss of the partnership and for that purpose subsection 96(1) is to be applied to determine the foreign affiliate’s share of that income or loss of the partnership, and

      • (B) if the foreign affiliate has, in the taxation year, disposed of a foreign resource property in respect of a country, it is deemed to have designated, in respect of the disposition and in accordance with subparagraph 59(1)(b)(ii) for the taxation year, the amount, if any, by which

        • (I) the amount determined under paragraph 59(1)(a) in respect of the disposition

        exceeds

        • (II) the amount determined under subparagraph 59(1)(b)(i) in respect of the disposition;

  • (f.12) a foreign affiliate of a taxpayer shall determine each of the following amounts using its calculating currency for a taxation year:

    • (i) subject to paragraph (f.13), each capital gain, capital loss, taxable capital gain and allowable capital loss of the foreign affiliate for the taxation year from the disposition, at any time, of a property that, at that time, was an excluded property of the foreign affiliate,

    • (ii) its income or loss for the taxation year from each active business carried on by it in the taxation year in a country, and

    • (iii) its income or loss that is included in computing its income or loss from an active business for the taxation year because of paragraph (a);

  • (f.13) where the calculating currency of a foreign affiliate of a taxpayer is a currency other than Canadian currency, the foreign affiliate shall determine the amount included in computing its foreign accrual property income, in respect of the taxpayer for a taxation year of the foreign affiliate, attributable to its capital gain or taxable capital gain, from the disposition of an excluded property in the taxation year, in Canadian currency by converting the amount of the capital gain, or taxable capital gain, otherwise determined under subparagraph (f.12)(i) using its calculating currency for the taxation year into Canadian currency using the rate of exchange quoted by the Bank of Canada at noon on the day on which the disposition was made;

  • (f.14) a foreign affiliate of a taxpayer shall determine using Canadian currency each amount of its income, loss, capital gain, capital loss, taxable capital gain or allowable capital loss for a taxation year, other than an amount to which paragraph (f.12) or (f.13) applies;

  • (f.15) for the purpose of applying subparagraph (f.12)(i), the reference in subsection 39(2) to “the currency or currencies of one or more countries other than Canada relative to Canadian currency” is to be read as a reference to “one or more currencies other than the calculating currency relative to the calculating currency” and the references in that subsection to “of a country other than Canada” are to be read as references to “other than the calculating currency”;

• (3) The portion of subsection 95(2.2) of the Act before paragraph (a) is replaced by the following:

  • Marginal note:Qualifying interest throughout year

    (2.2) For the purposes of paragraphs (2)(a) and (g), a non-resident corporation that is not a foreign affiliate of a taxpayer in respect of which the taxpayer has a qualifying interest throughout a particular taxation year is deemed to be a foreign affiliate of the taxpayer in respect of which the taxpayer has a qualifying interest throughout that particular taxation year if

• (4) Section 95 of the Act is amended by adding the following after subsection (2.2):

  • Marginal note:Controlled foreign affiliate throughout year

    (2.201) For the purposes of paragraphs (2)(a) and (g), a non-resident corporation is deemed to be a controlled foreign affiliate of a taxpayer throughout a taxation year of the non-resident corporation if

    • (a) in the taxation year, a person or partnership acquires or disposes of shares of the capital stock of a corporation and, because of the acquisition or disposition, the non-resident corporation becomes or ceases to be a controlled foreign affiliate of the taxpayer; and

    • (b) at either or both of the beginning and end of the taxation year, the non-resident corporation is a controlled foreign affiliate of the taxpayer.

• (5) Section 95 of the Act is amended by adding the following after subsection (2.5):

  • Rule for the definition “specified person or partnership”

    (2.6) For the purposes of paragraphs (a) to (d) of the definition “specified person or partnership” in subsection (1), if a person or partnership (referred to in this subsection as the “taxpayer”) is not dealing at arm’s length with another person or partnership (referred to in this subsection as the “particular person”) at a particular time, the taxpayer is deemed to have existed and not to have dealt at arm’s length with the particular person, nor with each specified predecessor corporation of the particular person, throughout the period that began when the particular person or the specified predecessor corporation, as the case may be, came into existence and that ends at the particular time.

• (6) Subsections (1), (2) and (5) apply to taxation years of a foreign affiliate of a taxpayer that begin after October 2, 2007. However,

  • (a) for taxation years of a foreign affiliate that begin before 2009, subparagraph 95(2)(f)(ii) of the Act, as enacted by subsection (2), shall be read as follows:

    • (ii) income or loss from a property or from a business other than an active business;

  • (b) if the taxpayer elects in writing in respect of all of its foreign affiliates and files the election with the Minister of National Revenue on or before the day (referred to in this subsection as the taxpayer’s “election day”) that is the later of the taxpayer’s filing-due date for the taxpayer’s taxation year that includes the day on which this Act is assented to and the day that is one year after the day on which this Act is assented to, subsection 95(2.6) of the Act, as enacted by subsection (5), shall, in its application to a taxation year of a foreign affiliate of the taxpayer that begins after October 2, 2007 and before July 14, 2008, be read as follows:

    • (2.6) For the purposes of paragraphs (a) to (d) of the definition “specified person or partnership” in subsection (1), in determining whether, at a particular time, a person was not, at a time (referred to in this subsection as the “prior time”) that is before the particular time and at which that person did not exist, dealing at arm’s length with another person, where the person exists at the particular time but did not exist at the prior time

      • (a) the person is deemed to exist at the prior time; and

      • (b) where the person is related to another person at the particular time, the person is deemed to have been related to that other person at the prior time.

  • (c) if the taxpayer elects in writing in respect of all of its foreign affiliates and files the election with the Minister of National Revenue on or before the taxpayer’s election day, subsections (1), (2) and (5) also apply to taxation years of a foreign affiliate of the taxpayer that begin before October 2, 2007 and after the date chosen by the taxpayer under paragraph (d), except that subparagraph 95(2)(f)(ii) of the Act, as enacted by subsection (2), shall be read in its application to those taxation years in the manner described in paragraph (a); and

  • (d) to be valid, an election under paragraph (c) must include the identification by the taxpayer of its choice of one of the following dates:

    • (i) December 31, 1994,

    • (ii) December 20, 2002, or

    • (iii) February 27, 2004.

• (7) Subsection (3) applies to taxation years of a foreign affiliate of a taxpayer that begin after 1994. However, the portion of subsection 95(2.2) of the Act before paragraph (a), as enacted by subsection (3), shall, in its application to taxation years of a foreign affiliate that begin after 1994 and before 2009, be read as follows:

  • (2.2) For the purposes of paragraphs (2)(a) and (g),

• (8) Subsection (4) applies to taxation years of a foreign affiliate of a taxpayer that end after 1999. However,

  • (a) subject to paragraph (b), for taxation years of a foreign affiliate that begin before December 21, 2002, the reference to “for the purposes of paragraphs (2)(a) and (g)” in subsection 95(2.201) of the Act, as enacted by subsection (4), shall be read as a reference to “for the purpose of paragraph (2)(a)”; and

  • (b) if the taxpayer has made a valid election under subsection 26(46) of the Budget and Economic Statement Implementation Act, 2007, subsection (4) applies to taxation years of a foreign affiliate of the taxpayer that begin after 1994.

• (9) Notwithstanding subsections 152(4) to (5) of the Act, any assessment of a taxpayer’s tax, interest and penalties payable under the Act for any taxation year shall be made that is necessary to take into account the provisions of subsections (1) to (8).

• 26. (1) The portion of subsection 107(2) of the Act before paragraph (a) is replaced by the following:

  • Marginal note:Distribution by personal trust

    (2) Subject to subsections (2.001), (2.002) and (4) to (5), if at any time a property of a personal trust or a prescribed trust is distributed (otherwise than as a SIFT trust wind-up event) by the trust to a taxpayer who was a beneficiary under the trust and there is a resulting disposition of all or any part of the taxpayer’s capital interest in the trust,

• (2) The portion of subsection 107(2.1) of the Act before paragraph (a) is replaced by the following:

  • Marginal note:Other distributions

    (2.1) Where at any time a property of a trust is distributed by the trust to a beneficiary under the trust, there would, if this Act were read without reference to paragraphs (h) and (i) of the definition “disposition” in subsection 248(1), be a resulting disposition of all or any part of the beneficiary’s capital interest in the trust (which interest or part, as the case may be, is in this subsection referred to as the “former interest”) and the rules in subsections (2) and (3.1) and sections 88.1 and 132.2 do not apply in respect of the distribution,

• (3) Section 107 of the Act is amended by adding the following after subsection (2.2):

  • Marginal note:Application of subsection (3.1)

    (3) Subsection (3.1) applies to a trust’s distribution of property to a taxpayer if

    • (a) the distribution is a SIFT trust wind-up event to which section 88.1 does not apply;

    • (b) the property is a share and the only shares distributed on any SIFT trust wind-up event of the trust are of a single class of the capital stock of a taxable Canadian corporation; and

    • (c) where the trust is a SIFT wind-up entity, the distribution occurs no more than 60 days after the earlier of

      • (i) the first SIFT trust wind-up event of the trust, and

      • (ii) the first distribution to the trust that is a SIFT trust wind-up event of another trust.

  • Marginal note:SIFT trust wind-up event

    (3.1) If this subsection applies to a trust’s distribution of property, the following rules apply:

    • (a) the trust is deemed to have disposed of the property for proceeds of disposition equal to the adjusted cost base to the trust of the property immediately before the distribution;

    • (b) the taxpayer is deemed to have disposed of the taxpayer’s interest as a beneficiary under the trust for proceeds of disposition equal to the cost amount to the taxpayer of the interest immediately before the distribution;

    • (c) the taxpayer is deemed to have acquired the property at a cost equal to

      • (i) if, at all times at which the trust makes a distribution that is a SIFT trust wind-up event, the taxpayer is the only beneficiary under the trust and is a SIFT wind-up entity or a taxable Canadian corporation, the adjusted cost base to the trust of the property immediately before the distribution, and

      • (ii) in any other case, the cost amount to the taxpayer of the taxpayer’s interest as a beneficiary under the trust immediately before the distribution;

    • (d) if the taxpayer’s interest as a beneficiary under the trust was immediately before the disposition taxable Canadian property of the taxpayer, the property is deemed to be taxable Canadian property of the taxpayer; and

    • (e) if a liability of the trust becomes as a consequence of the distribution a liability of the corporation described in paragraph (3)(b) in respect of the distribution, and the amount payable by the corporation on the maturity of the liability is the same as the amount that would have been payable by the trust on its maturity,

      • (i) the transfer of the liability by the trust to the corporation is deemed not to have occurred, and

      • (ii) the liability is deemed

        • (A) to have been incurred or issued by the corporation at the time at which, and under the agreement under which, it was incurred or issued by the trust, and

        • (B) not to have been incurred or issued by the trust.

• (4) Subsections (1) to (3) apply after July 14, 2008, except that

  • (a) paragraph 107(3)(b) of the Act, as enacted by subsection (3), is to be read without reference to “of a single class” in its application to a trust’s distribution of property before February 3, 2009; and

  • (b) subsection 107(3) of the Act, as enacted by subsection (3), is to be read without reference to its paragraph (c) in its application to a trust’s distribution of property, if the distribution occurs no more than 60 days after the day on which this Act is assented to.

• 27. (1) Paragraph 107.4(3)(f) of the Act is replaced by the following:

  • (f) if the property was deemed to be taxable Canadian property of the transferor by this paragraph or paragraph 44.1(2)(c), 51(1)(f), 85(1)(i) or 85.1(1)(a) or (8)(b), subsection 85.1(5) or 87(4) or (5) or paragraph 97(2)(c) or 107(2)(d.1) or (3.1)(d), the property is deemed to be taxable Canadian property of the transferee trust;

• (2) Subsection (1) applies

  • (a) to dispositions that occur after December 23, 1998; and

  • (b) in respect of the 1996 and subsequent taxation years, to transfers of capital property that occurred before December 24, 1998.

• 28. (1) The portion of the definition “cost amount” in subsection 108(1) of the Act before paragraph (a) is replaced by the following:

  “cost amount”

  « coût indiqué »

  “cost amount” to a taxpayer at any time of a capital interest or part of it, as the case may be, in a trust, means (notwithstanding subsection 248(1) and except for the purposes of subsection 107(3.1) and section 107.4 and except in respect of a capital interest in a trust that is at that time a foreign affiliate of the taxpayer),

• (2) Subsection (1) applies after July 14, 2008.

• 29. (1) Paragraph 110.1(8)(e) of the English version of the Act is replaced by the following:

  • (e) the donee is a registered charity that, in the opinion of the Minister for International Cooperation (or, if there is no such Minister, the Minister responsible for the Canadian International Development Agency) meets conditions prescribed by regulation.

• (2) Section 110.1 of the Act is amended by adding the following after subsection (8):

  • Marginal note:Rules governing international medical charities

    (9) For the purpose of paragraph (8)(e),

    • (a) for greater certainty, nothing in paragraph (8)(b) modifies the application to a registered charity of the prescribed conditions referred to in paragraph (8)(e);

    • (b) if, in respect of a registered charity, the Minister referred to in paragraph (8)(e) is of the opinion described in that paragraph

      • (i) that Minister may also designate a period of time during which that opinion is valid, and

      • (ii) notwithstanding subparagraph (i), the opinion may be revoked at any time by that Minister if

        • (A) that Minister is of the opinion that the registered charity no longer meets prescribed conditions referred to in paragraph (8)(e), or

        • (B) any person has made any misrepresentation that is attributable to neglect, carelessness or wilful default for the purpose of obtaining the opinion; and

    • (c) a revocation referred to in subparagraph (b)(ii) is effective as of the time that notice, in writing, of the revocation is issued by that Minister to the registered charity.

• (3) Subsections (1) and (2) apply in respect of gifts made after June 2008.

• 30. (1) Subsection 111(8) of the Act is amended by adding the following in alphabetical order:

  “exchange rate”

  « taux de change »

  “exchange rate” at any time in respect of a currency of a country other than Canada means the rate of exchange between that currency and Canadian currency quoted by the Bank of Canada at noon on the day that includes that time or, if that day is not a business day, on the day that immediately precedes that day, or a rate of exchange acceptable to the Minister;

  “foreign currency debt”

  « dette en monnaie étrangère »

  “foreign currency debt” means a debt obligation denominated in a currency of a country other than Canada;

• (2) Section 111 of the Act is amended by adding the following after subsection (11):

  • Marginal note:Foreign currency debt on acquisition of control

    (12) For the purposes of subsection (4), if at any time a corporation owes a foreign currency debt in respect of which the corporation would have had, if the foreign currency debt had been repaid at that time, a capital loss or gain, the corporation is deemed to own at the time (in this subsection referred to as the “measurement time”) that is immediately before that time a property

    • (a) the adjusted cost base of which at the measurement time is the amount determined by the formula

      A + B – C

      where

      A

      is the amount of principal owed by the corporation under the foreign currency debt at the measurement time, calculated, for greater certainty, using the exchange rate applicable at the measurement time,

      B

      is the portion of any gain, previously recognized in respect of the foreign currency debt because of this section, that is reasonably attributable to the amount described in A, and

      C

      is the portion of any capital loss previously recognized in respect of the foreign currency debt because of this section, that is reasonably attributable to the amount described in A; and

    • (b) the fair market value of which is the amount that would be the amount of the principal owed by the corporation under the foreign currency debt at the measurement time if that amount were calculated using the exchange rate applicable at the time of the original borrowing.

• (3) Subsections (1) and (2) apply to any acquisition of control of a corporation that occurs

  • (a) after March 7, 2008, other than an acquisition of control that occurs before 2009 under the terms of an agreement made in writing on or before March 7, 2008; or

  • (b) after 2005, if the corporation so elects in writing and files the election with the Minister of National Revenue on or before the corporation’s filing-due date for the corporation’s taxation year that includes the day on which this Act is assented to.

• (4) If an election under paragraph (3)(b) is made by the corporation in respect of an acquisition of control, a designation under paragraph 111(4)(e) of the Act by the corporation for its taxation year that ended immediately before the acquisition of control is deemed to have been made in a timely manner if that designation is made on or before the corporation’s filing-due date for its taxation year that includes the day on which this Act is assented to.

• 31. (1) Subparagraph 115(1)(a)(iii.21) of the Act is replaced by the following:

  • (iii.21) the total of all amounts, each of which is an amount included under subparagraph 56(1)(r)(v) or section 56.3 in computing the non-resident person’s income for the year,

• (2) Subsection (1) applies to the 2008 and subsequent taxation years.

• 32. (1) Paragraph 116(6)(b) of the Act is replaced by the following:

  • (b) a security that is

    • (i) listed on a recognized stock exchange, and

    • (ii) either

      • (A) a share of the capital stock of a corporation, or

      • (B) SIFT wind-up entity equity;

• (2) Subsection (1) applies after July 14, 2008.

• 33. (1) Subsection 117(2) of the Act is replaced by the following:

  • Marginal note:Rates for taxation years after 2008

    (2) The tax payable under this Part by an individual on the individual’s taxable income or taxable income earned in Canada, as the case may be (in this subdivision referred to as the “amount taxable”) for a taxation year is

    • (a) 15% of the amount taxable, if the amount taxable is equal to or less than the amount determined for the taxation year in respect of $40,726;

    • (b) if the amount taxable is greater than $40,726 and is equal to or less than $81,452, the maximum amount determinable in respect of the taxation year under paragraph (a), plus 22% of the amount by which the amount taxable exceeds $40,726 for the year;

    • (c) if the amount taxable is greater than $81,452, but is equal to or less than $126,264, the maximum amount determinable in respect of the taxation year under paragraph (b), plus 26% of the amount by which the amount taxable exceeds $81,452 for the year; and

    • (d) if the amount taxable is greater than $126,264, the maximum amount determinable in respect of the taxation year under paragraph (c), plus 29% of the amount by which the amount taxable exceeds $126,264 for the year.

• (2) Subsection (1) applies to the 2009 and subsequent taxation years.

• 34. (1) The portion of paragraph (a) of the description of B in subsection 118(1) of the Act before the description of C in subparagraph (ii) is replaced by the following:

  • Marginal note:Married or common-law partnership status

    (a) in the case of an individual who at any time in the year is a married person or a person who is in a common-law partnership who supports the individual’s spouse or common-law partner and is not living separate and apart from the spouse or common-law partner by reason of a breakdown of their marriage or common-law partnership, an amount equal to the total of

    • (i) $10,320, and

    • (ii) the amount determined by the formula

      $10,320 – C

      where

• (2) The description of C in subparagraph (a)(ii) of the description of B in subsection 118(1) of the English version of the Act is replaced by the following:

  C

  is the income of the individual’s spouse or common-law partner for the year or, where the individual and the individual’s spouse or common-law partner are living separate and apart at the end of the year because of a breakdown of their marriage or common-law partnership, the spouse’s or common-law partner’s income for the year while married to, or in a common-law partnership with, the individual and not so separated,

• (3) The portion of paragraph 118(1)(b) of the French version of the Act before the description of D is replaced by the following:

  • Marginal note:Crédit équivalent pour personne entièrement à charge

    b) le total de 10 320 $ et de la somme obtenue par la formule suivante :

    10 320 $ – D

    où :

• (4) Subparagraphs (b)(iii) and (iv) of the description of B in subsection 118(1) of the English version of the Act are replaced by the following:

  • (iii) $10,320, and

  • (iv) the amount determined by the formula

    $10,320 – D

    where

    D

    is the dependent person’s income for the year,

• (5) Paragraph (c) of the description of B in subsection 118(1) of the Act is replaced by the following:

  • Marginal note:Single status

    (c) except in the case of an individual entitled to a deduction because of paragraph (a) or (b), $10,320,

• (6) The formula in subsection 118(2) of the Act is replaced by the following:

  A × ($6,408 – B)

• (7) Subsections 118(3.1), (3.2) and (9) of the Act are repealed.

• (8) Paragraph (b) of the description of B in subsection 118(10) of the Act is replaced by the following:

  • (b) the total of all amounts, each of which is an amount included in computing the individual’s income for the taxation year from an office or employment or an amount included in the taxpayer’s income for the taxation year because of subparagraph 56(1)(r)(v).

• (9) Subsections (1) and (2) to (7) apply to the 2009 and subsequent taxation years.

• (10) Subsection (3) applies to the 2007 and subsequent taxation years.

• (11) Subsection (8) applies to the 2008 and subsequent taxation years.

• 35. (1) The portion of subsection 118.1(5.3) of the Act before paragraph (a) is replaced by the following:

  • Marginal note:Direct designation — RRSPs, RRIFs and TFSAs

    (5.3) If as a consequence of an individual’s death, a transfer of money, or a transfer by means of a negotiable instrument, is made, from an arrangement (other than an arrangement of which a licensed annuities provider is the issuer or carrier) that is a registered retirement savings plan or registered retirement income fund or that was, immediately before the individual’s death, a TFSA to a qualified donee, solely because of the donee’s interest or, for civil law, a right as a beneficiary under the arrangement, the individual was the annuitant under, or the holder of, the arrangement immediately before the individual’s death and the transfer occurs within the 36-month period that begins at the time of the death (or, where written application to extend the period has been made to the Minister by the individual’s legal representative, within such longer period as the Minister considers reasonable in the circumstances),

• (2) Subsection (1) applies to the 2009 and subsequent taxation years.

• 36. (1) The definition “investment” in subsection 122.1(1) of the Act is replaced by the following:

  “investment”

  « placement »

  “investment”, in a trust or partnership,

  • (a) means

    • (i) a property that is a security of the trust or partnership, or

    • (ii) a right which may reasonably be considered to replicate a return on, or the value of, a security of the trust or partnership; but

  • (b) does not include

    • (i) an unaffiliated publicly-traded liability of the trust or partnership, nor

    • (ii) regulated innovative capital.

• (2) The portion of paragraph (a) of the definition “non-portfolio property” in subsection 122.1(1) of the Act before subparagraph (i) is replaced by the following:

  • (a) a security of a subject entity (other than a portfolio investment entity), if at that time the trust or partnership holds

• (3) Paragraph (a) of the definition “qualified REIT property” in subsection 122.1(1) of the Act is replaced by the following:

  • (a) a real or immovable property;

• (4) Subparagraph (c)(i) of the definition “qualified REIT property” in subsection 122.1(1) of the Act is replaced by the following:

  • (i) legal title to real or immovable property of the trust or of another subject entity all of the securities of which are held by the trust (including real or immovable property that the trust or the other subject entity holds together with one or more other persons or partnerships), and

• (5) Paragraphs (c) and (d) of the definition “real estate investment trust” in subsection 122.1(1) of the Act are replaced by the following:

  • (c) not less than 75% of the trust’s revenues for the taxation year are derived from one or more of the following:

    • (i) rent from real or immovable properties,

    • (ii) interest from mortgages, or hypothecs, on real or immovable properties, and

    • (iii) capital gains from dispositions of real or immovable properties; and

  • (d) at each time in the taxation year an amount, that is equal to 75% or more of the equity value of the trust at that time, is the amount that is the total fair market value of all properties held by the trust each of which is real or immovable property, indebtedness of a Canadian corporation represented by a bankers’ acceptance, property described by either paragraph (a) or (b) of the definition “qualified investment” in section 204, or a deposit with a credit union.

• (6) Subparagraph (a)(ii) of the definition “rent from real or immovable properties” in subsection 122.1(1) of the Act is replaced by the following:

  • (ii) payment for services ancillary to the rental of real or immovable properties and customarily supplied or rendered in connection with the rental of real or immovable properties, and

  • (iii) a payment that is included under paragraph 104(13)(a) in computing the recipient’s income and that was made from the part of a trust’s income (determined without reference to subsection 104(6)) that was derived from rent from real or immovable properties; but

• (7) The portion of the definition “SIFT trust” in subsection 122.1(1) of the Act before paragraph (a) is replaced by the following:

  “SIFT trust”

  « fiducie intermédiaire de placement déterminée »

  “SIFT trust”, being a specified investment flow-through trust, for a taxation year means a trust (other than an excluded subsidiary entity, or a real estate investment trust, for the taxation year) that meets the following conditions at any time during the taxation year:

• (8) Subsection 122.1(1) of the Act is amended by adding the following in alphabetical order:

  “equity”

  « capitaux propres »

  “equity”, of an entity, means

  • (a) if the entity is a corporation, a share of the capital stock of the corporation;

  • (b) if the entity is a trust, an income or capital interest in the trust;

  • (c) if the entity is a partnership, an interest as a member of the partnership;

  • (d) a liability of the entity (and, for purposes of the definition “publicly-traded liability” in this section, a security of the entity that is a liability of another entity) if

    • (i) the liability is convertible into, or exchangeable for, equity of the entity or of another entity, or

    • (ii) any amount paid or payable in respect of the liability is contingent or dependent on the use of or production from property, or is computed by reference to revenue, profit, cash flow, commodity price or any other similar criterion or by reference to dividends paid or payable to shareholders of any class of shares of the capital stock of a corporation, or to income or capital paid or payable to any member of a partnership or beneficiary under a trust; and

  • (e) a right to, or to acquire, anything described in this paragraph and any of paragraphs (a) to (d).

  “excluded subsidiary entity”

  « filiale exclue »

  “excluded subsidiary entity”, for a taxation year, means an entity none of the equity of which is at any time in the taxation year

  • (a) listed or traded on a stock exchange or other public market; nor

  • (b) held by any person or partnership other than

    • (i) a real estate investment trust,

    • (ii) a taxable Canadian corporation,

    • (iii) a SIFT trust (determined without reference to subsection (2)),

    • (iv) a SIFT partnership (determined without reference to subsection 197(8)), or

    • (v) an excluded subsidiary entity for the taxation year.

  “portfolio investment entity”

  « entité de placement de portefeuille »

  “portfolio investment entity” at any time means an entity that does not at that time hold any non-portfolio property.

  “publicly-traded liability”

  « dette transigée publiquement »

  “publicly-traded liability”, of an entity, means a liability that is a security of the entity, that is not equity of the entity and that is listed or traded on a stock exchange or other public market.

  “regulated innovative capital”

  « capital innovateur réglementé »

  “regulated innovative capital” means equity of a trust, where

  • (a) since November 2006, the equity has been authorized, by the Superintendent of Financial Institutions or by a provincial regulatory authority having powers similar to those of the Superintendent, as Tier 1 or Tier 2 capital of a financial institution (as defined by subsection 181(1));

  • (b) the terms and conditions of the equity have not changed after August 1, 2008;

  • (c) the trust has not issued any equity after October 31, 2006; and

  • (d) the trust does not hold any non-portfolio property other than

    • (i) liabilities of the financial institution, and

    • (ii) shares of the capital stock of the financial institution that were acquired by the trust for the sole purpose of satisfying a right to require the trust to accept, as demanded by a holder of the equity, the surrender of the equity.

  “unaffiliated publicly-traded liability”

  « dette non affiliée transigée publiquement »

  “unaffiliated publicly-traded liability”, of an entity at any time means a publicly-traded liability of the entity if, at that time the total fair market value of all publicly-traded liabilities of the entity that are held at that time by persons or partnerships that are not affiliated with the entity is at least 90% of the total fair market value of all publicly-traded liabilities of the entity.

• (9) Subsections (1) to (8) are deemed to have come into force on October 31, 2006.

• 37. (1) Paragraph (c) of the definition “eligible individual” in subsection 122.51(1) of the Act is replaced by the following:

  • (c) the total of whose incomes for the year from the following sources is at least $2,500:

    • (i) offices and employments (computed without reference to paragraph 6(1)(f)),

    • (ii) businesses each of which is a business carried on by the individual either alone or as a partner actively engaged in the business, and

    • (iii) the program established under the Wage Earner Protection Program Act.

• (2) Subsection (1) applies to the 2008 and subsequent taxation years.

• 38. (1) Paragraph (b) of the definition “working income” in subsection 122.7(1) of the Act is replaced by the following:

  • (b) all amounts that are included, or that would, but for paragraph 81(1)(a), be included, because of paragraph 56(1)(n) or (o) or subparagraph 56(1)(r)(v) in computing the individual’s income for a period in the taxation year; and

• (2) Subsection (1) applies to the 2008 and subsequent taxation years.

• 39. (1) Subsection 125(2) of the Act is replaced by the following:

  • Marginal note:Business limit

    (2) For the purpose of this section, a corporation’s business limit for a taxation year is $500,000 unless the corporation is associated in the taxation year with one or more other Canadian-controlled private corporations, in which case, except as otherwise provided in this section, its business limit is nil.

• (2) Paragraph 125(3)(a) of the Act is replaced by the following:

  • (a) if the total of the percentages assigned in the agreement does not exceed 100%, $500,000 multiplied by the percentage assigned to that corporation in the agreement; and

• (3) In applying subsection 125(5) of the Act to a corporation for a 2009 or 2010 taxation year of the corporation that began before 2009, subparagraph 125(5)(a)(i) of the Act is to be read as follows:

  • (i) the amount that would have been its business limit determined under subsection (3) or (4) for the first such taxation year ending in the calendar year if the reference to $400,000 in subsection (3), as it applied in respect of that first such taxation year, had been read in the same manner as it is read in respect of the particular taxation year ending in the calendar year, and

• (4) The description of M in the definition “specified partnership income” in subsection 125(7) of the Act is replaced by the following:

  M

  is the lesser of

  • (i) $500,000, and

  • (ii) the product obtained when $1,370 is multiplied by the total of all amounts each of which is the number of days in a fiscal period of the partnership that ends in the year, and

• (5) Subsection (1) applies to the 2009 and subsequent taxation years except that, for a 2009 or 2010 taxation year that began before 2009, the reference in subsection 125(2) of the Act, as enacted by subsection (1), to “$500,000” shall be read as a reference to the total of

  • (a) that proportion of $400,000 that the number of days in the taxation year that are before 2009 is of the number of days in the taxation year, and

  • (b) that proportion of $500,000 that the number of days in the taxation year that are after 2008 is of the number of days in the taxation year.

• (6) Subsection (2) applies to the 2009 and subsequent taxation years except that, for a 2009 or 2010 taxation year that began before 2009, the reference in paragraph 125(3)(a) of the Act, as enacted by subsection (2), to “$500,000” is to be read as a reference to “the amount that would, if the corporation were not associated in the year with any other corporation, be its business limit for the year determined without reference to subsections (5) and (5.1)”.

• (7) Subsection (4) applies to fiscal periods of a partnership that end after 2008.

• 40. (1) Paragraph (a) of the definition “flow-through mining expenditure” in subsection 127(9) of the Act is replaced by the following:

  • (a) that is a Canadian exploration expense incurred by a corporation after March 2009 and before 2011 (including, for greater certainty, an expense that is deemed by subsection 66(12.66) to be incurred before 2011) in conducting mining exploration activity from or above the surface of the earth for the purpose of determining the existence, location, extent or quality of a mineral resource described in paragraph (a) or (d) of the definition “mineral resource” in subsection 248(1),

• (2) Paragraphs (c) and (d) of the definition “flow-through mining expenditure” in subsection 127(9) of the Act are replaced by the following:

  • (c) an amount in respect of which is renounced in accordance with subsection 66(12.6) by the corporation to the taxpayer (or a partnership of which the taxpayer is a member) under an agreement described in that subsection and made after March 2009 and before April 2010, and

  • (d) that is not an expense that was renounced under subsection 66(12.6) to the corporation (or a partnership of which the corporation is a member), unless that renunciation was under an agreement described in that subsection and made after March 2009 and before April 2010;

• (3) Paragraph 127(9.01)(b) of the Act is replaced by the following:

  • (b) the number that is the total of 10 and the number of taxation years by which the number of taxation years of the taxpayer that have ended after 1997 exceeds 11.

• (4) Paragraph 127(9.02)(b) of the Act is replaced by the following:

  • (b) the number that is the total of 9 and the number of taxation years by which the number of taxation years of the taxpayer that have ended after 1997 exceeds 11.

• (5) The formula in subsection 127(10.2) of the Act is replaced by the following:

  ($8 million – 10A) × [($40 million – B)/$40 million]

• (6) Paragraph (a) of the description of A in subsection 127(10.2) of the Act is replaced by the following:

  • (a) $500,000, and

• (7) Subparagraphs (a)(i) and (ii) of the description of B in subsection 127(10.2) of the Act are replaced by the following:

  • (i) if the particular corporation is not associated with any other corporation in the particular taxation year, the amount that is its taxable capital employed in Canada (within the meaning assigned by section 181.2 or 181.3) for its immediately preceding taxation year, or

  • (ii) if the particular corporation is associated with one or more other corporations in the particular taxation year, the amount that is the total of all amounts, each of which is the taxable capital employed in Canada (within the meaning assigned by section 181.2 or 181.3) of the particular corporation for its, or of one of the other corporations for its, last taxation year that ended in the last calendar year that ended before the end of the particular taxation year, or

• (8) Subsection 127(10.22) of the Act is replaced by the following:

  • Marginal note:Deemed non-association of corporations

    (10.22) If a particular Canadian-controlled private corporation is associated with another corporation in circumstances where those corporations would not be associated if the Act were read without reference to paragraph 256(1.2)(a), the particular corporation has issued shares to one or more persons who have been issued shares by the other corporation and there is at least one shareholder of the particular corporation who is not a shareholder of the other corporation or one shareholder of the other corporation who is not a shareholder of the particular corporation, the particular corporation is deemed not to be associated with the other corporation for the purpose of determining the particular corporation’s expenditure limit under subsection (10.2).

• (9) Paragraph 127(10.6)(c) of the Act is replaced by the following:

  • (c) for the purpose of subsection (10.2), where a Canadian-controlled private corporation has a taxation year that is less than 51 weeks, the taxable income of the corporation for the year shall be determined by multiplying that amount by the ratio that 365 is of the number of days in that year.

• (10) Paragraph 127(36)(b) of the Act is replaced by the following:

  • (b) the number that is the total of 10 and the number of taxation years or fiscal periods, as the case may be, by which the number of taxation years or fiscal periods of the taxpayer that have ended after 1997 exceeds 11.

• (11) Subsections (1) and (2) apply to expenses renounced under a flow through share agreement made after March 2009.

• (12) Subsections (3), (4) and (10) apply in respect of the 2008 and subsequent taxation years.

• (13) Subsections (5) and (6) apply to the 2010 and subsequent taxation years, except that the expenditure limit in subsection 127(10.2) of the Act in respect of a corporation for 2010 taxation years that begin before 2010, be determined by the formula

  A + [(B – A) × (C/D)]

  where

  A

  is the expenditure limit of the corporation for the taxation year determined in accordance with the formula in subsection 127(10.2) of the Act as that subsection read in its application to taxation years that end in 2009;

  B

  is the expenditure limit of the corporation for the taxation year determined in accordance with the formula in subsection 127(10.2) of the Act, as that subsection would apply to the taxation year in the absence of this exception;

  C

  is the number of days in the taxation year that are after 2009; and

  D

  is the total number of days in the taxation year.

• (14) Subsection (7) applies to taxation years that end on or after February 26, 2008.

• (15) Subsections (8) and (9) apply to taxation years that end on or after March 9, 2009.

• 41. (1) The definition “qualifying corporation” in subsection 127.1(2) of the Act is replaced by the following:

  “qualifying corporation”

  « société admissible »

  “qualifying corporation” for a particular taxation year that ends in a calendar year means a particular corporation that is a Canadian-controlled private corporation in the particular taxation year the taxable income of which for its immediately preceding taxation year — together with, if the particular corporation is associated in the particular taxation year with one or more other corporations (in this subsection referred to as “associated corporations”), the taxable income of each associated corporation for its last taxation year that ended in the preceding calendar year (determined before taking into consideration the specified future tax consequences for that last year) — does not exceed the qualifying income limit of the particular corporation for the particular taxation year;

• (2) Subsection 127.1(2) of the Act is amended by adding the following in alphabetical order:

  “qualifying income limit”

  « plafond de revenu admissible »

  “qualifying income limit” of a corporation for a particular taxation year is the amount determined by the formula

  $500,000 × [($40 million – A)/$40 million]

  where

  A

  is

  • (a) nil, if $10 million is greater than or equal to the amount (in paragraph (b) referred to as the “taxable capital amount”) that is the total of the corporation’s taxable capital employed in Canada (within the meaning assigned by section 181.2 or 181.3) for its immediately preceding taxation year and the taxable capital employed in Canada (within the meaning assigned by section 181.2 or 181.3) of each associated corporation for the associated corporation’s last taxation year that ended in the last calendar year that ended before the end of the particular taxation year, or

  • (b) in any other case, the lesser of $40 million and the amount by which the taxable capital amount exceeds $10 million;

• (3) Section 127.1 of the Act is amended by adding the following after subsection (3):

  • Marginal note:Qualifying income limit determined in certain cases

    (4) For the purpose of the definition of “qualifying corporation” in subsection (2), where a Canadian-controlled private corporation has a taxation year that is less than 51 weeks, the taxable income of the corporation for the year shall be determined by multiplying that amount by the ratio that 365 is of the number of days in that year.

• (4) Subsections (1) and (2) apply to taxation years that end on or after February 26, 2008, except that

  • (a) for taxation years that include February 26, 2008, the formula in the definition “qualifying income limit” in subsection 127.1(2) of the Act and the portion of that definition that follows that formula, as enacted by subsection (2), shall be read as follows:

    A + [($400,000 × [($40 million – B)/$40 million] – A) × (C/D)]

    where

    A

    is the business limit of the corporation for the particular taxation year determined in accordance with section 125 — together with, if the particular corporation is associated in the particular taxation year with one or more other corporations the business limit of each of those associated corporations for its last taxation year that ends in the particular taxation year (determined in accordance with section 125),

    B

    is

    • (a) nil, if $10 million is greater than or equal to the amount (in paragraph (b) referred to as the “taxable capital amount”) that is the total of the corporation’s taxable capital employed in Canada (within the meaning assigned by section 181.2 or 181.3) for its immediately preceding taxation year and the taxable capital employed in Canada (within the meaning assigned by section 181.2 or 181.3) of each associated corporation for the associated corporation’s last taxation year that ended in the last calendar year that ended before the end of the particular taxation year, or

    • (b) in any other case, the lesser of $40 million and the amount by which the taxable capital amount exceeds $10 million,

    C

    is the number of days in the particular taxation year that are after February 25, 2008, and

    D

    is the total number of days in the particular taxation year;

  • (b) for taxation years that begin after February 26, 2008 and end before 2010, the reference to “$500,000” in the formula in the definition “qualifying income limit” in subsection 127.1(2) of the Act, as enacted by subsection (2), shall be read as a reference to “$400,000”; and

  • (c) for 2010 taxation years that begin before 2010, the reference to “$500,000” in the formula in the definition “qualifying income limit” in subsection 127.1(2) of the Act, as enacted by subsection (2), shall be read as a reference to an amount that is the total of $400,000 and that proportion of $100,000 that the number of days in the taxation year that are in 2010 is of the number of days in the taxation year.

• (5) Subsection (3) applies in respect of the 2008 and subsequent taxation years.

• 42. (1) The definition “qualifying trust” in subsection 127.4(1) of the Act is replaced by the following:

  “qualifying trust”

  « fiducie admissible »

  “qualifying trust” for an individual in respect of a share means

  • (a) a trust governed by a registered retirement savings plan, under which the individual is the annuitant, that is not a spousal or common-law partner plan (in this definition having the meaning assigned by subsection 146(1)) in relation to another individual,

  • (b) a trust governed by a registered retirement savings plan, under which the individual or the individual’s spouse or common-law partner is the annuitant, that is a spousal or common-law partner plan in relation to the individual or the individual’s spouse or common-law partner, if the individual and no other person claims a deduction under subsection (2) in respect of the share, or

  • (c) a trust governed by a TFSA of which the individual is the holder;

• (2) Subsection (1) applies to the 2001 and subsequent taxation years, except that the definition “qualifying trust” in subsection 127.4(1) of the Act, as enacted by subsection (1),

  • (a) shall, for taxation years before 2009, be read without reference to its paragraph (c); and

  • (b) if a taxpayer and a person have jointly elected under section 144 of the Modernization of Benefits and Obligations Act in respect of the 1998, 1999 or 2000 taxation year, applies to the taxpayer and the person in respect of that taxation year and subsequent taxation years.

• 43. (1) Section 128.3 of the Act is replaced by the following:

  Marginal note:Former resident — replaced shares

  128.3 If, in a transaction to which section 51, subparagraphs 85.1(1)(a)(i) and (ii), subsection 85.1(8) or section 86 or 87 applies, a person acquires a share (in this section referred to as the “new share”) in exchange for another share or equity in a SIFT wind-up entity (in this section referred to as the “old share”), for the purposes of section 119, subsections 126(2.21) to (2.23), 128.1(6) to (8), 180.1(1.4) and 220(4.5) and (4.6), the person is deemed not to have disposed of the old share, and the new share is deemed to be the same share as the old share.

• (2) Subsection (1) applies after December 19, 2007.

• 44. (1) The portion of the definition “qualifying exchange” in subsection 132.2(2) of the Act before paragraph (a) is replaced by the following:

  “qualifying exchange”

  « échange admissible »

  “qualifying exchange” means a transfer at any time (in this section referred to as the “transfer time”) of all or substantially all of the property of a mutual fund corporation (other than a SIFT wind-up corporation) or mutual fund trust to a mutual fund trust (in this section referred to as the “transferor” and “transferee”, respectively, and as the “funds”), if

• (2) Subsection (1) applies after December 19, 2007.

• 45. (1) The portion of subsection 138(10) of the Act before paragraph (b) is replaced by the following:

  • Marginal note:Application of financial institution rules

    (10) Notwithstanding sections 142.3, 142.4, 142.5 and 142.51, where in a taxation year an insurer (other than an insurer resident in Canada that does not carry on a life insurance business) carries on an insurance business in Canada and in a country other than Canada, in computing its income for the year from carrying on an insurance business in Canada,

    • (a) sections 142.3, 142.5 and 142.51 apply only in respect of property that is designated insurance property for the year in respect of the business; and

• (2) Subsection 138(12) of the Act is amended by adding the following in alphabetical order:

  “base year”

  « année de base »

  “base year” of a life insurer means the life insurer’s taxation year that immediately precedes its transition year;

  “reserve transition amount”

  « montant transitoire »

  “reserve transition amount” of a life insurer, in respect of a life insurance business carried on by it in Canada in its transition year, is the positive or negative amount determined by the formula

  A – B

  where

  A

  is the maximum amount that the life insurer would be permitted to claim under subparagraph 138(3)(a)(i) (and that would be prescribed by section 1404 of the Regulations for the purpose of subparagraph 138(3)(a)(i)) as a policy reserve for its base year in respect of its life insurance policies in Canada if

  • (a) the generally accepted accounting principles that applied to the life insurer in valuing its assets and liabilities for its transition year had applied to it for its base year, and

  • (b) section 1404 of the Regulations were read in respect of the life insurer’s base year as it reads in respect of its transition year, and

  B

  is the maximum amount that the life insurer is permitted to claim under subparagraph 138(3)(a)(i) as a policy reserve for its base year;

  “transition year”

  « année transitoire »

  “transition year” of a life insurer means the life insurer’s first taxation year that begins after September 2006;

• (3) Section 138 of the Act is amended by adding the following after subsection (15):

  • Marginal note:Transition year income inclusion

    (16) There shall be included in computing a life insurer’s income for its transition year from a life insurance business carried on by it in Canada in the transition year, the positive amount, if any, of the life insurer’s reserve transition amount in respect of that life insurance business.

  • Marginal note:Transition year income deduction

    (17) There shall be deducted in computing a life insurer’s income for its transition year from a life insurance business carried on by it in Canada in the transition year, the absolute value of the negative amount, if any, of the life insurer’s reserve transition amount in respect of that life insurance business.

  • Marginal note:Transition year income inclusion reversal

    (18) If an amount has been included under subsection (16) in computing a life insurer’s income for its transition year from a life insurance business carried on by it in Canada, there shall be deducted in computing the life insurer’s income, for each particular taxation year of the life insurer that ends after the beginning of the transition year, from that life insurance business, the amount determined by the formula

    A × B/1825

    where

    A

    is the amount included under subsection (16) in computing the life insurer’s income for the transition year from that life insurance business; and

    B

    is the number of days in the particular taxation year that are before the day that is 1825 days after the first day of the transition year.

  • Marginal note:Transition year income deduction reversal

    (19) If an amount has been deducted under subsection (17) in computing a life insurer’s income for its transition year from a life insurance business carried on by it in Canada, there shall be included in computing the life insurer’s income, for each particular taxation year of the life insurer that ends after the beginning of the transition year, from that life insurance business, the amount determined by the formula

    A × B/1825

    where

    A

    is the amount deducted under subsection (17) in computing the life insurer’s income for the transition year from that life insurance business; and

    B

    is the number of days in the particular taxation year that are before the day that is 1825 days after the first day of the transition year.

  • Marginal note:Winding-up

    (20) If a life insurer has, in a winding-up to which subsection 88(1) has applied, been wound-up into another corporation (referred to in this subsection as the “parent”), and immediately after the winding-up the parent carries on a life insurance business, in applying subsections (18) and (19) in computing the income of the life insurer and of the parent for particular taxation years that end on or after the first day (referred to in this subsection as the “start day”) on which assets of the life insurer were distributed to the parent on the winding-up,

    • (a) the parent is, on and after the start day, deemed to be the same corporation as and a continuation of the life insurer in respect of

      • (i) any amount included under subsection (16) or deducted under subsection (17) in computing the life insurer’s income from a life insurance business for its transition year,

      • (ii) any amount deducted under subsection (18) or included under subsection (19) in computing the life insurer’s income from a life insurance business for a taxation year of the life insurer that begins before the start day, and

      • (iii) any amount that would — in the absence of this subsection and if the life insurer existed and carried on a life insurance business on each day that is the start day or a subsequent day and on which the parent carries on a life insurance business — be required to be deducted or included, in respect of any of those days, under subsection (18) or (19) in computing the life insurer’s income from a life insurance business; and

    • (b) the life insurer is, in respect of each of its particular taxation years, to determine the value for B in the formulas in subsections (18) and (19) without reference to the start day and days after the start day.

  • Marginal note:Amalgamations

    (21) If there is an amalgamation (within the meaning assigned by subsection 87(1)) of a life insurer with one or more other corporations to form one corporation (referred to in this subsection as the “new corporation”), and immediately after the amalgamation the new corporation carries on a life insurance business, in applying subsections (18) and (19) in computing the income of the new corporation for particular taxation years of the new corporation that begin on or after the day on which the amalgamation occurred, the new corporation is, on and after that day, deemed to be the same corporation as and a continuation of the life insurer in respect of

    • (a) any amount included under subsection (16) or deducted under subsection (17) in computing the life insurer’s income from a life insurance business for its transition year;

    • (b) any amount deducted under subsection (18) or included under subsection (19) in computing the life insurer’s income from a life insurance business for a taxation year that begins before the day on which the amalgamation occurred; and

    • (c) any amount that would — in the absence of this subsection and if the life insurer existed and carried on a life insurance business on each day that is the day on which the amalgamation occurred or a subsequent day and on which the new corporation carries on a life insurance business — be required to be deducted or included, in respect of any of those days, under subsection (18) or (19) in computing the life insurer’s income from a life insurance business.

  • Marginal note:Application of subsection (23)

    (22) Subsection (23) applies if, at any time, a life insurer (referred to in this subsection and subsection (23) as the “transferor”) transfers, to a corporation (referred to in this subsection and subsection (23) as the “transferee”) that is related to the transferor, property in respect of a life insurance business carried on by the transferor in Canada (referred to in this subsection and subsection (23) as the “transferred business”) and

    • (a) subsection 138(11.5) or (11.94) applies to the transfer; or

    • (b) subsection 85(1) applies to the transfer, the transfer includes all or substantially all of the property and liabilities of the transferred business and, immediately after the transfer, the transferee carries on a life insurance business.

  • Marginal note:Transfer of life insurance business

    (23) If this subsection applies in respect of the transfer, at any time, of property

    • (a) the transferee is, at and after that time, deemed to be the same corporation as and a continuation of the transferor in respect of

      • (i) any amount included under subsection (16) or deducted under subsection (17) in computing the transferor’s income for its transition year that can reasonably be attributed to the transferred business,

      • (ii) any amount deducted under subsection (18) or included under subsection (19) in computing the transferor’s income for a taxation year of the transferor that begins before that time that can reasonably be attributed to the transferred business, and

      • (iii) any amount that would — in the absence of this subsection and if the transferor existed and carried on a life insurance business on each day that includes that time or is a subsequent day and on which the transferee carries on a life insurance business — be required to be deducted or included, in respect of any of those days, under subsection (18) or (19) in computing the transferor’s income that can reasonably be attributed to the transferred business; and

    • (b) in determining, in respect of the day that includes that time or any subsequent day, any amount that is required under subsection (18) or (19) to be deducted or included in computing the transferor’s income for each particular taxation year from the transferred business, the description of A in the formulas in those subsections is deemed to be nil.

  • Marginal note:Ceasing to carry on business

    (24) If at any time a life insurer ceases to carry on all or substantially all of a life insurance business (referred to in this subsection as the “discontinued business”), and none of subsections (20) to (22) apply,

    • (a) there shall be deducted, in computing the life insurer’s income from the discontinued business for the life insurer’s taxation year that includes the time that is immediately before that time, the amount determined by the formula

      A – B

      where

      A

      is the amount included under subsection (16) in computing the life insurer’s income from the discontinued business for its transition year, and

      B

      is the total of all amounts each of which is an amount deducted under subsection (18) in computing the life insurer’s income from the discontinued business for a taxation year that began before that time; and

    • (b) there shall be included, in computing the life insurer’s income from the discontinued business for the life insurer’s taxation year that includes the time that is immediately before that time, the amount determined by the formula

      C – D

      where

      C

      is the amount deducted under subsection (17) in computing the life insurer’s income from the discontinued business for its transition year, and

      D

      is the total of all amounts each of which is an amount included under subsection (19) in computing the life insurer’s income from the discontinued business for a taxation year that began before that time.

  • Marginal note:Ceasing to exist

    (25) If at any time a life insurer that carried on a life insurance business ceases to exist (otherwise than as a result of a winding-up or amalgamation described in subsection (20) or (21)), for the purposes of subsection (24), the life insurer is deemed to have ceased to carry on the life insurance business at the earlier of

    • (a) the time (determined without reference to this subsection) at which the life insurer ceased to carry on the life insurance business, and

    • (b) the time that is immediately before the end of the last taxation year of the life insurer that ended at or before the time at which the life insurer ceased to exist.

• (4) Subsections (1) to (3) apply to taxation years that begin after September 2006.

• 46. (1) Paragraph (a) of the definition bien évalué à la valeur du marché in subsection 142.2(1) of the French version of the Act is replaced by the following:

  • a) une action;

• (2) Paragraph (d) of the definition “mark-to-market property” in subsection 142.2(1) of the Act is replaced by the following:

  • (d) a share of a corporation in which the taxpayer has a significant interest at any time in the year,

  • (d.1) a property that is, at all times in the year at which the taxpayer holds the property, a prescribed payment card corporation share of the taxpayer,

  • (d.2) if the taxpayer is an investment dealer and the year begins after 1998, a property that is, at all times in the year at which the taxpayer holds the property, a prescribed securities exchange investment of the taxpayer,

  • (d.3) a share of a corporation held, at any time in the year, by the taxpayer if

    • (i) control of the corporation is, at any time (referred to in this paragraph as the “acquisition of control time”) that is after 2001 and is in the 24-month period that begins immediately after the end of the year, acquired by

      • (A) the taxpayer,

      • (B) one or more persons related to the taxpayer (otherwise than by reason of a right referred to in paragraph 251(5)(b)), or

      • (C) the taxpayer and one or more persons described in clause (B), and

    • (ii) the taxpayer elects in writing to have subparagraph (i) apply and files the election with the Minister on or before the taxpayer’s filing-due date for the taxpayer’s taxation year that includes the acquisition of control time, or

• (3) The definition “mark-to-market property” in subsection 142.2(1) of the Act, as amended by subsection (2), is replaced by the following:

  “mark-to-market property”

  « bien évalué à la valeur du marché »

  “mark-to-market property” of a taxpayer for a taxation year means property (other than an excluded property) held at any time in the taxation year by the taxpayer that is

  • (a) a share,

  • (b) if the taxpayer is not an investment dealer, a specified debt obligation that is a fair value property of the taxpayer for the taxation year,

  • (c) if the taxpayer is an investment dealer, a specified debt obligation, or

  • (d) a tracking property of the taxpayer that is a fair value property of the taxpayer for the taxation year;

• (4) Subsection 142.2(1) of the Act is amended by adding the following in alphabetical order:

  “excluded property”

  « bien exclu »

  “excluded property” of a taxpayer for a taxation year means property, held at any time in the taxation year by the taxpayer, that is

  • (a) a share of the capital stock of a corporation if, at any time in the taxation year, the taxpayer has a significant interest in the corporation,

  • (b) a property that is, at all times in the taxation year at which the taxpayer held the property, a prescribed payment card corporation share of the taxpayer,

  • (c) if the taxpayer is an investment dealer, a property that is, at all times in the taxation year at which the taxpayer held the property, a prescribed securities exchange investment of the taxpayer,

  • (d) a share of the capital stock of a corporation if

    • (i) control of the corporation is, at any time (referred to in this paragraph as the “acquisition of control time”) that is in the 24-month period that begins immediately after the end of the year, acquired by

      • (A) the taxpayer,

      • (B) one or more persons related to the taxpayer (otherwise than by reason of a right referred to in paragraph 251(5)(b)), or

      • (C) the taxpayer and one or more persons described in clause (B), and

    • (ii) the taxpayer elects in writing to have subparagraph (i) apply and files the election with the Minister on or before the taxpayer’s filing-due date for the taxpayer’s taxation year that includes the acquisition of control time, or

  • (e) a prescribed property;

  “fair value property”

  « bien évalué à sa juste valeur »

  “fair value property” of a taxpayer for a taxation year means property, held at any time in the taxation year by the taxpayer, that is — or it is reasonable to expect would, if the taxpayer held the property at the end of the taxation year, be — valued (otherwise than solely because its fair value was less than its cost to the taxpayer or, if the property is a specified debt obligation, because of a default of the debtor) in accordance with generally accepted accounting principles, at its fair value (determined in accordance with those principles) in the taxpayer’s balance sheet as at the end of the taxation year;

  “tracking property”

  « bien à évaluer »

  “tracking property” of a taxpayer means property of the taxpayer the fair market value of which is determined primarily by reference to one or more criteria in respect of property (referred to in this definition as “tracked property”) that, if owned by the taxpayer, would be mark-to-market property of the taxpayer, which criteria are

  • (a) the fair market value of the tracked property,

  • (b) the profits or gains from the disposition of the tracked property,

  • (c) the revenue, income or cash flow from the tracked property, or

  • (d) any other similar criteria in respect of the tracked property;

• (5) The portion of subsection 142.2(2) of the Act before paragraph (a) is replaced by the following:

  • Marginal note:Significant interest

    (2) For the purposes of the definitions “excluded property”, “mark-to-market property” and “specified debt obligation” in subsection (1) and subsections (5) and 142.6(1.6), a taxpayer has a significant interest in a corporation at any time if

• (6) Subsections 142.2(4) and (5) of the Act are replaced by the following:

  • Extension of meaning of “related”

    (4) For the purposes of this subsection and subsections (2) and (3), in determining if, at a particular time, a person or partnership is related to another person or partnership, the rules in section 251 are to be applied as if,

    • (a) a partnership (other than a partnership in respect of which any amount of the income or capital of the partnership that any entity may receive directly from the partnership at any time as a member of the partnership depends on the exercise by any entity of, or the failure by any entity to exercise, a discretionary power) were a corporation having capital stock of a single class divided into 100 issued shares and each member of the partnership owned, at the particular time, that proportion of the issued shares of that class that

      • (i) the fair market value of the member’s interest in the partnership at the particular time

      is of

      • (ii) the fair market value of all interests in the partnership at the particular time; and

    • (b) a trust (other than a trust in respect of which any amount of the income or capital of the trust that any entity may receive directly from the trust at any time as a beneficiary under the trust depends on the exercise by any entity of, or the failure by any entity to exercise, a discretionary power) were a corporation having capital stock of a single class divided into 100 issued shares and each beneficiary under the trust owned, at the particular time, that proportion of the issued shares of that class that

      • (i) the fair market value of the beneficiary’s beneficial interest in the trust at the particular time

      is of

      • (ii) the fair market value at that time of all beneficial interests in the trust.

• (7) Subsections (1) and (2) apply to taxation years that end after February 22, 1994, except that any election made under paragraph (d.3) of the definition “mark-to-market property” in subsection 142.2(1) of the Act, as enacted by subsection (2), is deemed to have been made on a timely basis if it is filed with the Minister of National Revenue on or before the taxpayer’s filing-due date for the taxpayer’s taxation year in which this Act is assented to.

• (8) Subsection (3) applies to taxation years that begin after September 2006 except that for taxation years that begin before November 7, 2007, the definition “mark-to-market property” in subsection 142.2(1) of the Act, as enacted by subsection (3), is to be read without its paragraph (d).

• (9) Subsections (4) to (6) apply to taxation years that begin after September 2006 except that any election made under paragraph (d) of the definition “excluded property” in subsection 142.2(1) of the Act, as enacted by subsection (4), is deemed to have been made on a timely basis if it is filed with the Minister of National Revenue on or before the taxpayer’s filing-due date for the taxpayer’s taxation year in which this Act is assented to.

• 47. (1) Section 142.5 of the Act is amended by adding the following after subsection (8):

  • Marginal note:Application of subsection (8.2)

    (8.1) Subsection (8.2) applies to a taxpayer for its transition year if

    • (a) subsection (2) deems the taxpayer to have disposed of a particular specified debt obligation immediately before the end of its transition year (in subsection (8.2) referred to as “the particular disposition”); and

    • (b) the particular specified debt obligation was owned by the taxpayer at the end of its base year and was not a mark-to-market property of the taxpayer for its base year.

  • Marginal note:Rules applicable to first deemed disposition of debt obligation

    (8.2) If this subsection applies to a taxpayer for its transition year, the following rules apply to the taxpayer in respect of the particular disposition:

    • (a) subsection 20(21) does not apply to the taxpayer in respect of the particular disposition; and

    • (b) if section 12.4 does not apply to the taxpayer in respect of the particular disposition, there shall be included in computing the taxpayer’s income for its transition year the amount, if any, by which

      • (i) the total of all amounts each of which is

        • (A) an amount deducted under paragraph 20(1)(l) in respect of the particular specified debt obligation of the taxpayer in computing the taxpayer’s income for its base year, or

        • (B) an amount deducted under paragraph 20(1)(p) in respect of the particular specified debt obligation of the taxpayer in computing the taxpayer’s income for a taxation year that preceded its transition year,

      exceeds

      • (ii) the total of all amounts each of which is

        • (A) an amount included under paragraph 12(1)(d) in respect of the particular specified debt obligation of the taxpayer in computing the taxpayer’s income for its transition year, or

        • (B) an amount included under paragraph 12(1)(i) in respect of the particular specified debt obligation of the taxpayer in computing the taxpayer’s income for its transition year or a preceding taxation year.

• (2) Subsection (1) applies to taxation years that begin after September 2006.

• 48. (1) The Act is amended by adding the following after section 142.5:

  Marginal note:Definitions

  • 142.51 (1) The following definitions apply for the purposes of this section and subsections 142.5(8.1) and (8.2).

    “base year”

    « année de base »

    “base year” of a taxpayer means the taxpayer’s taxation year that immediately precedes its transition year.

    “transition amount”

    « montant transitoire »

    “transition amount” of a taxpayer for the taxpayer’s transition year is the positive or negative amount determined by the formula

    A – B

    where

    A

    is the total of all amounts each of which is the fair market value, at the end of the taxpayer’s base year, of a transition property of the taxpayer; and

    B

    is the total of all amounts each of which is the cost amount to the taxpayer, at the end of the taxpayer’s base year, of a transition property of the taxpayer.

    “transition property”

    « bien transitoire »

    “transition property” of a taxpayer means a property that

    • (a) was a specified debt obligation held by the taxpayer at the end of the taxpayer’s base year;

    • (b) was not a mark-to-market property of the taxpayer for the taxpayer’s base year, but would have been a mark-to-market property of the taxpayer for the taxpayer’s base year if the property had been carried at the property’s fair market value in the taxpayer’s balance sheet as at the end of each taxation year of the taxpayer that ends after the taxpayer last acquired the property (otherwise than by reason of a reacquisition under subsection 142.5(2)) and before the commencement of the taxpayer’s transition year; and

    • (c) was a mark-to-market property of the taxpayer for the transition year of the taxpayer.

    “transition year”

    « année transitoire »

    “transition year” of a taxpayer means the taxpayer’s first taxation year that begins after September 2006.

  • Marginal note:Transition year income inclusion

    (2) If a taxpayer is a financial institution in its transition year, there shall be included in computing the taxpayer’s income for its transition year the absolute value of the negative amount, if any, of the taxpayer’s transition amount.

  • Marginal note:Transition year income deduction

    (3) If a taxpayer is a financial institution in its transition year, there shall be deducted in computing the taxpayer’s income for its transition year the positive amount, if any, of the taxpayer’s transition amount.

  • Marginal note:Transition year income inclusion reversal

    (4) If an amount has been included under subsection (2) in computing a taxpayer’s income for its transition year there shall be deducted in computing the taxpayer’s income for each particular taxation year of the taxpayer that ends after the beginning of the transition year, and in which particular taxation year the taxpayer is a financial institution, the amount determined by the formula

    A × B/1825

    where

    A

    is the amount included under subsection (2) in computing the taxpayer’s income for the transition year; and

    B

    is the number of days in the particular taxation year that are before the day that is 1825 days after the first day of the transition year.

  • Marginal note:Transition year income deduction reversal

    (5) If an amount has been deducted under subsection (3) in computing a taxpayer’s income for its transition year, there shall be included in computing the taxpayer’s income, for each particular taxation year of the taxpayer ending after the beginning of the transition year, and in which particular taxation year the taxpayer is a financial institution, the amount determined by the formula

    A × B/1825

    where

    A

    is the amount deducted under subsection (3) in computing the taxpayer’s income for the transition year; and

    B

    is the number of days in the particular taxation year that are before the day that is 1825 days after the first day of the transition year.

  • Marginal note:Winding-up

    (6) If a taxpayer has, in a winding-up to which subsection 88(1) has applied, been wound-up into another corporation (referred to in this subsection as the “parent”), and immediately after the winding-up the parent is a financial institution, in applying subsections (4) and (5) in computing the income of the taxpayer and of the parent for particular taxation years that end on or after the first day (referred to in this subsection as the “start day”) on which assets of the taxpayer were distributed to the parent on the winding-up,

    • (a) the parent is, on and after the start day, deemed to be the same corporation as and a continuation of the taxpayer in respect of

      • (i) any amount included under subsection (2) or deducted under subsection (3) by the taxpayer in computing the taxpayer’s income for its transition year,

      • (ii) any amount deducted under subsection (4) or included under subsection (5) in computing the taxpayer’s income for a taxation year of the taxpayer that begins before the start day, and

      • (iii) any amount that would — in the absence of this subsection and if the taxpayer existed and was a financial institution on each day that is the start day or a subsequent day and on which the parent is a financial institution — be required to be deducted or included, in respect of any of those days, under subsection (4) or (5) in computing the taxpayer’s income for its transition year; and

    • (b) the taxpayer is, in respect of each of its particular taxation years, to determine the value for B in the formulas in subsections (4) and (5) without reference to the start day and days after the start day.

  • Marginal note:Amalgamations

    (7) If there is an amalgamation (within the meaning assigned by subsection 87(1)) of a taxpayer with one or more other corporations to form one corporation (referred to in this subsection as the “new corporation”), and immediately after the amalgamation the new corporation is a financial institution, in applying subsections (4) and (5) in computing the income of the new corporation for particular taxation years of the new corporation that begin on or after the day on which the amalgamation occurred, the new corporation is, on and after that day, deemed to be the same corporation as and a continuation of the taxpayer in respect of

    • (a) any amount included under subsection (2) or deducted under subsection (3) in computing the taxpayer’s income for its transition year of the taxpayer;

    • (b) any amount deducted under subsection (4) or included under subsection (5) in computing the taxpayer’s income for a taxation year of the taxpayer that begins before the day on which the amalgamation occurred; and

    • (c) any amount that would — in the absence of this subsection and if the taxpayer existed and was a financial institution on each day that is the day on which the amalgamation occurred or a subsequent day and on which the new corporation is a financial institution — be required to be deducted or included, in respect of any of those days, under subsection (4) or (5) in computing the taxpayer’s income.

  • Marginal note:Application of subsection (9)

    (8) Subsection (9) applies if, at any time, a taxpayer (referred to in this subsection and subsection (9) as the “transferor”) transfers, to a corporation (referred to in this subsection and subsection (9) as the “transferee”) that is related to the transferor, property in respect of a business carried on by the transferor in Canada (referred to in this subsection and subsection (9) as the “transferred business”) and

    • (a) subsection 138(11.5) or (11.94) applies to the transfer; or

    • (b) subsection 85(1) applies to the transfer, the transfer includes all or substantially all of the property and liabilities of the transferred business and, immediately after the transfer, the transferee is a financial institution.

  • Marginal note:Transfer of a business

    (9) If this subsection applies in respect of the transfer, at any time, of property

    • (a) the transferee is, at and after that time, deemed to be the same corporation as and a continuation of the transferor in respect of

      • (i) any amount included under subsection (2) or deducted under subsection (3) in computing the transferor’s income for its transition year that can reasonably be attributed to the transferred business,

      • (ii) any amount deducted under subsection (4) or included under subsection (5) in computing the transferor’s income for a taxation year of the transferor that begins before that time that can reasonably be attributed to the transferred business, and

      • (iii) any amount that would — in the absence of this subsection and if the transferor existed and was a financial institution on each day that includes that time or is a subsequent day and on which the transferee is a financial institution — be required to be deducted or included, in respect of any of those days, under subsection (4) or (5) in computing the transferor’s income that can reasonably be attributed to the transferred business; and

    • (b) in determining, in respect of the day that includes that time or any subsequent day, any amount that is required under subsection (4) or (5) to be deducted or included in computing the transferor’s income for each particular taxation year from the transferred business, the description of A in the formulas in those subsections is deemed to be nil.

  • Marginal note:Continuation of a partnership

    (10) If subsection 98(6) deems a partnership (in this subsection referred to as the “new partnership”) to be a continuation of another partnership (in this subsection referred to as the “predecessor partnership”) and, at the time that is immediately after the predecessor partnership ceases to exist, the new partnership is a financial institution, in applying subsections (4) and (5) in computing the income of the new partnership for particular taxation years of the new partnership that begin on or after the day on which it comes into existence, the new partnership is, on and after that day, deemed to be the same partnership as and a continuation of the predecessor partnership in respect of

    • (a) any amount included under subsection (2) or deducted under subsection (3) in computing the predecessor partnership’s income for its transition year;

    • (b) any amount deducted under subsection (4) or included under subsection (5) in computing the predecessor partnership’s income for a taxation year of the predecessor partnership that begins before the day on which the new partnership comes into existence; and

    • (c) any amount that would — in the absence of this subsection and if the predecessor partnership existed and was a financial institution on each day that is the day on which the new partnership comes into existence or a subsequent day and on which the new partnership is a financial institution — be required to be deducted or included, in respect of any of those days, under subsection (4) or (5) in computing the predecessor partnership’s income.

  • Marginal note:Ceasing to carry on a business

    (11) If at any time, a taxpayer ceases to be a financial institution

    • (a) there shall be deducted, in computing the income of the taxpayer for the taxation year of the taxpayer that includes the time that is immediately before that time, the amount determined by the formula

      A – B

      where

      A

      is the amount included under subsection (2) in computing the taxpayer’s income for its transition year, and

      B

      is the total of all amounts each of which is an amount deducted under subsection (4) in computing the income of the taxpayer for a taxation year that began before that time; and

    • (b) there shall be included, in computing the income of the taxpayer for the taxation year of the taxpayer that includes the time that is immediately before that time, the amount determined by the formula

      C – D

      where

      C

      is the amount deducted under subsection (3) in computing the taxpayer’s income for its transition year, and

      D

      is the total of all amounts each of which is an amount included under subsection (5) in computing the taxpayer’s income for a taxation year that began before that time.

  • Marginal note:Ceasing to exist

    (12) If at any time a taxpayer ceases to exist (otherwise than as a result of a merger to which subsection 87(2) applies, a winding-up to which subsection 88(1) applies or a continuation to which subsection 98(6) applies), for the purposes of subsection (11), the taxpayer is deemed to have ceased to be a financial institution at the earlier of

    • (a) the time (determined without reference to this subsection) at which the taxpayer ceased to be a financial institution, and

    • (b) the time that is immediately before the end of the last taxation year of the taxpayer that ended at or before the time at which the taxpayer ceased to exist.

• (2) Subsection (1) applies to taxation years that begin after September 2006.

• 49. (1) Section 142.6 of the Act is amended by adding the following after subsection (1.3):

  • Marginal note:Change in status — prescribed payment card corporation share

    (1.4) If, at any particular time in a taxation year of a taxpayer that is a financial institution for the taxation year, a property becomes a mark-to-market property of the taxpayer for the taxation year because it ceased, at the particular time, to be a prescribed payment card corporation share of the taxpayer,

    • (a) the taxpayer is deemed

      • (i) to have disposed of the property immediately before the particular time for proceeds of disposition equal to its fair market value immediately before the particular time, and

      • (ii) to have acquired the property, at the particular time, at a cost equal to those proceeds; and

    • (b) subsection 142.5(1) does not apply to the disposition under subparagraph (a)(i).

  • Marginal note:Change in status — prescribed securities exchange investment

    (1.5) If, at any particular time in a taxation year of a taxpayer that is a financial institution for the taxation year, a property becomes a mark-to-market property of the taxpayer for the taxation year because it ceased, at the particular time, to be a prescribed securities exchange investment of the taxpayer,

    • (a) the taxpayer is deemed

      • (i) to have disposed of the property immediately before the particular time for proceeds of disposition equal to its fair market value immediately before the particular time, and

      • (ii) to have acquired the property, at the particular time, at a cost equal to those proceeds; and

    • (b) subsection 142.5(1) does not apply to the disposition under subparagraph (a)(i).

  • Marginal note:Change in status — significant interest

    (1.6) If, at the end of a particular taxation year of a taxpayer that is a financial institution for the taxation year, the taxpayer holds a share of the capital stock of a corporation, the taxpayer has a significant interest in that corporation at any time in the particular taxation year and the share is mark-to-market property of the taxpayer for the immediately following taxation year, the taxpayer is deemed to have,

    • (a) disposed of the share immediately before the end of the particular taxation year for proceeds of disposition equal to the fair market value, at that time, of the share; and

    • (b) acquired the share at the end of the particular taxation year at a cost equal to those proceeds.

• (2) Subsection 142.6(2) of the Act is replaced by the following:

  • Marginal note:Deemed disposition not applicable

    (2) For the purposes of this Act, the determination of when a taxpayer acquired a share shall be made without regard to a disposition or acquisition that occurred because of subsection 142.5(2) or subsection (1), (1.1), (1.2), (1.4), (1.5) or (1.6).

• (3) Subsection 142.6(1.4) of the Act, as enacted by subsection (1), applies to taxation years that end after February 22, 1994.

• (4) Subsection 142.6(1.5) of the Act, as enacted by subsection (1), applies to taxation years that begin after 1998.

• (5) Subsection 142.6(1.6) of the Act, as enacted by subsection (1), applies to taxation years that begin after September 2006.

• (6) Subsection (2) applies to taxation years that begin after September 2006.

• 50. (1) Subsection 143.1(1) of the Act is replaced by the following:

  Marginal note:Definitions

  • 143.1 (1) The definitions in this subsection apply in this section.

    “amateur athlete”

    « athlète amateur »

    “amateur athlete” at any time means an individual (other than a trust) who is, at that time,

    • (a) a member of a registered Canadian amateur athletic association;

    • (b) eligible to compete, in an international sporting event sanctioned by an international sports federation, as a Canadian national team member; and

    • (c) not a professional athlete.

    “professional athlete”

    « athlète professionnel »

    “professional athlete” means an individual who receives income that is compensation for, or is otherwise attributable to, the individual’s activities as a player or athlete in a professional sport.

    “qualifying performance income”

    « revenu de performance admissible »

    “qualifying performance income” of an individual means income that

    • (a) is received by the individual in a taxation year in which

      • (i) the individual was, at any time, an amateur athlete, and

      • (ii) the individual was not, at any time, a professional athlete;

    • (b) may reasonably be considered to be in connection with the individual’s participation as an amateur athlete in one or more international sporting events referred to in the definition “amateur athlete”; and

    • (c) is endorsement income, prize money, or income from public appearances or speeches.

    “third party”

    « tiers »

    “third party” in respect of an arrangement described in paragraph (1.1)(b) means a person who deals at arm’s length with the amateur athlete in respect of the arrangement.

  • Marginal note:Where subsection (1.2) applies

    (1.1) Subsection (1.2) applies where, at any time,

    • (a) a national sport organization that is a registered Canadian amateur athletic association receives an amount for the benefit of an individual under an arrangement made under rules of an international sport federation that require amounts to be held, controlled and administered by the organization in order to preserve the eligibility of the individual to compete in a sporting event sanctioned by the federation; or

    • (b) an individual enters into an arrangement that

      • (i) is an account with an issuer described in paragraph (b) of the definition “qualifying arrangement” in subsection 146.2(1), or that would be so described if that definition applied at that time,

      • (ii) provides that no amount may be deposited, credited or added to the account, other than an amount that is qualifying performance income of the individual or that is interest or other income in respect of the property deposited, credited or added to the account,

      • (iii) provides that a third party is a mandatory signatory on any payment from the account, and

      • (iv) is not a registered retirement savings plan or a TFSA.

  • Marginal note:Amateur athletes’ reserve funds

    (1.2) If this subsection applies in respect of an arrangement referred to in subsection (1.1),

    • (a) an inter vivos trust (in this section referred to as the “amateur athlete trust”) is deemed

      • (i) to be created on the day on which the first amount referred to in paragraph (1.1)(a) or (b) is received by the sport organization or by the issuer, as the case may be, in respect of the arrangement, and

      • (ii) to exist until subsection (3) or (4) applies in respect of the trust;

    • (b) all property held under the arrangement is deemed to be the property of the amateur athlete trust and not property of any other person;

    • (c) if, at any time, the sport organization or the issuer, as the case may be, receives an amount under the arrangement and the amount would, in the absence of this subsection, be included in computing the income of the individual in respect of the arrangement for the taxation year that includes that time, the amount is deemed to be income of the amateur athlete trust for that taxation year and not to be income of the individual;

    • (d) if, at any time, the sport organization or the issuer, as the case may be, pays or transfers an amount under the arrangement to or for the benefit of the individual, the amount is deemed to be an amount distributed at that time to the individual by the amateur athlete trust;

    • (e) the individual is deemed to be the beneficiary under the amateur athlete trust;

    • (f) the sport organization or the third party, as the case may be, in respect of the arrangement is deemed to be the trustee of the amateur athlete trust; and

    • (g) no tax is payable under this Part by the amateur athlete trust on its taxable income for any taxation year.

• (2) Subsection (1) applies to the 2008 and subsequent taxation years except that, if the individual in respect of an amateur athlete trust elects under this subsection in writing filed with the Minister of National Revenue on or before the individual’s filing-due date for the 2008 taxation year, in its application to the individual and the amateur athlete trust for the 2008 taxation year, paragraph 143.1(1.2)(c) of the Act, as enacted by subsection (1), is to be read as follows:

  • (c) if, at any time before March 3, 2009, the sport organization or the issuer, as the case may be, receives an amount under the arrangement and the amount would, in the absence of this subsection, be included in computing the income of the individual in respect of the arrangement for the 2008 taxation year, the amount is deemed to be income of the amateur athlete trust for its 2009 taxation year and not to be income of the individual;

• 51. (1) Paragraph (b) of the definition “earned income” in subsection 146(1) of the Act is replaced by the following:

  • (b) an amount included under paragraph 56(1)(b), (c.2), (g) or (o) or subparagraph 56(1)(r)(v) in computing the taxpayer’s income for a period in the year throughout which the taxpayer was resident in Canada,

• (2) The description of D in paragraph (b) of the definition “unused RRSP deduction room” in subsection 146(1) of the Act is replaced by the following:

  D

  is the total of all amounts each of which is an amount deducted by the taxpayer,

  • (i) under subsection (5) or (5.1) or paragraph 60(v), in computing the taxpayer’s income for the year, or

  • (ii)  under  paragraph  10  of  Article XVIII of the Canada-United States Tax Convention signed at Washington on September 26, 1980 or a similar provision in another tax treaty, in computing the taxpayer’s taxable income for the year, and

• (3) Section 146 of the Act is amended by adding the following after subsection (8.91):

  • Marginal note:Deduction for post-death reduction in value

    (8.92) If the annuitant under a registered retirement savings plan dies before the maturity of the plan, there may be deducted in computing the annuitant’s income for the taxation year in which the annuitant dies an amount not exceeding the amount determined, after all amounts payable out of or under the plan have been paid, by the formula

    A – B

    where

    A

    is the total of all amounts each of which is

    • (a) the amount deemed by subsection (8.8) to have been received by the annuitant as a benefit out of or under the plan,

    • (b) an amount (other than an amount described in paragraph (c)) received, after the death of the annuitant, by a taxpayer as a benefit out of or under the plan and included, because of subsection (8), in computing the taxpayer’s income, or

    • (c) a tax-paid amount in respect of the plan; and

    B

    is the total of all amounts paid out of or under the plan after the death of the annuitant.

  • Marginal note:Subsection (8.92) not applicable

    (8.93) Except where the Minister has waived in writing the application of this subsection with respect to all or any portion of the amount determined in subsection (8.92) in respect of a registered retirement savings plan, that subsection does not apply if

    • (a) at any time after the death of the annuitant, a trust governed by the plan held a non-qualified investment; or

    • (b) the last payment out of or under the plan was made after the end of the year following the year in which the annuitant died.

• (4) Subsection (1) applies to the 1997 and subsequent taxation years, except that in its application to the 1997 to 2007 taxation years, paragraph (b) of the definition “earned income” in subsection 146(1) of the Act, as enacted by subsection (1), is to be read without reference to “or subparagraph 56(1)(r)(v)”.

• (5) Subsection (2) applies to the 2009 and subsequent taxation years.

• (6) Subsection (3) applies in respect of a registered retirement savings plan in respect of which the last payment out of the plan is made after 2008.

• 52. (1) Paragraph (h) of the definition “regular eligible amount” in subsection 146.01(1) of the Act is replaced by the following:

  • (h) the total of the amount and all other eligible amounts received by the individual in the calendar year that includes the particular time does not exceed $25,000, and

• (2) Paragraph (g) of the definition “supplemental eligible amount” in subsection 146.01(1) of the Act is replaced by the following:

  • (g) the total of the amount and all other eligible amounts received by the individual in the calendar year that includes the particular time does not exceed $25,000, and

• (3) Subsections (1) and (2) apply to the 2009 and subsequent taxation years in respect of withdrawals made after January 27, 2009.

• 53. (1) Subparagraph (b)(ii) of the definition “qualifying arrangement” in subsection 146.2(1) of the Act is replaced by the following:

  • (ii) an annuity contract with an issuer that is a licensed annuities provider, or

• (2) Subsections 146.2(3) to (9) of the Act are replaced by the following:

  • Marginal note:Paragraphs (2)(a), (b) and (e) not applicable

    (3) The conditions in paragraphs (2)(a), (b) and (e) do not apply to the extent that they are inconsistent with subsection (4).

  • Marginal note:Using TFSA interest as security for a loan

    (4) A holder of a TFSA may use the holder’s interest or, for civil law, right in the TFSA as security for a loan or other indebtedness if

    • (a) the terms and conditions of the indebtedness are terms and conditions that persons dealing at arm’s length with each other would have entered into; and

    • (b) it can reasonably be concluded that none of the main purposes for that use is to enable a person (other than the holder) or a partnership to benefit from the exemption from tax under this Part of any amount in respect of the TFSA.

  • Marginal note:TFSA

    (5) If the issuer of an arrangement that is, at the time it is entered into, a qualifying arrangement files with the Minister, before March of the calendar year following the calendar year in which the arrangement was entered into, an election in prescribed form and manner to register the arrangement as a TFSA under the Social Insurance Number of the individual with whom the arrangement was entered into, the arrangement becomes a TFSA at the time the arrangement was entered into and ceases to be a TFSA at the earliest of the following times:

    • (a) the time at which the last holder of the arrangement dies;

    • (b) the time at which the arrangement ceases to be a qualifying arrangement; or

    • (c) the earliest time at which the arrangement is not administered in accordance with the conditions in subsection (2).

  • Marginal note:Trust not taxable

    (6) No tax is payable under this Part by a trust that is governed by a TFSA on its taxable income for a taxation year, except that, if at any time in the taxation year, it carries on one or more businesses or holds one or more properties that are non-qualified investments (as defined in subsection 207.01(1)) for the trust, tax is payable under this Part by the trust on the amount that would be its taxable income for the taxation year if it had no incomes or losses from sources other than those businesses and properties, and no capital gains or capital losses other than from dispositions of those properties, and for that purpose,

    • (a) “income” includes dividends described in section 83; and

    • (b) the trust’s taxable capital gain or allowable capital loss from the disposition of a property is equal to its capital gain or capital loss, as the case may be, from the disposition.

  • Marginal note:Amount credited to a deposit

    (7) An amount that is credited or added to a deposit that is a TFSA as interest or other income in respect of the TFSA is deemed not to be received by the holder of the TFSA solely because of that crediting or adding.

  • Marginal note:Trust ceasing to be a TFSA

    (8) If an arrangement that governs a trust ceases, at a particular time, to be a TFSA,

    • (a) the trust is deemed

      • (i) to have disposed, immediately before the particular time, of each property held by the trust for proceeds equal to the property’s fair market value immediately before the particular time, and

      • (ii) to have acquired, at the particular time, each such property at a cost equal to that fair market value;

    • (b) the trust’s last taxation year that began before the particular time is deemed to have ended immediately before the particular time; and

    • (c) a taxation year of the trust is deemed to begin at the particular time.

  • Marginal note:Trust ceasing to be a TFSA on death of holder

    (9) If an arrangement that governs a trust ceases to be a TFSA because of the death of the holder of the TFSA,

    • (a) the arrangement is deemed, for the purposes of subsections (6) and (8), any regulations made under subsection (13), the definition “trust” in subsection 108(1), paragraph 149(1)(u.2) and the definitions “qualified investment” and “non-qualified investment” in subsection 207.01(1), to continue to be a TFSA until, and to cease to be a TFSA immediately after, the exemption-end time, being in this subsection the earlier of

      • (i) the time at which the trust ceases to exist, and

      • (ii) the end of the first calendar year that begins after the holder dies;

    • (b) there shall be included in computing a taxpayer’s income for a taxation year the total of all amounts each of which is an amount determined by the formula

      A – B

      where

      A

      is the amount of a payment made out of or under the trust, in satisfaction of all or part of the taxpayer’s beneficial interest in the trust, in the taxation year, after the holder’s death and at or before the exemption-end time, and

      B

      is an amount designated by the trust not exceeding the lesser of

      • (i) the amount of the payment, and

      • (ii) the amount by which the fair market value of all of the property held by the trust immediately before the holder’s death exceeds the total of all amounts each of which is the value of B in respect of any other payment made out of or under the trust; and

    • (c) there shall be included in computing the trust’s income for its first taxation year, if any, that begins after the exemption-end time the amount determined by the formula

      A – B

      where

      A

      is the fair market value of all of the property held by the trust at the exemption-end time, and

      B

      is the amount by which the fair market value of all of the property held by the trust immediately before the holder’s death exceeds the total of all amounts each of which is the value of B in paragraph (b) in respect of a payment made out of or under the trust.

  • Marginal note:Annuity contract ceasing to be a TFSA

    (10) If an annuity contract ceases, at a particular time, to be a TFSA,

    • (a) the holder of the TFSA is deemed to have disposed of the contract immediately before the particular time for proceeds equal to its fair market value immediately before the particular time;

    • (b) the contract is deemed to be a separate annuity contract issued and effected at the particular time otherwise than pursuant to or as a TFSA; and

    • (c) each person who has an interest or, for civil law, a right in the separate annuity contract at the particular time is deemed to acquire the interest at the particular time at a cost equal to its fair market value at the particular time.

  • Marginal note:Deposit ceasing to be a TFSA

    (11) If a deposit ceases, at a particular time, to be a TFSA,

    • (a) the holder of the TFSA is deemed to have disposed of the deposit immediately before the particular time for proceeds equal to its fair market value immediately before the particular time; and

    • (b) each person who has an interest or, for civil law, a right in the deposit at the particular time is deemed to acquire the interest at the particular time at a cost equal to its fair market value at the particular time.

  • Marginal note:Arrangement is TFSA only

    (12) An arrangement that is a qualifying arrangement at the time it is entered into is deemed not to be a retirement savings plan, an education savings plan, a retirement income fund or a disability savings plan.

  • Marginal note:Regulations

    (13) The Governor in Council may make regulations requiring issuers of TFSAs to file information returns in respect of TFSAs.

• (3) Subsections (1) and (2) apply to the 2009 and subsequent taxation years.

• 54. (1) Section 146.3 of the Act is amended by adding the following after subsection (1):

  • Marginal note:Adjusted minimum amount for 2008

    (1.1) The minimum amount under a retirement income fund for 2008 is 75 per cent of the amount that would, in the absence of this subsection, be the minimum amount under the fund for the year.

  • Marginal note:Exceptions

    (1.2) Subsection (1.1) does not apply to a retirement income fund

    • (a) for the purposes of subsections (5.1) and 153(1) and the definition “periodic pension payment” in section 5 of the Income Tax Conventions Interpretation Act; nor

    • (b) if the individual who was the annuitant under the fund on January 1, 2008 attained 70 years of age in 2007.

• (2) Section 146.3 of the Act is amended by adding the following after subsection (6.2):

  • Marginal note:Deduction for post-death reduction in value

    (6.3) If the last annuitant under a registered retirement income fund dies, there may be deducted in computing the annuitant’s income for the taxation year in which the annuitant dies an amount not exceeding the amount determined, after all amounts payable out of or under the fund have been paid, by the formula

    A – B

    where

    A

    is the total of all amounts each of which is

    • (a) the amount deemed by subsection (6) to have been received by the annuitant out of or under the fund,

    • (b) an amount (other than an amount described in paragraph (c)) received, after the death of the annuitant, by a taxpayer out of or under the fund and included, because of subsection (5), in computing the taxpayer’s income, or

    • (c) an amount that would, if the fund were a registered retirement savings plan, be a tax-paid amount (within the meaning assigned by subsection 146(1)) in respect of the fund; and

    B

    is the total of all amounts paid out of or under the fund after the death of the annuitant.

  • Marginal note:Subsection (6.3) not applicable

    (6.4) Except where the Minister has waived in writing the application of this subsection with respect to all or any portion of the amount determined in subsection (6.3) in respect of a registered retirement income fund, that subsection does not apply if

    • (a) at any time after the death of the annuitant, a trust governed by the fund held an investment that is not a qualified investment; or

    • (b) the last payment out of or under the fund was made after the end of the year following the year in which the annuitant died.

• (3) Subsection (2) applies in respect of a registered retirement income fund in respect of which the last payment out of the fund is made after 2008.

• 55. (1) The definition “entrusted shares percentage” in subsection 149.1(1) of the Act is repealed.

• (2) The definition “divestment obligation percentage” in subsection 149.1(1) of the Act is replaced by the following:

  “divestment obligation percentage”

  « pourcentage de dessaisissement »

  “divestment obligation percentage” of a private foundation for a particular taxation year, in respect of a class of shares of the capital stock of a corporation, is the percentage, if any, that is the lesser of

  • (a) the excess, if any, at the end of the taxation year, of the percentage of issued and outstanding shares of that class that are held by the private foundation over the exempt shares percentage of the private foundation, and

  • (b) the percentage determined by the formula

    A + B – C

    where

    A

    is the percentage determined under this paragraph in respect of the private foundation in respect of the class for the preceding taxation year,

    B

    is the total of all percentages, each of which is the portion of a net increase in the excess corporate holdings percentage of the private foundation in respect of the class for the particular taxation year or for a preceding taxation year that is allocated to the particular taxation year in accordance with subsection 149.2(5), and

    C

    is the total of all percentages, each of which is the portion of a net decrease in the excess corporate holdings percentage of the private foundation in respect of the class for the particular taxation year or for a preceding taxation year that is allocated to the particular taxation year in accordance with subsection 149.2(7);

• (3) Paragraph (c) of the definition “excess corporate holdings percentage” in subsection 149.1(1) of the Act is replaced by the following:

  • (c) in any other case, the number of percentage points, if any, by which the total corporate holdings percentage of the private foundation in respect of the class, at that time, exceeds the greater of 20% and the exempt shares percentage, at that time, of the private foundation in respect of the class;

• (4) Subsection 149.1(1) of the Act is amended by adding the following in alphabetical order:

  “equity percentage”

  « pourcentage d’intérêt »

  “equity percentage” of a person in a corporation has, subject to subsection 149.2(2.1), the same meaning as defined in subsection 95(4);

  “exempt shares”

  « actions exonérées »

  “exempt shares” held by a private foundation at any particular time means shares, of a class of the capital stock of a corporation,

  • (a) that were acquired by the private foundation by way of a gift that was subject to a trust or direction that the shares are to be held by the private foundation for a period ending not earlier than the particular time, if the gift was made

    • (i) before March 19, 2007,

    • (ii) on or after March 19, 2007 and before March 19, 2012

      • (A) under the terms of a will that was executed by a taxpayer before March 19, 2007 and not amended, by codicil or otherwise, on or after March 19, 2007, and

      • (B) in circumstances where no other will of the taxpayer was executed or amended on or after March 19, 2007, or

    • (iii) on or after March 19, 2007, under the terms of a testamentary or inter vivos trust created before March 19, 2007, and not amended on or after March 19, 2007,

  • (b) that were last acquired by the private foundation before March 19, 2007, other than shares that, at the particular time,

    • (i) are described in paragraph (a),

    • (ii) are listed on a designated stock exchange, or

    • (iii) are shares of the capital stock of a particular corporation, which particular corporation has an equity percentage greater than 0% in a public corporation, a class of the shares of the capital stock of which is listed on a designated stock exchange, if

      • (A) a corporation (in this subparagraph referred to as a “controlled corporation” and which may, for greater certainty, be the particular corporation)

        • (I) owns one or more shares of a class of the capital stock of the public corporation, and

        • (II) is controlled, directly or indirectly in any manner whatever, by one or more relevant persons in respect of the private foundation, or by the private foundation alone or together with one or more such relevant persons,

      • (B) the private foundation, if it held directly the shares described in subclause (A)(I), would have an excess corporate holdings percentage (determined without reference to subsection 149.2(8)) in respect of that class of shares that is greater than 0%, and

      • (C) the private foundation, alone or together with all controlled corporations, holds more than an insignificant interest in respect of the class of shares described in subclause (A)(I), or

  • (c) that are substituted shares held by the private foundation;

  “exempt shares percentage”

  « pourcentage d’actions exonérées »

  “exempt shares percentage” of a private foundation at any time, in respect of a class of shares of the capital stock of a corporation, is the total of all amounts, each of which is the percentage of the issued and outstanding shares of that class that are exempt shares held by the private foundation at that time;

  “substituted shares”

  « actions de remplacement »

  “substituted shares” held by a private foundation means shares acquired by the private foundation, in exchange for exempt shares held by the private foundation, in the course of a transaction to which section 51, subsection 85.1(1) or section 86 or 87 applies;

• (5) Subsection 149.1(15) of the Act is amended by striking out “and” at the end of paragraph (b), by adding “and’’ at the end of paragraph (c) and by adding the following after paragraph (c):

  • (d) the Minister, or a Minister referred to in paragraph 110.1(8)(e), may make available to the public in any manner a listing of the registered charities in respect of which an opinion has been formed for the purpose of paragraph 110.1(8)(e) or revoked under subsection 110.1(9).

• (6) Subsections (1) to (4) apply after March 18, 2007.

• 56. (1) Section 149.2 of the Act is amended by adding the following after subsection (2):

  • Marginal note:Ownership

    (2.1) For the purposes of the definition “equity percentage”, and subparagraph (b)(iii) of the definition “exempt shares”, in subsection 149.1(1), a person who, if paragraph 251(5)(b) applied would be deemed by that paragraph to have the same position in relation to the control of a corporation as if the person owned a share, is deemed to own the share.

• (2) Section 149.2 of the Act is amended by adding the following after subsection (8):

  • Marginal note:Where subsection (10) applies

    (9) Subsection (10) applies for the purposes of applying section 149.1 and subsections (8) and 188.1(3.1) to a private foundation at a particular time if, both on March 18, 2007 and at the particular time,

    • (a) the private foundation was the sole trustee of a trust, or was a majority interest beneficiary (within the meaning assigned by section 251.1) of a trust more than 50% of the trustees of which were the private foundation and one or more relevant persons in respect of the private foundation; and

    • (b) the trust held one or more shares of a class of the capital stock of a corporation.

  • Marginal note:Shares held through a trust on March 18, 2007

    (10) If this subsection applies at a particular time to a private foundation in respect of shares of a class of the capital stock of a corporation held by a trust, the private foundation is deemed to hold at the particular time that number of those shares as is determined by the formula

    A × B/C

    where

    A

    is the lesser of the number of those shares held by the trust on March 18, 2007 and the number so held at the particular time;

    B

    is the total fair market value of all interests held by the private foundation in the trust at the particular time; and

    C

    is the total fair market value of all property held by the trust at the particular time.

  • Marginal note:Discretionary trusts

    (11) For the purpose of subsection (10), if the amount of income or capital of a trust that a person may receive as a beneficiary under the trust depends on the exercise by any person of, or the failure by any person to exercise, a discretionary power, that person is deemed to have fully exercised, or to have failed to exercise, the power, as the case may be.

• (3) Subsection (1) applies after March 18, 2007.

• (4) Subsection (2) applies to taxation years, of private foundations, that begin on or after February 26, 2008.

• (5) If a registered charity was on March 19, 2007 a private foundation, in applying paragraphs 149.2(5)(b) and (c) of the Act to the first taxation year of the registered charity that begins after that date, the reference in those paragraphs to “in the current year” shall be read as a reference to “in the period that begins on March 18, 2007 and ends at the end of the current year”.

• 57. (1) Section 150.1 of the Act is amended by adding the following after subsection (2):

  • Marginal note:Mandatory filing of return by electronic transmission

    (2.1) If a corporation is, in respect of a taxation year, a prescribed corporation, the corporation shall file its return of income for the taxation year by way of electronic filing.

• (2) Subsection (1) applies to taxation years that end after 2009.

• 58. (1) Subsection 152(4) of the Act is amended by striking out “or” at the end of paragraph (a) and by adding the following after paragraph (b):

  • (c) the taxpayer or person filing the return has filed with the Minister a waiver in prescribed form within the additional 3-year period referred to in paragraph (b); or

  • (d) as a consequence of a change in the allocation of the taxpayer’s taxable income earned in a province as determined under the law of a province that provides rules similar to those prescribed for the purposes of section 124, an assessment, reassessment or additional assessment of tax for a taxation year payable by a corporation under a law of a province that imposes on the corporation a tax similar to the tax imposed under this Part (in this paragraph referred to as a “provincial reassessment”) is made, and as a consequence of the provincial reassessment, an assessment, reassessment or additional assessment is made on or before the day that is one year after the later of

    • (i) the day on which the Minister is advised of the provincial reassessment, and

    • (ii) the day that is 90 days after the day of mailing of a notice of the provincial reassessment.

• (2) The portion of subsection 152(4.01) of the Act before paragraph (a) is replaced by the following:

  • Marginal note:Assessment to which paragraph 152(4)(a), (b) or (c) applies

    (4.01) Notwithstanding subsections (4) and (5), an assessment, reassessment or additional assessment to which paragraph (4)(a), (b) or (c) applies in respect of a taxpayer for a taxation year may be made after the taxpayer’s normal reassessment period in respect of the year to the extent that, but only to the extent that, it can reasonably be regarded as relating to,

• (3) The portion of paragraph 152(4.01)(b) of the Act before subparagraph (i) is replaced by the following:

  • (b) where paragraph 4(b) or (c) applies to the assessment, reassessment or additional assessment,

• (4) Subsection 152(6) of the Act is amended by adding the following after paragraph (f.2):

  • (f.3) a deduction (including for the purposes of this subsection a reduction of an amount otherwise required to be included in computing a taxpayer’s income) under subsection 146(8.9) or (8.92) or 146.3(6.2) or (6.3),

• (5) Section 152 of the Act is amended by adding the following after subsection (6.1):

  • Marginal note:Extended reassessment period

    (6.2) The Minister shall reassess a taxpayer’s tax for a particular taxation year, in order to take into account the application of paragraph (d) of the definition “excluded property” in subsection 142.2(1), or the application of subsection 142.6(1.6), in respect of property held by the taxpayer, if

    • (a) the taxpayer has filed for the particular taxation year the return of income required by section 150; and

    • (b) the taxpayer files with the Minister a prescribed form amending the return, on or before the filing-due date for the taxpayer’s taxation year that

      • (i) if the filing is in respect of paragraph (d) of that definition “excluded property”, includes the acquisition of control time referred to in that paragraph, and

      • (ii) if the filing is in respect of subsection 142.6(1.6), immediately follows the particular taxation year.

• (6) Subsection (4) applies in respect of a registered retirement income fund or a registered retirement savings plan in respect of which the last payment out of the fund or plan is made after 2008.

• (7) Subsection (5) applies to taxation years that begin after 2001, except that

  • (a) for taxation years that begin before October 1, 2006, each reference in subsection 152(6.2) of the Act, as enacted by subsection (5), to paragraph (d) of the definition “excluded property” shall be read as a reference to paragraph (d.3) of the definition “mark-to-market property”; and

  • (b) a prescribed form referred to in paragraph 152(6.2)(b) of the Act, as enacted by subsection (5), is deemed to have been filed by a taxpayer on a timely basis if it is filed by the taxpayer on or before the taxpayer’s filing-due date for the taxpayer’s taxation year that includes the day on which this Act is assented to.

• 59. (1) Paragraph 157(1.2)(a) of the Act is replaced by the following:

  • (a) for which the amount determined under subsection (1.3) for the taxation year, or for the preceding taxation year, does not exceed $500,000;

• (2) Subsection (1) applies to taxation years ending after 2008, except that for taxation years that end in 2009, paragraph 157(1.2)(a) of the Act, as enacted by subsection (1), shall be read as follows:

  • (a) for which

    • (i) the amount determined under subsection (1.3) for the taxation year does not exceed the amount that is the total of $400,000 and that proportion of $100,000 that the number of days in the taxation year that are in 2009 is of the number of days in the taxation year, or

    • (ii) the amount determined under subsection (1.3) for the preceding taxation year does not exceed $400,000;

• 60. (1) Section 162 of the Act is amended by adding the following after subsection (7):

  • Marginal note:Late filing penalty — prescribed information returns

    (7.01) Every person (other than a registered charity) or partnership who fails to file, when required by this Act or the regulations, one or more information returns of a type prescribed for the purpose of this subsection is liable to a penalty equal to the greater of $100 and

    • (a) where the number of those information returns is less than 51, $10 multiplied by the number of days, not exceeding 100, during which the failure continues;

    • (b) where the number of those information returns is greater than 50 and less than 501, $15 multiplied by the number of days, not exceeding 100, during which the failure continues;

    • (c) where the number of those information returns is greater than 500 and less than 2,501, $25 multiplied by the number of days, not exceeding 100, during which the failure continues;

    • (d) where the number of those information returns is greater than 2,500 and less than 10,001, $50 multiplied by the number of days, not exceeding 100, during which the failure continues; and

    • (e) where the number of those information returns is greater than 10,000, $75 multiplied by the number of days, not exceeding 100, during which the failure continues.

  • Marginal note:Failure to file in appropriate manner — prescribed information returns

    (7.02) Every person (other than a registered charity) or partnership who fails to file, in the manner required by the regulations, one or more information returns of a type prescribed for the purpose of this subsection is liable to a penalty equal to

    • (a) where the number of those information returns is greater than 50 and less than 251, $250;

    • (b) where the number of those information returns is greater than 250 and less than 501, $500;

    • (c) where the number of those information returns is greater than 500 and less than 2,501, $1,500;

    • (d) where the number of those information returns is greater than 2,500, $2,500; and

    • (e) in any other case, nil.

• (2) Section 162 of the Act is amended by adding the following after subsection (7.1):

  • Marginal note:Failure to file in appropriate manner — return of income

    (7.2) Every person who fails to file a return of income for a taxation year as required by subsection 150.1(2.1) is liable to a penalty equal to $1,000.

• (3) Subsection (1) applies to returns required to be filed after 2009.

• (4) Subsection (2) applies to taxation years that end after 2010 except that, in its application to the 2011 and 2012 taxation years, the reference to $1,000 in subsection 162(7.2) of the Act, as enacted by subsection (2), is to be read as

  • (a) $250, for the 2011 taxation year; and

  • (b) $500, for the 2012 taxation year.

• 61. (1) Clause 181.3(1)(c)(ii)(B) of the Act is repealed.

• (2) Subsection (1) applies to taxation years that begin after September 2006.

• 62. (1) Paragraph 188.1(3.2)(c) of the Act is replaced by the following:

  • (c) each of those shares is deemed to have a fair market value, at the particular time, equal to the fair market value, at the particular time, of a share of the class issued by the corporation, determined without reference to this subsection.

• (2) Section 188.1 of the Act is amended by adding the following after subsection (3.2):

  • Marginal note:Where subsection (3.5) applies

    (3.3) Subsection (3.5) applies to a private foundation at a particular time in a taxation year if

    • (a) at the particular time, a person (in this subsection and subsection (3.5) referred to as an “insider” of the private foundation) that is the private foundation, or is a relevant person in respect of the private foundation, is a beneficiary under a trust;

    • (b) at or before the particular time

      • (i) the insider acquired an interest in or under the trust, or

      • (ii) the trust acquired a property;

    • (c) it may reasonably be considered that a purpose of the acquisition described in paragraph (b) was to hold, directly or indirectly, shares of a class of the capital stock of a corporation (referred to in subsection (3.5) as the “subject corporation”);

    • (d) the shares described in paragraph (c) would, if they were held by the insider, cause the private foundation to have a divestment obligation percentage for the taxation year; and

    • (e) at the particular time, the insider holds the interest described in subparagraph (b)(i), or the trust holds the property described in subparagraph (b)(ii), as the case may be.

  • Marginal note:Rules applicable

    (3.4) For the purpose of subsections (3.3) and (3.5),

    • (a) interests (or, for civil law, rights), other than shares, of a trust in a corporation that entitle the trust to a right described in paragraph 251(5)(b) in respect of a class of the capital stock of the corporation, are deemed to be converted into shares of that class in the manner described by paragraph (3.2)(a); and

    • (b) if the amount of income or capital of the trust that a person may receive as a beneficiary under the trust depends on the exercise by any person of, or the failure by any person to exercise, a discretionary power, that person is deemed to have fully exercised, or to have failed to exercise, the power, as the case may be.

  • Marginal note:Avoidance of divestiture

    (3.5) If this subsection applies to a private foundation at a particular time in respect of an interest of an insider of the private foundation in a trust, for the purposes of applying this section, subsection 149.1(1) and section 149.2,

    • (a) the insider is deemed to hold at the particular time, in addition to any shares of the capital stock of the subject corporation that it holds otherwise than because of this subsection, the number of shares, of the class of shares referred to in paragraph (3.3)(c), determined by the formula

      A × B/C

      where

      A

      is the number of shares of that class that are held, directly or indirectly, by the trust at the particular time,

      B

      is the total fair market value of all interests held by the insider in the trust at the particular time, and

      C

      is the total fair market value of all property held by the trust at the particular time;

    • (b) each of those shares is deemed to be a share that is issued by the subject corporation and outstanding and to continue to be held by the holder until such time as the holder no longer holds the interest or right; and

    • (c) each of those shares is deemed to have a fair market value, at the particular time, equal to the fair market value, at the particular time, of a share of the class issued by the subject corporation, determined without reference to this subsection.

• (3) Subsections (1) and (2) apply to taxation years, of private foundations, that begin on or after February 26, 2008.

• 63. (1) Subparagraph 190.11(b)(ii) of the Act is repealed.

• (2) Subsection (1) applies to taxation years that begin after September 2006.

• 64. (1) Subparagraph 190.13(c)(iv) of the Act is repealed.

• (2) Subsection (1) applies to taxation years that begin after September 2006.

• 65. (1) The portion of the definition “SIFT partnership” in subsection 197(1) of the Act before paragraph (a) is replaced by the following:

  “SIFT partnership”

  « société de personnes intermédiaire de placement déterminée »

  “SIFT partnership”, being a specified investment flow-through partnership, for any taxation year, means a partnership other than an excluded subsidiary entity (as defined in subsection 122.1(1)) for the taxation year that meets the following conditions at any time during the taxation year:

• (2) Subsection (1) is deemed to have come into force on October 31, 2006.

• 66. (1) Paragraph (c.1) of the definition “qualified investment” in section 204 of the Act is replaced by the following:

  • (c.1) debt obligations that meet the following criteria, namely,

    • (i) any of

      • (A) the debt obligations had, at the time of acquisition by the trust, an investment grade rating with a prescribed credit rating agency,

      • (B) the debt obligations have an investment grade rating with a prescribed credit rating agency, or

      • (C) the debt obligations were acquired by the trust in exchange for debt obligations that satisfied the condition in clause (A) and as part of a proposal to, or an arrangement with, the creditors of the issuer of the debt obligations that has been approved by a court under the Bankruptcy and Insolvency Act or the Companies’ Creditors Arrangement Act, and

    • (ii) either

      • (A) the debt obligations were issued as part of a single issue of debt of at least $25 million, or

      • (B) in the case of debt obligations that are issued on a continuous basis under a debt issuance program, the issuer of the debt obligations had issued and outstanding debt under the program of at least $25 million,

• (2) Subsection (1) applies in determining whether a property is, at any time after March 18, 2007, a qualified investment.

• 67. (1) The portion of clause 204.81(1)(c)(ii)(A) of the Act before subclause (I) is replaced by the following:

  • (A) Class A shares that are issuable only to individuals (other than trusts), trusts governed by registered retirement savings plans and trusts governed by TFSAs and that entitle their holders

• (2) Subsection (1) applies to the 2009 and subsequent taxation years.

• 68. (1) The definition “restricted property” in subsection 207.01(1) of the Act is repealed.

• (2) Paragraph (a) of the definition “advantage” in subsection 207.01(1) of the Act is amended by striking out “and” at the end of subparagraphs (i) and (ii) and by adding the following after subparagraph (ii):

  • (iii) a distribution under the TFSA, and

  • (iv) the payment or allocation of any amount to the TFSA by the issuer; and

• (3) Paragraph (b) of the definition “advantage” in subsection 207.01(1) of the Act is replaced by the following:

  • (b) a benefit that is an increase in the total fair market value of the property held in connection with the TFSA if it is reasonable to consider, having regard to all the circumstances, that the increase is attributable, directly or indirectly, to

    • (i) a transaction or event or a series of transactions or events that

      • (A) would not have occurred in an open market in which parties deal with each other at arm’s length and act prudently, knowledgeably and willingly, and

      • (B) had as one of its main purposes to enable a person or a partnership to benefit from the exemption from tax under Part I of any amount in respect of the TFSA, or

    • (ii) a payment received as, on account or in lieu of, or in satisfaction of, a payment

      • (A) for services provided by a person who is, or who does not deal at arm’s length with, the holder of the TFSA, or

      • (B) of interest, of a dividend, of rent, of a royalty or of any other return on investment, or of proceeds of disposition, in respect of property (other than property held in connection with the TFSA) held by a person who is, or who does not deal at arm’s length with, the holder of the TFSA; and

  • (c) a prescribed benefit.

• (4) The description of E in the definition “excess TFSA amount” in subsection 207.01(1) of the Act is replaced by the following:

  E

  is the total of all amounts each of which is the qualifying portion of a distribution made in the calendar year and at or before the particular time under a TFSA of which the individual was the holder at the time of the distribution and, for this purpose, the qualifying portion of a distribution is

  • (a) nil, if the distribution is a qualifying transfer or a prescribed distribution, and

  • (b) in any other case, the lesser of

    • (i) the amount of the distribution, and

    • (ii) the amount that would be the individual’s excess TFSA amount at the time of the distribution if the amount of the distribution were nil.

• (5) The portion of the definition “prohibited investment” in subsection 207.01(1) of the Act before paragraph (a) is replaced by the following:

  “prohibited investment”

  « placement interdit »

  “prohibited investment”, at any time, for a trust governed by a TFSA means property (other than prescribed property) that is at that time

• (6) Paragraph (d) of the definition “prohibited investment” in subsection 207.01(1) of the Act is replaced by the following:

  • (d) prescribed property.

• (7) Subsection 207.01(1) of the Act is amended by adding the following in alphabetical order:

  “exempt contribution”

  « cotisation exclue »

  “exempt contribution” means a contribution made in a calendar year under a TFSA by the survivor of an individual if

  • (a) the contribution is made during the period (in this definition referred to as the “rollover period”) that begins when the individual dies and that ends at the end of the first calendar year that begins after the individual dies (or at any later time that is acceptable to the Minister);

  • (b) a payment (in this definition referred to as the “survivor payment”) was made to the survivor during the rollover period, as a consequence of the individual’s death, directly or indirectly out of or under an arrangement that ceased, because of the individual’s death, to be a TFSA;

  • (c) the survivor designates, in prescribed form filed in prescribed manner within 30 days after the day on which the contribution is made, the contribution in relation to the survivor payment; and

  • (d) the amount of the contribution does not exceed the least of

    • (i) the amount, if any, by which

      • (A) the amount of the survivor payment

      exceeds

      • (B) the total of all other contributions designated by the survivor in relation to the survivor payment,

    • (ii) the amount, if any, by which

      • (A) the total proceeds of disposition that would, if section 146.2 were read without reference to subsection 146.2(9), be determined in respect of the arrangement under paragraph 146.2(8)(a), (10)(a) or (11)(a), as the case may be,

      exceeds

      • (B) the total of all other exempt contributions in respect of the arrangement made by the survivor at or before the time of the contribution, and

    • (iii) if the individual had, immediately before the individual’s death, an excess TFSA amount or if payments described in paragraph (b) are made to more than one survivor of the individual, nil or the greater amount, if any, allowed by the Minister in respect of the contribution.

• (8) Subsection 207.01(2) of the Act is repealed.

• (9) The portion of subsection 207.01(3) of the Act before paragraph (a) is replaced by the following:

  • Marginal note:Survivor as successor holder

    (3) If an individual’s survivor becomes the holder of a TFSA as a consequence of the individual’s death and, immediately before the individual’s death, the individual had an excess TFSA amount, the survivor is deemed (other than for the purposes of the definition “exempt contribution”) to have made, at the beginning of the month following the individual’s death, a contribution under a TFSA equal to the amount, if any, by which

• (10) Subsections (1) to (9) apply to the 2009 and subsequent taxation years.

• 69. (1) The portion of section 207.03 of the Act before paragraph (a) is replaced by the following:

  Marginal note:Tax payable on non-resident contributions

  207.03 If, at a particular time, a non-resident individual makes a contribution under a TFSA (other than a contribution that is a qualifying transfer or an exempt contribution), the individual shall pay a tax under this Part equal to 1% of the amount of the contribution in respect of each month that ends after the particular time and before the earlier of

• (2) Subsection (1) applies to the 2009 and subsequent taxation years.

• 70. (1) Subsection 207.04(3) of the Act is replaced by the following:

  • Marginal note:Where both prohibited and non-qualified investment

    (3) For the purposes of this section and subsection 146.2(6), if a trust governed by a TFSA holds property at any time that is, for the trust, both a prohibited investment and a non-qualified investment, the property is deemed at that time not to be a non-qualified investment, but remains a prohibited investment, for the trust.

• (2) The portion of subsection 207.04(7) of the Act before paragraph (b) is replaced by the following:

  • Marginal note:Amount of additional tax payable

    (7) The amount of tax payable under subsection (6) for a calendar year is 150% of the amount of tax that would be payable under Part I by the trust for the taxation year that ends in the calendar year if

    • (a) the Act were read without reference to paragraph 82(1)(b), section 121 and subsection 146.2(6); and

• (3) Subsections (1) and (2) apply to the 2009 and subsequent taxation years.

• 71. (1) The portion of subsection 207.06(2) of the Act before paragraph (a) is replaced by the following:

  • Marginal note:Waiver of tax payable

    (2) If a person would otherwise be liable to pay a tax under this Part because of subsection 207.04(1) or section 207.05, the Minister may waive or cancel all or part of the liability where the Minister considers it just and equitable to do so having regard to all the circumstances, including

• (2) Subsection (1) applies to the 2009 and subsequent taxation years.

• 72. (1) Paragraph (a) of the definition “registered life insurance policy” in subsection 211(1) of the Act is replaced by the following:

  • (a) as a registered retirement savings plan, or

• (2) Subsection (1) applies to the 2009 and subsequent taxation years.

• 73. (1) Paragraph 212(1)(p) of the Act is replaced by the following:

  • Marginal note:Former TFSA

    (p) an amount that would, if the non-resident person had been resident in Canada at the time at which the amount was paid, be required by paragraph 12(1)(z.5) to be included in computing the non-resident person’s income for the taxation year that includes that time;

• (2) Subsection (1) applies to the 2009 and subsequent taxation years.

• 74. (1) The definition “assessable distribution” in subsection 218.3(1) of the Act is replaced by the following:

  “assessable distribution”

  « distribution déterminée »

  “assessable distribution”, in respect of a Canadian property mutual fund investment, means the portion of any amount that is paid or credited (otherwise than as a SIFT trust wind-up event), by the mutual fund that issued the investment, to a non-resident investor who holds the investment, and that is not otherwise subject to tax under Part I or Part XIII.

• (2) Subsection (1) applies after July 14, 2008.

• 75. (1) The portion of subsection 241(1) of the Act before paragraph (a) is replaced by the following:

  Marginal note:Provision of information

  • 241. (1) Except as authorized by this section, no official or other representative of a government entity shall

• (2) Subsection 241(2) of the Act is replaced by the following:

  • Marginal note:Evidence relating to taxpayer information

    (2) Notwithstanding any other Act of Parliament or other law, no official or other representative of a government entity shall be required, in connection with any legal proceedings, to give or produce evidence relating to any taxpayer information.

• (3) Paragraph 241(4)(l) of the Act is replaced by the following:

  • (l) subject to subsection (9.2), provide to a representative of a government entity the business number of, the name of (including any trade name or other name used by), and any contact information, corporate information and registration information in respect of, the holder of a business number (other than an excluded individual), if the information is provided solely for the purposes of the administration or enforcement of

    • (i) an Act of Parliament or of a legislature of a province, or

    • (ii) a by-law of a municipality in Canada or a law of an aboriginal government;

• (4) The portion of subsection 241(5) of the Act before paragraph (a) is replaced by the following:

  • Marginal note:Disclosure to taxpayer or on consent

    (5) An official or other representative of a government entity may provide taxpayer information relating to a taxpayer

• (5) The portion of subsection 241(6) of the Act before paragraph (a) is replaced by the following:

  • Marginal note:Appeal from order or direction

    (6) An order or direction that is made in the course of or in connection with any legal proceedings and that requires an official, other representative of a government entity or authorized person to give or produce evidence relating to any taxpayer information may, by notice served on all interested parties, be appealed forthwith by the Minister or by the person against whom the order or direction is made to

• (6) Section 241 of the Act is amended by adding the following after subsection (9.1):

  • Marginal note:Restrictions on information sharing

    (9.2) No information may be provided to a representative of a government entity under paragraph (4)(l) in connection with a program, activity or service provided or undertaken by the government entity unless the government entity uses the business number as an identifier in connection with the program, activity or service.

  • Marginal note:Public disclosure

    (9.3) The Minister may, in connection with a program, activity or service provided or undertaken by the Minister, make available to the public the business number of, and the name of (including any trade name or other name used by), the holder of a business number (other than an excluded individual).

  • Marginal note:Public disclosure by representative of government entity

    (9.4) A representative of a government entity may, in connection with a program, activity or service provided or undertaken by the government entity, make available to the public the business number of, and the name of (including any trade name or other name used by), the holder of a business number (other than an excluded individual), if

    • (a) a representative of the government entity was provided with that information pursuant to paragraph (4)(l); and

    • (b) the government entity uses the business number as an identifier in connection with the program, activity or service.

• (7) The portion of the definition “taxpayer information” in subsection 241(10) of the Act after paragraph (b) is replaced by the following:

  but does not include information that does not directly or indirectly reveal the identity of the taxpayer to whom it relates and, for the purposes of applying subsections (2), (5) and (6) to a representative of a government entity that is not an official, taxpayer information includes only the information referred to in paragraph (4)(l);

• (8) Subsection 241(10) of the Act is amended by adding the following in alphabetical order:

  “aboriginal government”

  « gouvernement autochtone »

  “aboriginal government” means an aboriginal government as defined in subsection 2(1) of the Federal-Provincial Fiscal Arrangements Act;

  “contact information”

  « coordonnées »

  “contact information”, in respect of a holder of a business number, means the name, address, telephone number, facsimile number and preferred language of communication of the holder, or similar information as specified by the Minister in respect of the holder, and includes such information in respect of one or more

  • (a) trustees of the holder, if the holder is a trust,

  • (b) members of the holder, if the holder is a partnership,

  • (c) officers of the holder, if the holder is a corporation, or

  • (d) officers or members of the holder, if the holder is not described by any of paragraphs (a) to (c);

  “corporate information”

  « renseignements d’entreprise »

  “corporate information”, in respect of a holder of a business number that is a corporation, means the name (including the number assigned by the incorporating authority), date of incorporation, jurisdiction of incorporation and any information on the dissolution, reorganization, amalgamation, winding-up or revival of the corporation;

  “excluded individual”

  « particulier exclu »

  “excluded individual” means an individual who is a holder of a business number solely because the individual is required under this Act to deduct or withhold an amount from an amount paid or credited or deemed to be paid or credited;

  “government entity”

  « entité gouvernementale »

  “government entity” means

  • (a) a department or agency of the government of Canada or of a province,

  • (b) a municipality in Canada,

  • (c) an aboriginal government,

  • (d) a corporation all of the shares (except directors’ qualifying shares) of the capital stock of which are owned by one or more persons each of which is

    • (i) Her Majesty in right of Canada,

    • (ii) Her Majesty in right of a province,

    • (iii) a municipality in Canada, or

    • (iv) a corporation described in this paragraph, or

  • (e) a board or commission, established by Her Majesty in right of Canada or Her Majesty in right of a province, that performs an administrative or regulatory function of government, or by one or more municipalities in Canada, that performs an administrative or regulatory function of a municipality;

  “registration information”

  « renseignements relatifs à l’inscription »

  “registration information”, in respect of a holder of a business number, means

  • (a) any information pertaining to the legal form of the holder,

  • (b) the type of activities carried on or proposed to be carried on by the holder,

  • (c) each date on which

    • (i) the business number was issued to the holder,

    • (ii) the holder began activities,

    • (iii) the holder ceased or resumed activities, or

    • (iv) the business number assigned to the holder was changed, and

  • (d) the reasons for the cessation, resumption or change referred to in subparagraph (c)(iii) or (iv);

  “representative”

  « représentant »

  “representative” of a government entity means a person who is employed in the service of, who occupies a position of responsibility in the service of, or who is engaged by or on behalf of, a government entity, and includes, for the purposes of subsections (1), (2), (5) and (6), a person who was formerly so employed, who formerly occupied such a position or who formerly was so engaged;

• 76. (1) The definition “functional currency” in subsection 248(1) of the Act is repealed.

• (2) The definitions “amateur athlete trust”, “personal trust” and “TFSA” in subsection 248(1) of the Act are replaced by the following:

  “amateur athlete trust”

  « fiducie au profit d’un athlète amateur »

  “amateur athlete trust” has the meaning assigned by subsection 143.1(1.2);

  “personal trust”

  « fiducie personnelle »

  “personal trust” means a trust (other than a trust that is, or was at any time after 1999, a unit trust) that is

  • (a) a testamentary trust, or

  • (b) an inter vivos trust no beneficial interest in which was acquired for consideration payable directly or indirectly to

    • (i) the trust, or

    • (ii) any person or partnership that has made a contribution to the trust by way of transfer, assignment or other disposition of property;

  “TFSA”

  « compte d’épargne libre d’impôt »

  “TFSA”, being a tax-free savings account, has the meaning assigned by subsection 146.2(5);

• (3) Paragraph (d) of the definition “Canadian real, immovable or resource property” in subsection 248(1) of the Act is replaced by the following:

  • (d) a share of the capital stock of a corporation, an income or capital interest in a trust or an interest in a partnership (other than a taxable Canadian corporation, a SIFT trust or a SIFT partnership), if more than 50% of the fair market value of the share or interest is derived directly or indirectly from one or any combination of properties described in paragraphs (a) to (c), or

• (4) Subsection 248(1) of the Act is amended by adding the following in alphabetical order:

  “foreign currency debt”

  « dette en monnaie étrangère »

  “foreign currency debt” has the meaning assigned by subsection 111(8);

  “SIFT trust wind-up event”

  « fait lié à la conversion d’une EIPD-fiducie »

  “SIFT trust wind-up event” means a distribution by a particular trust resident in Canada of property to a taxpayer in respect of which the following conditions are met:

  • (a) the distribution occurs before 2013,

  • (b) there is a resulting disposition of all of the taxpayer’s interest as a beneficiary under the particular trust,

  • (c) the particular trust is

    • (i) a SIFT wind-up entity,

    • (ii) a trust whose only beneficiary throughout the period (referred to in this definition as the “qualifying period”) that begins on July 14, 2008 and that ends at the time of the distribution is another trust that throughout the qualifying period

      • (A) is resident in Canada, and

      • (B) is a SIFT wind-up entity or a trust described by this subparagraph, or

    • (iii) a trust whose only beneficiary at the time of distribution is another trust that throughout the qualifying period

      • (A) is resident in Canada,

      • (B) is a SIFT wind-up entity or a trust described by subparagraph (ii), and

      • (C) is a majority interest beneficiary (within the meaning that would be assigned by section 251.1 if the references in the definition “majority interest beneficiary” in subsection 251.1(3) to “50%” were read as references to “25%”) of the particular trust,

  • (d) the particular trust ceases to exist immediately after the distribution or immediately after the last of a series of SIFT trust wind-up events (determined without reference to this paragraph) of the particular trust that includes the distribution, and

  • (e) the property was not acquired by the particular trust as a result of a transfer or an exchange

    • (i) that is

      • (A) a “qualifying exchange” as defined in subsection 132.2(1) or a “qualifying disposition” as defined in subsection 107.4(1),

      • (B) made after February 2, 2009, and

      • (C) from any person other than a SIFT wind-up entity, or

    • (ii) to which any of sections 51, 85, 85.1, 86, 87, 88, 107.4 or 132.2 applies, of another property acquired as a result of a transfer or an exchange described by subparagraph (i) or this subparagraph;

  “SIFT wind-up corporation”

  « société de conversion d’EIPD »

  “SIFT wind-up corporation”, in respect of a SIFT wind-up entity, means at any particular time a corporation

  • (a) that, at any time that is after July 13, 2008 and before the earlier of the particular time and January 1, 2013, owns all of the equity in the SIFT wind-up entity, or

  • (b) shares of the capital stock of which are at or before the particular time distributed on a SIFT trust wind-up event of the SIFT wind-up entity;

  “SIFT wind-up entity”

  « EIPD convertible »

  “SIFT wind-up entity” means a trust or partnership that at any time in the period that began on October 31, 2006 and that ends on July 14, 2008 is

  • (a) a SIFT trust (determined without reference to subsection 122.1(2)),

  • (b) a SIFT partnership (determined without reference to subsection 197(8)), or

  • (c) a real estate investment trust (as defined in subsection 122.1(1));

  “SIFT wind-up entity equity”

  « intérêt dans une EIPD convertible »

  “SIFT wind-up entity equity”, or equity in a SIFT wind-up entity, means

  • (a) if the SIFT wind-up entity is a trust, a capital interest (determined without reference to subsection (25)) in the trust, and

  • (b) if the SIFT wind-up entity is a partnership, an interest as a member of the partnership where, by operation of any law governing the arrangement in respect of the partnership, the liability of the member as a member of the partnership is limited,

  except that if all of the interests described in paragraph (a) or (b), as the case may be, in the SIFT wind-up entity are described by reference to units, it means the part of the interest represented by such a unit;

• (5) Subsection 248(3) of the Act is replaced by the following:

  • Marginal note:Property subject to certain Quebec institutions and arrangements

    (3) For the purposes of this Act, if property is subject to an institution or arrangement that is described by this subsection and that is governed by the laws of the Province of Quebec, the following rules apply in respect of the property:

    • (a) if at any time property is subject to a usufruct, right of use or habitation, or substitution,

      • (i) the usufruct, right of use or habitation, or substitution, as the case may be, is deemed to be at that time

        • (A) a trust, and

        • (B) where the usufruct, right of use or habitation, or substitution, as the case may be, is created by will, a trust created by will,

      • (ii) the property is deemed

        • (A) where the usufruct, right of use or habitation, or substitution, as the case may be, arises on the death of a testator, to have been transferred to the trust on and as a consequence of the death of the testator, and not otherwise, and

        • (B) where the usufruct, right of use or habitation, or substitution, as the case may be, arises otherwise, to have been transferred (at the time it first became subject to the usufruct, right of use or habitation, or substitution, as the case may be) to the trust by the person that granted the usufruct, right of use or habitation, or substitution, and

      • (iii) the property is deemed to be, throughout the period in which it is subject to the usufruct, right of use or habitation, or substitution, as the case may be, held by the trust, and not otherwise;

    • (b) an arrangement (other than a partnership, a qualifying arrangement or an arrangement that is a trust determined without reference to this paragraph) is deemed to be a trust and property subject to rights and obligations under the arrangement is, if the arrangement is deemed by this paragraph to be a trust, deemed to be held in trust and not otherwise, where the arrangement

      • (i) is established before October 31, 2003 by or under a written contract that

        • (A) is governed by the laws of the Province of Quebec, and

        • (B) provides that, for the purposes of this Act, the arrangement shall be considered to be a trust, and

      • (ii) creates rights and obligations that are substantially similar to the rights and obligations under a trust (determined without reference to this subsection);

    • (c) if the arrangement is a qualifying arrangement,

      • (i) the arrangement is deemed to be a trust,

      • (ii) any property contributed at any time to the arrangement by an annuitant, a holder or a subscriber of the arrangement, as the case may be, is deemed to have been transferred, at that time, to the trust by the contributor, and

      • (iii) property subject to rights and obligations under the arrangement is deemed to be held in trust and not otherwise;

    • (d) a person who has a right (whether immediate or future and whether absolute or contingent) to receive all or part of the income or capital in respect of property that is referred to in paragraph (a) or (b) is deemed to be beneficially interested in the trust; and

    • (e) notwithstanding that a property is at any time subject to a servitude, the property is deemed to be beneficially owned by a person at that time if, at that time, the person has in relation to the property

      • (i) the right of ownership,

      • (ii) a right as a lessee under an emphyteusis, or

      • (iii) a right as a beneficiary in a trust.

  • Marginal note:Gift of bare ownership of immovables

    (3.1) Subsection (3) does not apply in respect of a usufruct or a right of use of an immovable in circumstances where a taxpayer disposes of the bare ownership of the immovable by way of a gift to a donee described in the definition “total charitable gifts”, “total Crown gifts” or “total ecological gifts” in subsection 118.1(1) and retains, for life, the usufruct or the right of use.

  • Marginal note:Qualifying arrangement

    (3.2) For the purposes of paragraphs 248(3)(b) and (c), an arrangement is a qualifying arrangement if it is

    • (a) entered into with a corporation that is licensed or otherwise authorized under the laws of Canada or a province to carry on in Canada the business of offering to the public its services as trustee;

    • (b) established by or under a written contract that is governed by the laws of the Province of Quebec;

    • (c) presented as a declaration of trust or provides that, for the purposes of this Act, it shall be considered to be a trust; and

    • (d) presented as an arrangement in respect of which the corporation is to take action for the arrangement to become a registered disability savings plan, a registered education savings plan, a registered retirement income fund, a registered retirement savings plan or a TFSA.

• (6) Subsection 248(25.1) of the Act is replaced by the following:

  • Marginal note:Trust-to-trust transfers

    (25.1) Where at any time a particular trust transfers property to another trust (other than a trust governed by a registered retirement savings plan or by a registered retirement income fund) in circumstances to which paragraph (f) of the definition “disposition” in subsection (1) applies, without affecting the personal liabilities under this Act of the trustees of either trust or the application of subsection 104(5.8) and paragraph 122(2)(f), the other trust is deemed to be after that time the same trust as, and a continuation of, the particular trust, and, for greater certainty, if the property was deemed to be taxable Canadian property of the particular trust by paragraph 51(1)(f), 85(1)(i) or 85.1(1)(a) or (8)(b), subsection 85.1(5) or 87(4) or (5) or paragraph 97(2)(c) or 107(2)(d.1) or (3.1)(d), the property is deemed to be taxable Canadian property of the other trust.

• (7) Subsection (1) applies in respect of taxation years that begin after December 13, 2007.

• (8) The definition “amateur athlete trust” in subsection 248(1) of the Act, as enacted by subsection (2), applies to the 2008 and subsequent taxation years.

• (9) The definition “personal trust” in subsection 248(1) of the Act, as enacted by subsection (2), applies after July 14, 2008.

• (10) The definition “TFSA” in subsection 248(1) of the Act, as enacted by subsection (2), applies to the 2009 and subsequent taxation years.

• (11) Subsection (3) is deemed to have come into force on October 31, 2006.

• (12) The definition “foreign currency debt” in subsection 248(1) of the Act, as enacted by subsection (4), applies after 2005.

• (13) The definitions “SIFT trust wind-up event”, “SIFT wind-up corporation”, “SIFT wind-up entity” and “SIFT wind-up entity equity” in subsection 248(1) of the Act, as enacted by subsection (4), apply after December 19, 2007.

• (14) Subsections 248(3) and (3.2) of the Act, as enacted by subsection (5), apply to taxation years that begin after October 30, 2003 except that

  • (a) for taxation years that end before 2008,

    • (i) subparagraph 248(3)(c)(ii) of the Act, as enacted by subsection (5), shall be read without reference to the expression “a holder”, and

    • (ii) paragraph 248(3.2)(d) of the Act, as enacted by subsection (5), shall be read without reference to registered disability savings plans and TFSAs; and

  • (b) for taxation years that end in 2008, paragraph 248(3.2)(d) of the Act, as enacted by subsection (5), shall be read without reference to TFSAs.

• (15) For taxation years that begin after 1988 and before October 31, 2003, paragraph 248(3)(d) of the Act shall, in its application to each arrangement that is entered into between an individual and a corporation licensed or otherwise authorized under the laws of Canada or a province to carry on in Canada the business of offering to the public its services as trustee and that is accepted by the Minister for registration under section 146 or 146.3 of the Act, be read without reference to

  • (a) clause (i)(B) of that paragraph, if the arrangement is presented as a declaration of trust but does not provide that, for the purposes of the Act, the arrangement shall be considered to be a trust; and

  • (b) subparagraph (ii) of that paragraph.

• (16) Subsection 248(3.1) of the Act, as enacted by subsection (5), applies to dispositions that occur after July 18, 2005.

• (17) Subsection (6) applies after December 19, 2007.

• 77. (1) Section 253.1 of the Act is replaced by the following:

  Marginal note:Investments in limited partnerships

  253.1 For the purposes of subparagraph 108(2)(b)(ii), paragraphs 130.1(6)(b), 131(8)(b) and 132(6)(b), subsection 146.2(6), paragraphs 146.4(5)(b) and 149(1)(o.2), the definition “private holding corporation” in subsection 191(1) and regulations made for the purposes of paragraphs 149(1)(o.3) and (o.4), if a trust or corporation holds an interest as a member of a partnership and, by operation of any law governing the arrangement in respect of the partnership, the liability of the member as a member of the partnership is limited, the member shall not, solely because of its acquisition and holding of that interest, be considered to carry on any business or other activity of the partnership.

• (2) Subsection (1) applies to the 2009 and subsequent taxation years.

• 78. (1) Subsection 256(7) of the Act is amended by striking out “and” at the end of paragraph (d), by adding “and” at the end of paragraph (e) and by adding the following after paragraph (e):

  • (f) if a particular trust is the only beneficiary of another trust, the particular trust is described in paragraph (c) of the definition “SIFT trust wind-up event”, the particular trust would, in the absence of this paragraph, acquire control of a corporation solely because of a SIFT trust wind-up event that is a distribution of shares of the capital stock of the corporation by the other trust, and the other trust controlled the corporation immediately before the distribution, the particular trust is deemed not to acquire control of the corporation because of the distribution.

• (2) Subsection 256(9) of the Act is replaced by the following:

  • Marginal note:Date of acquisition of control

    (9) For the purposes of this Act, other than for the purposes of determining if a corporation is, at any time, a small business corporation or a Canadian-controlled private corporation, where control of a corporation is acquired by a person or group of persons at a particular time on a day, control of the corporation shall be deemed to have been acquired by the person or group of persons, as the case may be, at the beginning of that day and not at the particular time unless the corporation elects in its return of income under Part I filed for its taxation year that ends immediately before the acquisition of control not to have this subsection apply.

• (3) Subsection (1) applies after July 14, 2008.

• (4) Subsection (2) applies in respect of an acquisition of control of a corporation that occurs after 2005, other than in respect of such an acquisition of control that occurs before January 28, 2009 and in respect of which the taxpayer elects in writing, filed with the Minister of National Revenue on or before the taxpayer’s filing-due date for the taxpayer’s 2009 taxation year, that subsection (2) not apply.

• (5) A taxpayer is deemed to have made the election described in subsection (4) in respect of an acquisition of control of a corporation that occurs before January 28, 2009 if it can reasonably be considered, having regard to a return of income, notice of objection, or notice of appeal, filed or served by the taxpayer under the Act before January 28, 2009, that the taxpayer has interpreted and applied subsection 256(9) of the Act for the purposes of determining if the corporation was a small business corporation or a Canadian-controlled private corporation at the time of the transfer of shares of the corporation that caused the acquisition of control to occur.

• 79. (1) The portion of subsection 259(1) of the Act before paragraph (a) is replaced by the following:

  Marginal note:Proportional holdings in trust property

  • 259. (1) For the purposes of subsections 146(6), (10) and (10.1), 146.2(6) and 146.3(7), (8) and (9) and Parts X, X.2 and XI to XI.1, if at any time a taxpayer that is a registered investment or that is described in any of paragraphs 149(1)(r), (s), (u) to (u.2) or (x) acquires, holds or disposes of a particular unit in a qualified trust and the qualified trust elects for any period that includes that time to have this subsection apply,

• (2) Subsection (1) applies to the 2009 and subsequent taxation years.

• 80. (1) Section 261 of the Act is replaced by the following:

  Marginal note:Definitions

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

    “Canadian currency year”

    « année de déclaration en monnaie canadienne »

    “Canadian currency year” of a taxpayer means a taxation year that precedes the first functional currency year of the taxpayer.

    “Canadian tax results”

    « résultats fiscaux canadiens »

    “Canadian tax results” of a taxpayer for a taxation year means

    • (a) the amount of the income, taxable income or taxable income earned in Canada of the taxpayer for the taxation year;

    • (b) the amount (other than an amount payable on behalf of another person under subsection 153(1) or section 215) of tax or other amount payable under this Act by the taxpayer in respect of the taxation year;

    • (c) the amount (other than an amount refundable on behalf of another person in respect of amounts payable on behalf of that person under subsection 153(1) or section 215) of tax or other amount refundable under this Act to the taxpayer in respect of the taxation year; and

    • (d) any amount that is relevant in determining the amounts described in respect of the taxpayer under paragraphs (a) to (c).

    “elected functional currency”

    « monnaie fonctionnelle choisie »

    “elected functional currency” of a taxpayer means the currency of a country other than Canada that was the functional currency of the taxpayer for its first taxation year in respect of which it made an election under paragraph (3)(b).

    “functional currency”

    « monnaie fonctionnelle »

    “functional currency” of a taxpayer for a taxation year means the currency of a country other than Canada if that currency is, throughout the taxation year,

    • (a) a qualifying currency; and

    • (b) the primary currency in which the taxpayer maintains its records and books of account for financial reporting purposes.

    “functional currency year”

    « année de déclaration en monnaie fonctionnelle »

    “functional currency year” of a taxpayer means a taxation year in respect of which subsection (5) applies to the taxpayer.

    “pre-reversion debt”

    « créance pré-rétablissement »

    “pre-reversion debt” of a taxpayer means a debt obligation of the taxpayer that was issued by the taxpayer before the beginning of the taxpayer’s first reversionary year.

    “pre-transition debt”

    « créance pré-transition »

    “pre-transition debt” of a taxpayer means a debt obligation of the taxpayer that was issued by the taxpayer before the beginning of the taxpayer’s first functional currency year.

    “qualifying currency”

    « monnaie admissible »

    “qualifying currency” at any time means each of

    • (a) the currency of the United States of America;

    • (b) the currency of the European Monetary Union;

    • (c) the currency of the United Kingdom;

    • (d) the currency of Australia; and

    • (e) a prescribed currency.

    “relevant spot rate”

    « taux de change au comptant »

    “relevant spot rate” for a particular day means, in respect of a conversion of an amount from a particular currency to another currency,

    • (a) if the particular currency or the other currency is Canadian currency, the rate quoted by the Bank of Canada for noon on the particular day (or, if there is no such rate quoted for the particular day, the closest preceding day for which such a rate is quoted) for the exchange of the particular currency for the other currency, or, in applying paragraphs (2)(b) and (5)(c), another rate of exchange that is acceptable to the Minister; and

    • (b) if neither the particular currency nor the other currency is Canadian currency, the rate — calculated by reference to the rates quoted by the Bank of Canada for noon on the particular day (or, if either of such rates is not quoted for the particular day, the closest preceding day for which both such rates are quoted) for the exchange of Canadian currency for each of those currencies — for the exchange of the particular currency for the other currency, or, in applying paragraphs (2)(b) and (5)(c), another rate of exchange that is acceptable to the Minister.

    “reversionary year”

    « année de rétablissement »

    “reversionary year” of a taxpayer means a taxation year that begins after the last functional currency year of the taxpayer.

    “tax reporting currency”

    « monnaie de déclaration »

    “tax reporting currency” of a taxpayer for a taxation year, and at any time in the taxation year, means the currency in which the taxpayer’s Canadian tax results for the taxation year are to be determined.

  • Marginal note:Canadian currency requirement

    (2) In determining the Canadian tax results of a taxpayer for a particular taxation year,

    • (a) subject to this section, other than this subsection, Canadian currency is to be used; and

    • (b) subject to this section, other than this subsection, subsection 79(7) and paragraphs 80(2)(k) and 142.7(8)(b), if a particular amount that is relevant in computing those Canadian tax results is expressed in a currency other than Canadian currency, the particular amount is to be converted to an amount expressed in Canadian currency using the relevant spot rate for the day on which the particular amount arose.

  • Marginal note:Application of subsection (5)

    (3) Subsection (5) applies to a taxpayer in respect of a particular taxation year if

    • (a) the taxpayer is, throughout the particular taxation year, a corporation (other than an investment corporation, a mortgage investment corporation or a mutual fund corporation) resident in Canada;

    • (b) the taxpayer has elected that subsection (5) apply to the taxpayer and has filed that election with the Minister in prescribed form and manner on or before the day that is six months before the end of the particular taxation year;

    • (c) there is a functional currency of the taxpayer for the first taxation year of the taxpayer in respect of which subsection (5) would, if this subsection were read without reference to this paragraph, apply;

    • (d) the taxpayer has not filed another election under paragraph (b); and

    • (e) a revocation by the taxpayer under subsection (4) does not apply to the particular taxation year.

  • Marginal note:Revocation of election

    (4) A taxpayer may revoke its election under paragraph (3)(b) by filing, on a day that is in a functional currency year of the taxpayer (other than its first functional currency year), a notice of revocation in prescribed form and manner. The revocation applies to each taxation year of the taxpayer that begins on or after the day that is six months after that day.

  • Marginal note:Functional currency tax reporting

    (5) If this subsection applies to a taxpayer in respect of a particular taxation year,

    • (a) the taxpayer’s Canadian tax results for the particular taxation year are to be determined using the taxpayer’s elected functional currency;

    • (b) unless the context otherwise requires, each reference in this Act or the regulations to an amount (other than in respect of a penalty or fine) that is described as a particular number of Canadian dollars is to be read, in respect of the taxpayer and the particular taxation year, as a reference to that amount expressed in the taxpayer’s elected functional currency using the relevant spot rate for the first day of the particular taxation year;

    • (c) subject to paragraph (9)(b), subsection (15), subsection 79(7) and paragraphs 80(2)(k) and 142.7(8)(b), if a particular amount that is relevant in computing the taxpayer’s Canadian tax results for the particular taxation year is expressed in a currency other than the taxpayer’s elected functional currency, the particular amount is to be converted to an amount expressed in the taxpayer’s elected functional currency using the relevant spot rate for the day on which the particular amount arose;

    • (d) the definition “exchange rate” in subsection 111(8) is, in respect of the taxpayer and the particular taxation year, and with such modifications as the context requires, to be read as follows:

      “exchange rate” at any time in respect of a particular currency other than the taxpayer’s elected functional currency means the relevant spot rate, for the day that includes that time, in respect of the conversion of an amount from the particular currency to the taxpayer’s elected functional currency, or a rate of exchange acceptable to the Minister;

    • (e) except in applying paragraph 95(2)(f.15) in respect of a taxation year, of a foreign affiliate of the taxpayer, that is a functional currency year of the foreign affiliate within the meaning of subsection (6.1), each reference in subsection 39(2)

      • (i) to “the value of the currency or currencies of one or more countries other than Canada relative to Canadian currency, a taxpayer” is to be read, in respect of the taxpayer and the particular taxation year, and with such modifications as the context requires, as a reference to “the value of the currency or currencies of one or more countries (other than the taxpayer’s elected functional currency) relative to a taxpayer’s elected functional currency, the taxpayer”, and

      • (ii) to “currency of a country other than Canada” is to be read, in respect of the taxpayer and the particular taxation year, and with such modifications as the context requires, as a reference to “currency other than the taxpayer’s elected functional currency”;

    • (f) each reference in

      • (i) section 76.1, subsection 79(7), paragraph 80(2)(k), subsections 80.01(11), 80.1(8), 142.4(1) and 142.7(8) and the definition “amortized cost” in subsection 248(1), and subparagraph 231(6)(a)(iv) of the Regulations, to “Canadian currency” is, in respect of the taxpayer and the particular taxation year, and with such modifications as the context requires, to be read as a reference to “the taxpayer’s elected functional currency”, and

      • (ii) subparagraph 94.1(1)(b)(vii), the definition “foreign currency debt” in subsection 111(8), subsection 142.4(1), and the definition “amortized cost” in subsection 248(1) to “currency of a country other than Canada” is, in respect of the taxpayer and the particular taxation year, and with such modifications as the context requires, to be read as a reference to “currency other than the taxpayer’s elected functional currency”;

    • (g) the definition “foreign currency” in subsection 248(1) is, in respect of the taxpayer and the taxation year, and with such modifications as the context requires, to be read as follows:

      “foreign currency” in respect of a taxpayer, at any time in a taxation year, means a currency other than the taxpayer’s elected functional currency;

    • (h) where a taxation year, of a foreign affiliate of the taxpayer, is a functional currency year of the foreign affiliate within the meaning of subsection (6.1),

      • (i) the references in section 95 (other than paragraph 95(2)(f.15)) and the references in regulations made for the purposes of section 95 or 113 (other than subsection 5907(6) of the Regulations) to

        • (A) “Canadian currency” are to be read, in respect of the foreign affiliate and the taxation year, and with such modifications as the context requires, as references to “the taxpayer’s elected functional currency”, and

        • (B) “currency of a country other than Canada” are to be read, in respect of the foreign affiliate and the taxation year, and with such modifications as the context requires, as references to “currency other than the taxpayer’s elected functional currency”, and

      • (ii) the reference in paragraph 95(2)(f.13) to “the rate of exchange quoted by the Bank of Canada at noon on” is to be read, in respect of the foreign affiliate and the taxation year, and with such modifications as the context requires, as a reference to “the relevant spot rate for”.

  • Marginal note:Partnerships

    (6) For the purposes of computing the Canadian tax results of a particular taxpayer for each taxation year that is a functional currency year or a reversionary year of the particular taxpayer, this section is to be applied as if each partnership of which the particular taxpayer is a member at any time in the taxation year were a taxpayer that

    • (a) had as its first functional currency year its first fiscal period, if any, that

      • (i) is a fiscal period at any time during which the particular taxpayer is a member of the partnership,

      • (ii) begins after December 13, 2007, and

      • (iii) ends at least six months after the day that is six months before the end of the particular taxpayer’s first functional currency year;

    • (b) had as its last Canadian currency year its last fiscal period, if any, that ends before its first functional currency year;

    • (c) had as its first reversionary year its first fiscal period, if any, that begins after the particular taxpayer’s last functional currency year;

    • (d) is subject to subsection (5) for each of its fiscal periods that is, or begins after, its first functional currency year and that ends before its first reversionary year;

    • (e) had as its elected functional currency in respect of each fiscal period described in paragraph (d) the elected functional currency of the particular taxpayer; and

    • (f) had as its last functional currency year its last fiscal period, if any, that ends before its first reversionary year.

  • Marginal note:Foreign affiliates

    (6.1) For the purposes of computing the foreign accrual property income of a foreign affiliate of a particular taxpayer, in respect of the particular taxpayer, for each taxation year that is a functional currency year or a reversionary year of the particular taxpayer, this section is to be applied as if

    • (a) the foreign affiliate were a taxpayer that

      • (i) had, as its first functional currency year, its first taxation year that

        • (A) is a taxation year at any time during which the foreign affiliate is a foreign affiliate of the particular taxpayer,

        • (B) begins after December 13, 2007, and

        • (C) ends at least six months after the day that is six months before the end of the particular taxpayer’s first functional currency year,

      • (ii) had as its last Canadian currency year its last taxation year, if any, that ends before its first functional currency year,

      • (iii) had as its first reversionary year its first taxation year, if any, that begins after the particular taxpayer’s last functional currency year,

      • (iv) is subject to subsection (5) for each of its taxation years that is, or begins after, its first functional currency year and that ends before its first reversionary year,

      • (v) had as its elected functional currency in respect of each taxation year described in subparagraph (iv) the elected functional currency of the particular taxpayer, and

      • (vi) had as its last functional currency year its last taxation year, if any, that ends before its first reversionary year; and

    • (b) the Canadian tax results of the foreign affiliate for each taxation year that is a functional currency year or a reversionary year of the foreign affiliate, within the meaning of paragraph (a), were its foreign accrual property income, in respect of the particular taxpayer, for that taxation year and any amount that is relevant in determining such foreign accrual property income.

  • Marginal note:Converting Canadian currency amounts

    (7) In applying this Act to a taxpayer for a particular functional currency year of the taxpayer, the following amounts are to be converted from Canadian currency to the taxpayer’s elected functional currency using the relevant spot rate for the last day of the taxpayer’s last Canadian currency year:

    • (a) each particular amount that

      • (i) is, or is relevant to the determination of, an amount that may be deducted under subsection 37(1) or 66(4), element F in the definition “foreign accrual property income” in subsection 95(1), section 110.1 or 111 or subsection 126(2), 127(5), 129(1), 181.1(4) or 190.1(3), in the particular functional currency year, and

      • (ii) was determined for a Canadian currency year of the taxpayer;

    • (b) the cost to the taxpayer of a property that was acquired by the taxpayer in a Canadian currency year of the taxpayer;

    • (c) an amount that was required by section 53 to be added or deducted in computing, at any time in a Canadian currency year of the taxpayer, the adjusted cost base to the taxpayer of a capital property that was acquired by the taxpayer in such a year;

    • (d) an amount that

      • (i) is in respect of the taxpayer’s undepreciated capital cost of depreciable property of a prescribed class, cumulative eligible capital in respect of a business, cumulative Canadian exploration expense (within the meaning assigned by subsection 66.1(6)), cumulative Canadian development expense (within the meaning assigned by subsection 66.2(5)), cumulative foreign resource expense in respect of a country other than Canada (within the meaning assigned by subsection 66.21(1)) or cumulative Canadian oil and gas property expense (within the meaning assigned by subsection 66.4(5)) (each of which is referred to in this paragraph as a “pool amount”), and

      • (ii) was added to or deducted from a pool amount of the taxpayer in respect of a Canadian currency year of the taxpayer;

    • (e) an amount that has been deducted or claimed as a reserve in computing the income of the taxpayer for its last Canadian currency year;

    • (f) an outlay or expense referred to in subsection 18(9) that was made or incurred by the taxpayer in respect of a Canadian currency year of the taxpayer, and any amount that was deducted in respect of the outlay or expense in computing the income of the taxpayer for such a year;

    • (g) an amount that was added or deducted in computing the taxpayer’s paid-up capital in respect of a class of shares of its capital stock in a Canadian currency year of the taxpayer; and

    • (h) any amount (other than an amount referred to in any of paragraphs (a) to (g) or any of subsections (6), (6.1) and (8)) determined under the provisions of this Act in or in respect of a Canadian currency year of the taxpayer that is relevant in determining the Canadian tax results of the taxpayer for the particular functional currency year.

  • Marginal note:Converting pre-transition debts

    (8) In determining, at any time in a particular functional currency year of a taxpayer, the amount for which a pre-transition debt of the taxpayer (other than a pre-transition debt denominated in the taxpayer’s elected functional currency) was issued and its principal amount at the beginning of the taxpayer’s first functional currency year,

    • (a) where the pre-transition debt is denominated in Canadian currency, those amounts are to be converted to the taxpayer’s elected functional currency using the relevant spot rate for the last day of the taxpayer’s last Canadian currency year; and

    • (b) where the pre-transition debt is denominated in a currency (referred to in this paragraph as the “debt currency”) that is neither Canadian currency nor the taxpayer’s elected functional currency, those amounts are to be converted from the debt currency to the taxpayer’s elected functional currency using the relevant spot rate for the last day of the taxpayer’s last Canadian currency year.

  • Marginal note:Pre-transition debts

    (9) A pre-transition debt of a taxpayer that is denominated in a currency other than the taxpayer’s elected functional currency is deemed to have been issued immediately before the taxpayer’s first functional currency year for the purposes of

    • (a) determining the amount of the taxpayer’s income, gain or loss, for a functional currency year of the taxpayer (other than an amount that subsection (10) deems to arise), that is attributable to a fluctuation in the value of a currency; and

    • (b) applying paragraph 80(2)(k) in respect of a functional currency year of the taxpayer.

  • Marginal note:Deferred amounts relating to pre-transition debts

    (10) If a taxpayer has, at any time in a taxation year that is a functional currency year or a reversionary year of the taxpayer, made a particular payment on account of the principal amount of a pre-transition debt of the taxpayer:

    • (a) where the taxpayer would have made a gain — or, if the pre-transition debt was not on account of capital, would have had income — (referred to in this paragraph as the “hypothetical gain or income”) attributable to a fluctuation in the value of a currency if the pre-transition debt had been settled by the taxpayer’s having paid, immediately before the end of its last Canadian currency year, an amount equal to the principal amount (expressed in the currency in which the pre-transition debt is denominated, which currency is referred to in this subsection as the “debt currency”) at that time, the taxpayer is deemed to make a gain or to have income, as the case may be, for the taxation year equal to the amount determined by the formula

      A × B/C

      where

      A

      is

      • (i) if the taxation year is a functional currency year of the taxpayer, the amount of the hypothetical gain or income converted to the taxpayer’s elected functional currency using the relevant spot rate for the last day of the taxpayer’s last Canadian currency year, and

      • (ii) if the taxation year is a reversionary year of the taxpayer, the amount determined under subparagraph (i) converted to Canadian currency using the relevant spot rate for the last day of the taxpayer’s last functional currency year,

      B

      is the amount of the particular payment (expressed in the debt currency), and

      C

      is the principal amount of the pre-transition debt at the beginning of the taxpayer’s first functional currency year (expressed in the debt currency); and

    • (b) where the taxpayer would have sustained a loss — or, if the pre-transition debt was not on account of capital, would have had a loss — (referred to in this paragraph as the “hypothetical loss”) attributable to a fluctuation in the value of a currency if the pre-transition debt had been settled by the taxpayer’s having paid, immediately before the end of its last Canadian currency year, an amount equal to the principal amount (expressed in the debt currency) at that time, the taxpayer is deemed to sustain or to have a loss in respect of the particular payment for the taxation year equal to the amount that would be determined by the formula in paragraph (a) if the reference in the description of A in that paragraph to “hypothetical gain or income” were read as a reference to “hypothetical loss”.

  • Marginal note:Determination of amounts payable

    (11) Notwithstanding subsections (5) and (7), for the purposes of applying this Act in respect of a functional currency year (referred to in this subsection as the “particular taxation year”) of a taxpayer,

    • (a) for the purposes of determining the taxpayer’s payment obligations under paragraph 157(1)(a) or (1.1)(a),

      • (i) the estimated amounts, each of which is described in subparagraph 157(1)(a)(i) or (1.1)(a)(i), that are payable by the taxpayer for the particular taxation year are to be determined by converting those amounts, as determined in the taxpayer’s elected functional currency, to Canadian currency using the relevant spot rate for the day on which those amounts are due,

      • (ii) the taxpayer’s first instalment base (within the meaning assigned by subsection 157(4)) for the particular taxation year is to be determined

        • (A) if the particular taxation year is the taxpayer’s first functional currency year, without reference to this section, and

        • (B) in any other case, as if the taxes payable by the taxpayer for the taxpayer’s functional currency year (referred to in this paragraph as the “first base year”) immediately preceding the particular taxation year were the total of

          • (I) the total of the taxpayer’s payment obligations under paragraph 157(1)(a) or (1.1)(a), as determined with reference to this subparagraph or subparagraph (i) or (iii), as the case may be, in respect of the first base year, and

          • (II) the amount, if any, of the remainder of the taxes payable by the taxpayer under paragraph 157(1)(b) or (1.1)(b), as determined under paragraph (b), in respect of the first base year, and

      • (iii) the taxpayer’s second instalment base (within the meaning assigned by subsection 157(4)) for the particular taxation year is to be determined

        • (A) if the particular taxation year is the taxpayer’s first functional currency year or its taxation year that immediately follows its first functional currency year, without reference to this section, and

        • (B) in any other case, as if the taxes payable by the taxpayer for the taxpayer’s functional currency year (referred to in this subparagraph as the “second base year”) immediately preceding the first base year were the total of

          • (I) the total of the taxpayer’s payment obligations under paragraph 157(1)(a) or (1.1)(a), as determined with reference to this subparagraph or subparagraph (i) or (ii), as the case may be, in respect of the second base year, and

          • (II) the amount, if any, of the remainder of the taxes payable by the taxpayer under paragraph 157(1)(b) or (1.1)(b), as determined under paragraph (b), in respect of the second base year;

    • (b) the remainder of the taxes payable by the taxpayer under paragraph 157(1)(b) or (1.1)(b) for the particular taxation year is the amount, if any, determined by

      • (i) computing the amount, if any, by which

        • (A) the total of the taxes payable by the taxpayer under this Part and Parts VI, VI.1 and XIII.1 for the particular taxation year, as determined in the taxpayer’s elected functional currency

        exceeds

        • (B) the total of all amounts each of which is the amount determined by converting the amount of a payment obligation — determined by paragraph 157(1)(a) or (1.1)(a), as the case may be, with reference to subparagraph (a)(i), (ii) or (iii), as the case may be — of the taxpayer in respect of the particular taxation year to the taxpayer’s elected functional currency using the relevant spot rate for the day on which the payment obligation was due, and

      • (ii) converting the amount, if any, determined by subparagraph (i) to Canadian currency using the relevant spot rate for the taxpayer’s balance-due day for the partic-ular taxation year;

    • (c) for the purposes of determining any amount (other than tax) that is payable by the taxpayer under this Part or Part VI, VI.1 or XIII.1 for the particular taxation year, the taxpayer’s tax payable under the Part for the particular taxation year is deemed to be equal to the total of

      • (i) the total of the taxpayer’s payment obligations under paragraph 157(1)(a) or (1.1)(a), in respect of the Part, as determined with reference to subparagraph (a)(i), (ii) or (iii), as the case may be, in respect of the particular taxation year, and

      • (ii) the amount, if any, of the remainder of the taxes payable by the taxpayer under paragraph 157(1)(b) or (1.1)(b), in respect of the Part, as determined under paragraph (b), in respect of the particular taxation year;

    • (d) amounts of tax that are payable under this Act (except under this Part and Parts VI, VI.1 and XIII.1) by the taxpayer for the particular taxation year are to be determined by converting those amounts, as determined in the taxpayer’s elected functional currency, to Canadian currency using the relevant spot rate for the day on which those amounts are due;

    • (e) if a particular amount that is determined in the taxpayer’s elected functional currency is deemed to be paid at any time on account of an amount payable by the taxpayer under this Act for the particular taxation year, the particular amount is to be converted to Canadian currency using the relevant spot rate for the day that includes that time;

    • (f) the following amounts are to be determined in the taxpayer’s elected functional currency and converted to Canadian currency using the relevant spot rate for the taxpayer’s balance-due day for the particular taxation year:

      • (i) amounts described in paragraph 163(1)(a) in respect of the particular taxation year, and

      • (ii) the amount of the taxpayer’s taxable capital employed in Canada, for the purpose of applying section 235; and

    • (g) for greater certainty, all amounts payable by the taxpayer under this Act in respect of the particular taxation year are to be paid in Canadian currency.

  • Marginal note:Application of subsections (7) and (8) to reversionary years

    (12) In applying this Act to a reversionary year of a taxpayer, subsections (7) and (8) are to be read as if the references in those subsections to

    • (a) “Canadian currency” were references to “the taxpayer’s elected functional currency”;

    • (b) “Canadian currency year” were references to “functional currency year”;

    • (c) “functional currency year” were references to “reversionary year”;

    • (d) “first functional currency year” were references to “first reversionary year”;

    • (e) “last Canadian currency year” were references to “last functional currency year”;

    • (f) “pre-transition debt” were references to “pre-reversion debt”; and

    • (g) “the taxpayer’s elected functional currency” were references to “Canadian currency”.

  • Marginal note:Pre-reversion debts

    (13) A pre-reversion debt of a taxpayer that is denominated in a currency other than Canadian currency is deemed to have been issued immediately before the taxpayer’s first reversionary year for the purposes of

    • (a) determining the amount of the taxpayer’s income, gain or loss, for a reversionary year of the taxpayer (other than an amount that subsection (14) deems to arise), that is attributable to a fluctuation in the value of a currency; and

    • (b) applying paragraph 80(2)(k) in respect of a reversionary year of the taxpayer.

  • Marginal note:Deferred amounts relating to pre-reversion debts

    (14) If a taxpayer has, at any time in a reversionary year of the taxpayer, made a particular payment on account of the principal amount of a pre-reversion debt of the taxpayer:

    • (a) where the taxpayer would have made a gain — or, if the pre-reversion debt was not on account of capital, would have had income — (referred to in this paragraph as the “hypothetical gain or income”) attributable to a fluctuation in the value of a currency if the pre-reversion debt had been settled by the taxpayer’s having paid, immediately before the end of its last functional currency year, an amount equal to the principal amount (expressed in the currency in which the pre-reversion debt is denominated, which currency is referred to in this subsection as the “debt currency”) at that time, the taxpayer is deemed to make a gain or to have income, as the case may be, for the reversionary year equal to the amount determined by the formula

      A × B/C

      where

      A

      is the amount of the hypothetical gain or income converted to Canadian currency using the relevant spot rate for the last day of the taxpayer’s last functional currency year,

      B

      is the amount of the particular payment (expressed in the debt currency), and

      C

      is the principal amount of the pre-reversion debt at the beginning of the taxpayer’s first reversionary year (expressed in the debt currency); and

    • (b) where the taxpayer would have sustained a loss — or, if the pre-reversion debt was not on account of capital, would have had a loss — (referred to in this paragraph as the “hypothetical loss”) attributable to a fluctuation in the value of a currency if the pre-reversion debt had been settled by the taxpayer’s having paid, immediately before the end of its last functional currency year, an amount equal to the principal amount (expressed in the debt currency) at that time, the taxpayer is deemed to sustain or to have a loss in respect of the particular payment for the reversionary year equal to the amount that would be determined by the formula in paragraph (a) if the reference in the description of A in that paragraph to “hypothetical gain or income” were read as a reference to “hypothetical loss”.

  • Marginal note:Amounts carried back

    (15) For the purposes of determining the amount that may be deducted, in respect of a particular amount that arises in a taxation year (referred to in this subsection as the “later year”) of a taxpayer, under section 111 or subsection 126(2), 127(5), 181.1(4) or 190.1(3) in computing the taxpayer’s Canadian tax results for a taxation year (referred to in this subsection as the “current year”) that ended before the later year,

    • (a) if the later year is a functional currency year of the taxpayer and the current year is a Canadian currency year of the taxpayer, the following amounts (expressed in the taxpayer’s elected functional currency) are to be converted to Canadian currency using the relevant spot rate for the last day of the taxpayer’s last Canadian currency year:

      • (i) the particular amount, and

      • (ii) any amount so deducted in computing the taxpayer’s Canadian tax results for another functional currency year of the taxpayer;

    • (b) if the later year is a reversionary year of the taxpayer and the current year is a functional currency year of the taxpayer,

      • (i) the following amounts (expressed in Canadian currency) are to be converted to the taxpayer’s elected functional currency using the relevant spot rate for the last day of the taxpayer’s last functional currency year:

        • (A) the particular amount, and

        • (B) any amount so deducted in computing the taxpayer’s Canadian tax results for another reversionary year of the taxpayer, and

      • (ii) any amount (expressed in Canadian currency) so deducted in computing the taxpayer’s Canadian tax results for a Canadian currency year of the taxpayer is to be converted to the taxpayer’s elected functional currency using the relevant spot rate for the last day of the taxpayer’s last Canadian currency year;

    • (c) if the later year is a reversionary year of the taxpayer and the current year is a Canadian currency year of the taxpayer, the following amounts (expressed in the taxpayer’s elected functional currency) are to be converted to Canadian currency using the relevant spot rate for the last day of the taxpayer’s last Canadian currency year:

      • (i) the amount that would be determined under clause (b)(i)(A) in respect of the particular amount if the current year were a functional currency year of the taxpayer, and

      • (ii) any amount so deducted in computing the taxpayer’s Canadian tax results for a functional currency year of the taxpayer; and

    • (d) in any other case, this subsection does not apply.

  • Marginal note:Windings-up

    (16) If a winding-up described in subsection 88(1) commences at any time (referred to in this subsection as the “commencement time”) and the parent and the subsidiary referred to in that subsection would, in the absence of this subsection, have different tax reporting currencies at the commencement time, the following rules apply for the purposes of determining the subsidiary’s Canadian tax results for its taxation years that end after the commencement time:

    • (a) where the subsidiary’s tax reporting currency is Canadian currency,

      • (i) notwithstanding subsection (3), subsection (5) is deemed to apply to the subsidiary in respect of its taxation year that includes the commencement time and each of its subsequent taxation years, if any,

      • (ii) the subsidiary is deemed to have as its elected functional currency the parent’s tax reporting currency, and

      • (iii) if the subsidiary’s taxation year that includes the commencement time would, in the absence of this subsection, be a reversionary year of the subsidiary, this section is to be read with any modifications that the circumstances require; and

    • (b) where the subsidiary’s tax reporting currency is not Canadian currency,

      • (i) the subsidiary is deemed to have filed, at the time that is six months and one day before the beginning of its taxation year that includes the commencement time, in prescribed form and manner, a notice of revocation described in subsection (4), and

      • (ii) if the parent’s tax reporting currency is not Canadian currency,

        • (A) the subsidiary’s first reversionary year is deemed to have ended at the particular time that is immediately after the time at which it began,

        • (B) a new taxation year of the subsidiary is deemed to have begun immediately after the particular time,

        • (C) notwithstanding subsection (3), subsection (5) is deemed to apply to the subsidiary in respect of its taxation year that includes the commencement time and each of its subsequent taxation years, if any, and

        • (D) the subsidiary is deemed to have as its elected functional currency the parent’s tax reporting currency.

  • Marginal note:Amalgamations

    (17) If a predecessor corporation and the new corporation, in respect of an amalgamation within the meaning of subsection 87(1), have different tax reporting currencies for their last and first taxation years, respectively, paragraphs (16)(a) and (b) apply, for the purposes of determining the predecessor corporation’s Canadian tax results for its last taxation year, as if the tax reporting currencies referred to in those paragraphs were the tax reporting currencies referred to in this subsection and as if the references in those paragraphs to

    • (a) “subsidiary” were references to “predecessor corporation”;

    • (b) “parent” were references to “new corporation”; and

    • (c) “taxation year that includes the commencement time” were references to “last taxation year”.

  • Marginal note:Anti-avoidance

    (18) The Canadian tax results of a corporation for any one or more taxation years shall be determined using a particular currency if

    • (a) at any time (referred to in this subsection as the “transfer time”) one or more properties are directly or indirectly transferred

      • (i) by the corporation to another corporation (referred to in this subsection as the “transferor” and the “transferee”, respectively), or

      • (ii) by another corporation to the corporation (referred to in this subsection as the “transferor” and the “transferee”, respectively);

    • (b) the transferor and the transferee are related at the transfer time or become related in the course of a series of transactions or events that includes the transfer;

    • (c) the transfer time

      • (i) is, or would in the absence of subsections (16) and (17) be, in a functional currency year of the transferor and the transferor and the transferee have, or would in the absence of those subsections have, different tax reporting currencies at the transfer time, or

      • (ii) is, or would in the absence of those subsections be, in a reversionary year of the transferor and is not in a reversionary year of the transferee;

    • (d) it can reasonably be considered that one of the main purposes of the transfer or of any portion of a series of transactions or events that includes the transfer is to change, or to enable the changing of, the currency in which the Canadian tax results in respect of the property, or property substituted for it, for a taxation year would otherwise be determined; and

    • (e) the Minister directs that those Canadian tax results be determined in the particular currency.

  • Marginal note:Mergers

    (19) For the purposes of subsection (18), if one corporate entity (referred to in this subsection as the “new corporation”) is formed at a particular time by the amalgamation or other merger of two or more corporations (each of which is referred to in this subsection as a “predecessor corporation”),

    • (a) the predecessor corporation is deemed to have transferred to the new corporation at the time (referred to in this subsection as the “merger transfer time”) that is immediately before the particular time each property that was held at the merger transfer time by the predecessor corporation and at the particular time by the new corporation;

    • (b) the new corporation is deemed to exist, and to be related to the predecessor corporation, at the merger transfer time; and

    • (c) the new corporation is deemed to have as its tax reporting currency at the merger transfer time its tax reporting currency at the particular time.

  • Marginal note:Application of subsection (21)

    (20) Subsection (21) applies in determining a taxpayer’s income, gain or loss for a taxation year in respect of a transaction (referred to in this subsection and subsection (21) as a “specified transaction”) if

    • (a) the specified transaction was entered into, directly or indirectly, at any time by the taxpayer and a corporation (referred to in this subsection as the “related corporation”) to which the taxpayer is at that time related;

    • (b) the taxpayer and the related corporation had different tax reporting currencies at any time during the period (referred to in this subsection as the “accrual period”) in which the income, gain or loss accrued; and

    • (c) it would, in the absence of this subsection and subsection (21), be reasonable to consider that a fluctuation at any time in the accrual period in the value of the taxpayer’s tax reporting currency relative to the value of the related corporation’s tax reporting currency

      • (i) increased the taxpayer’s loss in respect of the specified transaction,

      • (ii) reduced the taxpayer’s income or gain in respect of the specified transaction, or

      • (iii) caused the taxpayer to have a loss, instead of income or a gain, in respect of the specified transaction.

  • Marginal note:Income, gain or loss determinations

    (21) If this subsection applies, each fluctuation in value referred to in paragraph (20)(c) is, for the purposes of determining the taxpayer’s income, gain or loss in respect of the specified transaction and notwithstanding any other provision of this Act, deemed not to have occurred.

  • Marginal note:Partnership transactions

    (22) For the purposes of this subsection and subsections (18) to (21),

    • (a) if a property is directly or indirectly transferred to or by a partnership, the property is deemed to have been transferred to or by (as the case may be) each member of the partnership; and

    • (b) if a partnership is a party to a transaction, each member of the partnership is deemed to be that party to that transaction.

• (2) The definitions in subsection 261(1) (other than the definition “Canadian tax results”) and subsections 261(3) to (14) and (16) to (22) of the Act, as enacted by subsection (1), apply in respect of taxation years that begin after December 13, 2007, except that

  • (a) where a taxpayer has, on or before June 27, 2008, made an election under paragraph 261(3)(b) of the Act,

    • (i) if the taxpayer makes a further election in writing, and files it with the Minister of National Revenue on or before the taxpayer’s filing-due date for the taxpayer’s taxation year that includes the day on which this Act is assented to, the relevant spot rate for a particular day is deemed, for the purposes of subsections 261(7) to (10) of the Act, as enacted by subsection (1), to be the average of the rates that would, in the absence of this subparagraph, be the relevant spot rates for each day in the 12-month period that ends on the particular day, and

    • (ii) subsections 261(20) and (21) of the Act, as enacted by subsection (1), apply in respect of taxation years that begin after June 27, 2008; and

  • (b) in applying paragraph 261(3)(b) of the Act, as enacted by subsection (1), if the day that is six months before the end of the particular taxation year referred to in that paragraph is before December 15, 2008, the reference in that paragraph to “the day that is six months before the end of the particular taxation year” is, in respect of that particular taxation year, to be read as a reference to “December 15, 2008”.

• (3) The definition “Canadian tax results” in subsection 261(1) of the Act, and subsection 261(2) of the Act, as enacted by subsection (1), apply for all taxation years.

• (4) Subsection 261(15) of the Act, as enacted by subsection (1), applies after December 13, 2007.

• 81. (1) For the purposes of the Income Tax Act and the Canada Disability Savings Act, specified RDSP events are deemed to have occurred, in the order that they actually occurred, on December 31, 2008 and not on the day or days that they actually occurred.

• (2) For the purposes of subsection (1), “specified RDSP event” means an event occurring after 2008 and before March 3, 2009 that

  • (a) establishes a “disability savings plan” as defined in subsection 146.4(1) of the Income Tax Act;

  • (b) satisfies conditions in subsection 146.4(2) of the Income Tax Act;

  • (c) establishes a “registered disability savings plan” as defined in subsection 146.4(1) of the Income Tax Act for a beneficiary who is, in respect of the 2008 taxation year, a “DTC-eligible individual” as defined in subsection 146.4(1) of the Income Tax Act and who was resident in Canada at the end of that year;

  • (d) is the making of any contribution to the registered disability savings plan;

  • (e) satisfies the requirement in paragraph 3(b) of the Canada Disability Savings Regulations; or

  • (f) is the taking of any other action to ensure that the registered disability savings plan is validly established and contributions to the plan are validly made.

2008, c. 28Budget Implementation Act, 2008

82. The descriptions of A and B in subsection 19(5) of the Budget Implementation Act, 2008 are replaced by the following:

C.R.C., c. 945Income Tax Regulations

• 83. (1) Paragraph 202(2)(h) of the Income Tax Regulations is replaced by the following:

  • (h) a payment to which paragraph 212(1)(p) of the Act applies,

• (2) Subsection (1) applies to the 2009 and subsequent taxation years.

• 84. (1) Subsection 204(3) of the Regulations is amended by striking out “or” at the end of paragraph (d.1), by adding “or” at the end of paragraph (e) and by adding the following after paragraph (e):

  • (f) governed by a TFSA or by an arrangement that is deemed by paragraph 146.2(9)(a) of the Act to be a TFSA.

• (2) Subsection (1) applies to the 2009 and subsequent taxation years.

• 85. (1) Subsection 209(1) of the Regulations is replaced by the following:

  • 209. (1) A person who is required by section 200, 201, 202, 204, 208, 212, 214, 215, 217 or 218, subsection 223(2) or section 228, 229, 230, 232, 233 or 234 to make an information return shall forward to each taxpayer to whom the return relates two copies of the portion of the return that relates to that taxpayer.

• (2) Subsection (1) applies to the 2009 and subsequent taxation years.

• 86. (1) Section 214 of the Regulations is amended by adding the following after subsection (5):

  • (6) Where an amount may be deducted under subsection 146(8.92) of the Act in computing the income of a deceased annuitant under a registered retirement savings plan, the issuer of the plan shall make an information return in prescribed form in respect of the amount.

• (2) Subsection (1) applies after 2008.

• 87. (1) Section 215 of the Regulations is amended by adding the following after subsection (5):

  • (6) Where an amount may be deducted under subsection 146.3(6.3) of the Act in computing the income of a deceased annuitant under a registered retirement income fund, the carrier of the fund shall make an information return in prescribed form in respect of the amount.

• (2) Subsection (1) applies after 2008.

• 88. (1) Subsection 221(2) of the Regulations is replaced by the following:

  • (2) Where in any taxation year a reporting person (other than a registered investment) claims that a share of its capital stock issued by it, or an interest as a beneficiary under it, is a qualified investment under section 146, 146.1, 146.3, 204, 205 or 207.01 of the Act, the reporting person shall, in respect of the year and within 90 days after the end of the year, make an information return in prescribed form.

• (2) Subsection (1) applies to the 2009 and subsequent taxation years.

• 89. (1) Section 223 of the Regulations and the heading before it are replaced by the following:

  TFSAs

  • 223. (1) An issuer of a TFSA shall make an information return for each calendar year in prescribed form in respect of the TFSA.

  • (2) An issuer of a TFSA who makes a payment of an amount that is required because of paragraph 146.2(9)(b) of the Act to be included in computing the income of a taxpayer for a taxation year shall make an information return in prescribed form.

  • (3) An issuer of a TFSA that governs a trust shall notify the holder of the TFSA in prescribed form and manner before March of a calendar year if, at any time during the preceding calendar year,

    • (a) the trust acquires or disposes of property that is a non-qualified investment for the trust; or

    • (b) property held by the trust becomes or ceases to be a non-qualified investment for the trust.

• (2) Subsection (1) applies to the 2009 and subsequent taxation years.

• 90. (1) Paragraph 304(1)(a) of the Regulations is replaced by the following:

  • (a) an annuity contract that is, or is issued pursuant to, an arrangement described in any of paragraphs 148(1)(a) to (b.2) and (d) of the Act;

• (2) Subsection (1) applies to annuity contracts issued after 2008.

• 91. (1) Subsection 400(1) of the Regulations is replaced by the following:

  • 400. (1) In applying the definition “taxable income earned in the year in a province” in subsection 124(4) of the Act for a corporation’s taxation year

    • (a) the prescribed rules referred to in that definition are the rules in this Part; and

    • (b) the amount determined under those prescribed rules means the total of all amounts each of which is the taxable income of the corporation earned in the taxation year in a particular province as determined under this Part.

  • (1.1) In this Part, a corporation’s taxable income for a taxation year is equal to the total of

    • (a) the corporation’s taxable income for the taxation year (determined without reference to this subsection) or the corporation’s taxable income earned in Canada for the taxation year, as the case may be, and

    • (b) the positive or negative amount determined by the formula

      A – B

      where

      A

      is the total of all amounts that are, because of the application of section 33.1 of the Act, not required to be added in computing the corporation’s income for the taxation year, and

      B

      is the total of all amounts that are, because of the application of section 33.1 of the Act, not allowed to be deducted in computing the corporation’s income for the taxation year.

• (2) Subsection 400(2) of the Regulations is amended by adding the following after paragraph (e):

  • (e.1) if, but for this paragraph, a corporation would not have a permanent establishment, the corporation is deemed to have a permanent establishment at the place designated in its incorporating documents or bylaws as its head office or registered office;

• (3) Subsections (1) and (2) apply to the 2009 and subsequent taxation years.

• 92. (1) Section 401 of the Regulations is replaced by the following:

  401. This Part applies to determine the amount of taxable income of a corporation earned in a taxation year in a particular province.

• (2) Subsection (1) applies to the 2009 and subsequent taxation years.

• 93. (1) The heading before section 402.1 and sections 402.1 and 402.2 of the Regulations are replaced by the following:

  Central Paymaster

  • 402.1 (1) In this Part, if an individual (referred to in this section as the “employee”) is employed by a person (referred to in this section as the “employer”) and performs a service in a particular province for the benefit of or on behalf of a corporation that is not the employer, an amount that may reasonably be regarded as equal to the amount of salary or wages earned by the employee for the service (referred to in this section as the “particular salary”) is deemed to be salary paid by the corporation to an employee of the corporation in the corporation’s taxation year in which the particular salary is paid if

    • (a) at the time the service is performed,

      • (i) the corporation and the employer do not deal at arm’s length, and

      • (ii) the corporation has a permanent establishment in the particular province;

    • (b) the service

      • (i) is performed by the employee in the normal course of the employee’s employment by the employer,

      • (ii) is performed for the benefit of or on behalf of the corporation in the ordinary course of a business carried on by the corporation, and

      • (iii) is of a type that could reasonably be expected to be performed by employees of the corporation in the ordinary course of the business referred to in subparagraph (ii); and

    • (c) the amount is not otherwise included in the aggregate, determined for the purposes of this Part, of the salaries and wages paid by the corporation.

  • (2) In this Part, an amount deemed under subsection (1) to be salary paid by a corporation to an employee of the corporation for a service performed in a particular province is deemed to have been paid,

    • (a) if the service was performed at one or more permanent establishments of the corporation in the particular province, to an employee of the permanent establishment or establishments; or

    • (b) if paragraph (a) does not apply, to an employee of any other permanent establishment (as is reasonably determined in the circumstances) of the corporation in the particular province.

  • (3) In determining under this Part the amount of salaries and wages paid in a year by an employer, there shall be deducted the total of all amounts each of which is a particular salary paid by the employer in the year.

  • (4) Despite subparagraph (1)(a)(i), this section applies to a corporation and an employer that deal at arm’s length if the Minister determines that the corporation and the employer have entered into an arrangement the purpose of which is to reduce, through the provision of services as described in subsection (1), the total amount of income tax payable by the corporation under a law of the particular province referred to in subsection (1).

  • (5) For the purposes of this section, a partnership is deemed to be a corporation and the corporation’s taxation year is deemed to be the partnership’s fiscal period.

• (2) Subsection (1) applies to the 2009 and subsequent taxation years.

• 94. (1) Section 403 of the Regulations is amended by adding the following after subsection (3):

  • (4) For the purposes of subsection (1), if in a taxation year an insurance corporation has no permanent establishment in a particular country other than Canada, but provides insurance on property in the particular country or has a contract for insurance, other than on property, with a person resident in the particular country, each net premium for the taxation year in respect of the insurance is deemed to be a net premium in respect of insurance on property situated in, or from contracts with persons resident in, as the case may be, the province in Canada or country other than Canada in which is situated the permanent establishment of the corporation to which the net premium is reasonably attributable in the circumstances.

• (2) Subsection (1) applies to the 2009 and subsequent taxation years.

• 95. (1) Subsection 413(1) of the Regulations is replaced by the following:

  • 413. (1) In this Part, if a corporation is not resident in Canada, “salaries and wages paid in the year” by the corporation does not include salaries and wages paid to employees of a permanent establishment outside Canada.

• (2) Subsection (1) applies to the 2009 and subsequent taxation years.

• 96. (1) The Regulations are amended by adding the following after section 413:

  International Banking Centre Exception

  413.1 Despite any other provision in this Part, a corporation’s taxable income earned in a taxation year in a particular province is equal to the total of

  • (a) the corporation’s taxable income earned in the taxation year in the particular province (determined without reference to this section), and

  • (b) the positive or negative amount determined by the formula

    A – B

    where

    A

    is the total of all amounts that are, because of the application of section 33.1 of the Act to a business carried on in a branch or office situated in the particular province, not allowed to be deducted in computing the corporation’s income for the taxation year, and

    B

    is the total of all amounts that are, because of the application of section 33.1 of the Act to a business carried on in a branch or office situated in the particular province, not required to be added in computing the corporation’s income for the taxation year.

• (2) Subsection (1) applies to the 2009 and subsequent taxation years.

• 97. (1) The heading before section 414 and sections 414 and 415 of the Regulations are replaced by the following:

  Provincial SIFT Tax Rate

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

    “general corporate income tax rate”

    “general corporate income tax rate”, in a province for a taxation year, means

    • (a) for Quebec, 0%;

    • (b) for the Newfoundland offshore area, the highest percentage rate of tax imposed under the laws of Newfoundland and Labrador on the taxable income of a public corporation earned in the taxation year in Newfoundland and Labrador;

    • (c) for the Nova Scotia offshore area, the highest percentage rate of tax imposed under the laws of Nova Scotia on the taxable income of a public corporation earned in the taxation year in Nova Scotia; and

    • (d) for each other province, the highest percentage rate of tax imposed under the laws of the province on the taxable income of a public corporation earned in the taxation year in the province. (taux général d’imposition du revenu des sociétés)

    “province”

    “province” includes the Newfoundland offshore area and the Nova Scotia offshore area. (province)

    “taxable SIFT distributions”

    “taxable SIFT distributions”, for a taxation year, means

    • (a) in the case of a SIFT trust, its non-deductible distributions amount for the taxation year; and

    • (b) in the case of a SIFT partnership, its taxable non-portfolio earnings for the taxation year. (montant des distributions imposables)

  • (2) In determining the amount of a SIFT trust’s or SIFT partnership’s taxable SIFT distributions for a taxation year earned in a province

    • (a) except as provided in paragraph (b), this Part applies in respect of the SIFT trust or SIFT partnership as though

      • (i) each reference to “corporation” (other than in the expression “subsidiary controlled corporation”) were read as a reference to “SIFT trust” or “SIFT partnership”, as the case may be,

      • (ii) each reference to “taxable income” were read as a reference to “taxable SIFT distributions”,

      • (iii) each reference to “its incorporating documents or bylaws” were read as a reference to “the agreement governing the SIFT trust” or “the agreement governing the SIFT partnership”, as the case may be, and

      • (iv) “subsidiary controlled corporation” in respect of a SIFT trust or a SIFT partnership meant a corporation more than 50% of the issued share capital of which (having full voting rights under all circumstances) belongs to the SIFT trust or SIFT partnership, as the case may be; and

    • (b) subsection 400(1), section 401, subsections 402(1) and (2) and sections 403 to 413 do not apply.

  • (3) Subject to subsection (4), in applying the definition “provincial SIFT tax rate” in subsection 248(1) of the Act in respect of a SIFT trust or SIFT partnership for a taxation year, the prescribed amount determined in respect of the SIFT trust or SIFT partnership for the taxation year is

    • (a) if the SIFT trust or SIFT partnership has no permanent establishment in a province in the taxation year, 0.10;

    • (b) if the SIFT trust or SIFT partnership has a permanent establishment in a province in the taxation year and has no permanent establishment outside that province in the taxation year, the decimal fraction equivalent of the general corporate income tax rate in the province for the taxation year; and

    • (c) if the SIFT trust or SIFT partnership has a permanent establishment in the taxation year in a province, and has a permanent establishment outside that province in the taxation year, the amount, expressed as a decimal fraction, determined by the formula

      A + B

      where

      A

      is the total of all amounts, if any, each of which is in respect of a province in which the SIFT trust or SIFT partnership has a permanent establishment in the taxation year and is determined by the formula

      C/D × E

      where

      C

      is its taxable SIFT distributions for the taxation year earned in the province,

      D

      is its total taxable SIFT distributions for the taxation year, and

      E

      is the decimal fraction equivalent of the general corporate income tax rate in the province for the taxation year, and

      B

      is the amount determined by the formula

      (1 – F/D) × 0.1

      where

      F

      is the total of all amounts each of which is an amount determined under the description of C in the description of A in respect of a province in which the SIFT trust or SIFT partnership has a permanent establishment in the taxation year.

  • (4) If a SIFT trust or a SIFT partnership has a permanent establishment in Quebec in a taxation year, paragraph (a) of the definition “general corporate income tax rate” in subsection (1) does not apply in determining the prescribed amount under subsection (3) in respect of the SIFT trust or the SIFT partnership for the taxation year for the purposes of applying the definition “provincial SIFT tax rate” in determining:

    • (a) in the case of the SIFT partnership, the amount of a dividend deemed by paragraph 96(1.11)(b) of the Act to have been received by it in the taxation year; and

    • (b) in the case of the SIFT trust, the amount of its taxable SIFT trust distributions for the taxation year.

• (2) Subsection (1) applies to the 2007 and subsequent taxation years, except that paragraph 414(4)(b), as enacted by subsection (1), shall not apply for the taxation years of a SIFT trust that end before February 3, 2009.

• 98. (1) The heading “Policy Reserves for Pre-1996 Policies” before section 1401 of the Regulations is replaced by the following:

  Amounts Determined

• (2) Subsection (1) applies to taxation years that begin after September 2006.

• 99. (1) The portion of subsection 1401(1) of the Regulations before subparagraph (c)(i) is replaced by the following:

  • 1401. (1) For the purposes of section 307 of the Regulations and subsection 211.1(3) of the Act, the amounts determined under this subsection are,

    • (a) in respect of deposit administration fund policies, the aggregate of the insurer’s liabilities under those policies calculated in the manner required for the purposes of the insurer’s annual report to the relevant authority for the year or, where the insurer was throughout the year subject to the supervision of the relevant authority but was not required to file an annual report with the relevant authority for the year, in its financial statements for the year;

    • (b) in respect of a group term life insurance policy that provides coverage for a period not exceeding 12 months, the unearned portion of the premium paid by the policyholder for the policy at the end of the year determined by apportioning the premium paid by the policyholder equally over the period to which that premium pertains;

    • (c) in respect of a life insurance policy, other than a policy referred to in paragraph (a) or (b), the greater of

• (2) The portion of paragraph 1401(1)(c.1) of the Regulations before subparagraph (i) is replaced by the following:

  • (c.1) in respect of a group life insurance policy, the amount (other than an amount in respect of which a deduction may be claimed by the insurer pursuant to subsection 140(1) of the Act because of subparagraph 138(3)(a)(v) of the Act in computing its income for the year) in respect of a dividend, refund of premiums or refund of premium deposits provided for under the terms of the policy that will be used by the insurer to reduce or eliminate a future adverse claims experience under the policy or that will be paid or unconditionally credited to the policyholder by the insurer or applied in discharge, in whole or in part, of a liability of the policyholder to pay premiums to the insurer, which is the least of

• (3) The portion of paragraph 1401(1)(d) of the Regulations before subparagraph (i) is replaced by the following:

  • (d) in respect of a policy, other than a policy referred to in paragraph (a), in respect of a benefit, risk or guarantee that is

• (4) The portion of paragraph 1401(1)(d) of the Regulations after subparagraph (ix) and before subparagraph (x) is replaced by the following:

  equal to the lesser of

• (5) Subsection 1401(1) of the Regulations is amended by adding “and” at the end of paragraph (c.1) and by repealing paragraphs (d.1) to (e).

• (6) Subsection 1401(1.1) of the Regulations is repealed.

• (7) Subsections 1401(3) and (4) of the Regulations are repealed.

• (8) Subsections (1) to (7) apply to taxation years that begin after September 2006.

• 100. (1) The headings before section 1404 and sections 1404 and 1405 of the Regulations are replaced by the following:

  Division 4Life Insurance Policy Reserves

  • 1404. (1) For the purpose of subparagraph 138(3)(a)(i) of the Act, there may be deducted, in computing a life insurer’s income from carrying on its life insurance business in Canada for a taxation year in respect of its life insurance policies in Canada, the amount the insurer claims, not exceeding

    • (a) the amount determined under subsection (3) in respect of the insurer for the year, where that amount is greater than nil; and

    • (b) nil, in any other case.

  • (2) For the purpose of paragraph 138(4)(b) of the Act, the amount prescribed in respect of an insurer for a taxation year, in respect of its life insurance policies in Canada, is

    • (a) the absolute value of the amount determined under subsection (3) in respect of the insurer for the year, where that amount is less than nil; and

    • (b) nil, in any other case.

  • (3) For the purposes of paragraphs (1)(a) and (2)(a), the amount determined under this subsection in respect of an insurer for a taxation year, in respect of its life insurance policies in Canada, is the amount, which may be positive or negative, determined by the formula

    A + B + C + D – M

    where

    A

    is the amount (except to the extent the amount is determined in respect of a claim, premium, dividend or refund in respect of which an amount is included in determining the value of B, C or D), in respect of the insurer’s life insurance policies in Canada, equal to the lesser of

    • (a) the total of the reported reserves of the insurer at the end of the year in respect of those policies, and

    • (b) the total of the policy liabilities of the insurer at the end of the year in respect of those policies;

    B

    is the amount, in respect of the insurer’s life insurance policies in Canada under which there may be claims incurred before the end of the year that have not been reported to the insurer before the end of the year, equal to 95% of the lesser of

    • (a) the total of the reported reserves of the insurer at the end of the year in respect of the possibility that there are such claims, and

    • (b) the total of the policy liabilities of the insurer at the end of the year in respect of the possibility that there are such claims;

    C

    is the total of all amounts each of which is the unearned portion at the end of the year of the premium paid by the policyholder for the policy, determined by apportioning the premium paid by the policyholder equally over the period to which that premium relates, where the policy is a group term life insurance policy that

    • (a) provides coverage for a period that does not exceed 12 months, and

    • (b) is a life insurance policy in Canada;

    D

    is the total of all amounts (other than an amount deductible under subparagraph 138(3)(a)(v) of the Act) each of which is the amount, which is the least of P, Q and R, in respect of a dividend, refund of premiums or refund of premium deposits provided for under the terms of a group life insurance policy that is a life insurance policy in Canada that will be

    • (a) used by the insurer to reduce or eliminate a future adverse claims experience under the policy,

    • (b) paid or unconditionally credited to the policyholder by the insurer, or

    • (c) applied in discharge, in whole or in part, of a liability of the policyholder to pay premiums to the insurer under the policy,

    where

    P

    is a reasonable amount as a reserve determined as at the end of the year in respect of the dividend, refund of premiums or refund of premium deposits provided for under the terms of the policy,

    Q

    is 25% of the amount of the premium under the terms of the policy for the 12-month period ending

    • (a) on the day the policy is terminated, if the policy is terminated in the year, and

    • (b) at the end of the year, in any other case, and

    R

    is the amount of the reported reserve of the insurer at the end of the year in respect of the dividend, refund of premiums or refund of premium deposits provided for under the terms of the policy; and

    M

    is the total of all amounts determined in respect of a life insurance policy in Canada each of which is

    • (a) an amount payable in respect of a policy loan under the policy, or

    • (b) interest that has accrued to the insurer to the end of the year in respect of a policy loan under the policy.

  1405. For the purpose of subparagraph 138(3)(a)(ii) of the Act, there may be deducted, in computing a life insurer’s income for a taxation year, the amount it claims as a reserve in respect of an unpaid claim received by the insurer before the end of the year under a life insurance policy in Canada, not exceeding the lesser of

  • (a) the reported reserve of the insurer at the end of the year in respect of the claim, and

  • (b) the policy liability of the insurer at the end of the year in respect of the claim.

• (2) Subsection (1) applies to taxation years that begin after September 2006.

• 101. (1) The definition “life insurance policy in Canada” in subsection 1408(1) of the Regulations is replaced by the following:

  “life insurance policy in Canada”

  “life insurance policy in Canada” has the same meaning as defined in subsection 138(12) of the Act. (police d’assurance-vie au Canada)

• (2) Subsection 1408(1) of the Regulations is amended by adding the following in alphabetical order:

  “life insurance policy”

  “life insurance policy” has the same meaning as defined in subsection 138(12) of the Act. (police d’assurance-vie)

• (3) Subsections (1) and (2) apply to taxation years that begin after November 7, 2007.

• 102. (1) Section 2400 of the Regulations is amended by adding the following after subsection (7):

  Transition Year

  • (8) A computation that is required to be made under this Part in respect of an insurer’s taxation year that included September 30, 2006 and that is relevant to a computation (in this subsection referred to as the “transition year computation”) that is required to be made under this Part in respect of the insurer’s first taxation year that begins after that date shall, for the purposes only of the transition year computation, be made using the same definitions, rules and methodologies that are used in the transition year computation.

• (2) Subsection (1) applies to taxation years that begin after September 2006.

• 103. (1) Subsection 2600(1) of the Regulations is replaced by the following:

  • 2600. (1) In applying the definition “income earned in the year in a province” in subsection 120(4) of the Act for an individual’s taxation year

    • (a) the prescribed rules referred to in that definition are the rules in this Part; and

    • (b) the amount determined under those prescribed rules means the total of all amounts each of which is the individual’s income earned in the taxation year in a particular province as determined under this Part.

• (2) Subsection (1) applies to the 2009 and subsequent taxation years.

• 104. (1) The Regulations are amended by adding the following after section 3504:

  Conditions

  • 3505. (1) The following conditions are prescribed in respect of a donee for the purposes of paragraph 110.1(8)(e) of the Act:

    • (a) the donee has applied to the Minister for International Cooperation (or, if there is no such Minister, the Minister responsible for the Canadian International Development Agency) for a determination that the conditions described in this section have been met;

    • (b) medicines received by the donee for use in charitable activities outside Canada are

      • (i) delivered outside Canada by the donee for use in its charitable activities, or

      • (ii) transferred to another registered charity that would meet the conditions contained in this section if that registered charity were a donee described in subsection 110.1(8) of the Act;

    • (c) in the course of delivering medicines outside Canada for use in its charitable activities, the donee acts in a manner consistent with the principles and objectives of the inter-agency Guidelines for Drug Donations issued by the World Health Organization, as amended from time to time, (referred to in this section as “the WHO Guidelines”);

    • (d) the donee has sufficient expertise in delivering medicines for use in charitable activities carried on outside Canada;

    • (e) the donee carries on a program that includes delivering medicines for use in charitable activities carried on outside Canada and that is

      • (i) an international development assistance program, or

      • (ii) an international humanitarian assistance program, responding to situations of international humanitarian crisis (resulting from either natural disaster or complex emergency); and

    • (f) the donee has sufficient expertise to design, implement and monitor each program described in subparagraph (e)(i) or (ii) that it carries on, unless the donee has declared that it will not deliver medicines in that program.

  • (2) Without limiting the application of the WHO Guidelines, for the purposes of paragraph (1)(c), a donee does not act in a manner consistent with the principles and objectives of those guidelines if the donee’s directors, trustees, officers or like officials have not

    • (a) approved a policy and procedural framework, under which the donee is required to act in a manner consistent with the WHO Guidelines; and

    • (b) declared that the donee acts in compliance with that policy and procedural framework.

  • (3) A donee is considered not to have sufficient expertise for the purpose of a program to which paragraph (1)(d) or (e) applies if

    • (a) the program does not address the specific and differentiated needs, interests and vulnerabilities of affected women and men, girls and boys;

    • (b) the program does not incorporate, in the design of projects under the program, consideration for environmental effects of those projects; or

    • (c) the donee does not have policies and practices for the design, implementation and monitoring of the program.

  • (4) The Minister referred to in subsection (1) may

    • (a) rely on any information or evidence in making a determination under subsection (1); and

    • (b) require the donee to provide any other information or evidence that that Minister considers relevant and sufficient for the purpose of this section.

• (2) Subsection (1) applies in respect of applications made at any time by donees for determinations in respect of gifts made after June 2008.

• 105. (1) The portion of subsection 4900(1) of the Regulations before paragraph (a) is replaced by the following:

  • 4900. (1) For the purposes of paragraph (d) of the definition “qualified investment” in subsection 146(1) of the Act, paragraph (e) of the definition “qualified investment” in subsection 146.1(1) of the Act, paragraph (c) of the definition “qualified investment” in subsection 146.3(1) of the Act, paragraph (h) of the definition “qualified investment” in section 204 of the Act, paragraph (d) of the definition “qualified investment” in subsection 205(1) of the Act and paragraph (c) of the definition “qualified investment” in subsection 207.01(1) of the Act, each of the following investments is prescribed as a qualified investment for a plan trust at a particular time if at that time it is

• (2) Paragraph 4900(1)(i.3) of the Regulations is repealed.

• (3) Subparagraph 4900(1)(j.2)(ii) of the Regulations is replaced by the following:

  • (ii) the certificate has, at the time of acquisition by the plan trust, an investment grade rating with a credit rating agency referred to in subsection (2), and

• (4) Paragraphs 4900(1)(k) and (l) of the Regulations are repealed.

• (5) Paragraph 4900(1)(o) of the Regulations is repealed.

• (6) Paragraph 4900(1)(s) of the Regulations is repealed.

• (7) Subsection 4900(1) of the Regulations is amended by striking out “or” at the end of paragraph (u), by adding “or” at the end of paragraph (v) and by adding the following after paragraph (v):

  • (w) an American Depositary Receipt where the property represented by the receipt is listed on a designated stock exchange.

• (8) Subsection 4900(5) of the Regulations is replaced by the following:

  • (5) For the purposes of paragraph (e) of the definition “qualified investment” in subsection 146.1(1) of the Act, paragraph (d) of the definition “qualified investment” in subsection 205(1) of the Act and paragraph (c) of the definition “qualified investment” in subsection 207.01(1) of the Act, a property is prescribed as a qualified investment for a trust governed by a registered disability savings plan, a registered education savings plan or a TFSA at any time if at that time the property is an interest in a trust or a share of the capital stock of a corporation that was a registered investment for a trust governed by a registered retirement savings plan during the calendar year in which that time occurs or during the preceding year.

• (9) Paragraph 4900(12)(a) of the Regulations is replaced by the following:

  • (a) the property was a share of the capital stock of a specified small business corporation,

• (10) Section 4900 of the Regulations is amended by adding the following after subsection (13):

  • (14) For the purposes of paragraph (c) of the definition “qualified investment” in subsection 207.01(1) of the Act, a property is prescribed as a qualified investment for a trust governed by a TFSA at any time if, at the time the property was acquired by the trust, the property

    • (a) was

      • (i) a share of the capital stock of a specified small business corporation,

      • (ii) a share of the capital stock of a venture capital corporation described in any of sections 6700 to 6700.2, or

      • (iii) a qualifying share in respect of a specified cooperative  corporation  and  the TFSA; and

    • (b) was not a prohibited investment for the trust.

• (11) Subsections (1) and (8) to (10) apply to the 2009 and subsequent taxation years.

• (12) Subsections (2) to (6) apply to property acquired after the day on which this Act is assented to.

• (13) Subsection (7) applies in determining whether a property is, at any time after 2005, a qualified investment, except that in applying paragraph 4900(1)(w) of the Regulations, as enacted by subsection (7), before December 14, 2007, it is to be read as follows:

  • (w) an American Depositary Receipt where the property represented by the receipt is listed on a stock exchange referred to in section 3200 or 3201.

• 106. (1) The definitions “governing plan” and “qualifying share” in subsection 4901(2) of the Regulations are replaced by the following:

  “governing plan”

  “governing plan” means a deferred profit sharing plan or a revoked plan, a registered disability savings plan, a registered education savings plan, a registered retirement income fund, a registered retirement savings plan or a TFSA; (régime d’encadrement)

  “qualifying share”

  “qualifying share”, in respect of a specified cooperative corporation and a governing plan, means a share of the capital or capital stock of the corporation where

  • (a) ownership of the share or a share identical to the share is not a condition of membership in the corporation, or

  • (b) a connected person under the governing plan

    • (i) has not received a payment from the corporation pursuant to an allocation in proportion to patronage in respect of consumer goods or services, and

    • (ii) can reasonably be expected not to receive a payment, after the acquisition of the share by the plan trust, from the corporation pursuant to an allocation in proportion to patronage in respect of consumer goods or services; (part admissible)

• (2) The definition “connected person” in subsection 4901(2) of the English version of the Regulations is replaced by the following:

  “connected person”

  “connected person” under a governing plan of a plan trust means a person who is an annuitant, a beneficiary, an employer or a subscriber under, or a holder of, the governing plan and any person who does not deal at arm’s length with that person; (personne rattachée)

• (3) Subsection 4901(2) of the Regulations is amended by adding the following in alphabetical order:

  “specified small business corporation”

  “specified small business corporation”, at any time, means a corporation (other than a cooperative corporation) that would, at that time or at the end of the last taxation year of the corporation that ended before that time, be a small business corporation if the expression “Canadian-controlled private corporation” in the definition “small business corporation” in subsection 248(1) of the Act were read as “Canadian corporation (other than a corporation controlled at that time, directly or indirectly in any manner whatever, by one or more non-resident persons)”. (société déterminée exploitant une petite entreprise)

• (4) Subsections (1) to (3) apply to the 2009 and subsequent taxation years.

• 107. (1) The Regulations are amended by adding the following after Part XLIX:

  PART LTAX-FREE SAVINGS ACCOUNTS — PROHIBITED INVESTMENTS

  Marginal note:Investment not prohibited

  5000. For the purpose of the portion of the definition “prohibited investment” in subsection 207.01(1) of the Act before paragraph (a), property described in paragraph 4900(1)(j.1) is prescribed property.

  Marginal note:Prohibited investment

  5001. For the purpose of paragraph (d) of the definition “prohibited investment” in subsection 207.01(1) of the Act, property that is a qualified investment for a trust governed by a TFSA solely because of subsection 4900(14) is prescribed property for the trust at any time if, at that time, it is not described in any of subparagraphs 4900(14)(a)(i) to (iii).

• (2) Subsection (1) applies to the 2009 and subsequent taxation years.

• 108. (1) The headings before section 5700 of Regulations are replaced by the following:

  PART LVIIMEDICAL EXPENSE TAX CREDIT

• (2) Subsection (1) is deemed to have come into force on February 27, 2008.

• 109. (1) Section 5700 of the Regulations is amended by striking out “and” at the end of paragraph (y) and by adding the following after paragraph (z):

  • (z.1) altered auditory feedback device designed to be used by an individual who has a speech impairment;

  • (z.2) electrotherapy device designed to be used by an individual with a medical condition or by an individual who has a severe mobility impairment;

  • (z.3) standing device designed to be used by an individual who has a severe mobility impairment to undertake standing therapy; and

  • (z.4) pressure pulse therapy device designed to be used by an individual who has a balance disorder.

• (2) Subsection (1) applies to the 2008 and subsequent taxation years.

• 110. (1) The Regulations are amended by adding the following after section 5700:

  5701. For the purpose of subparagraph 118.2(2)(n)(ii) of the Act, a drug, medicament or other preparation or substance is prescribed if it

  • (a) is manufactured, sold or represented for use in the diagnosis, treatment or prevention of a disease, disorder or abnormal physical state, or its symptoms, or in restoring, correcting or modifying an organic function;

  • (b) is prescribed for a patient by a medical practitioner; and

  • (c) may, in the jurisdiction in which it is acquired, be lawfully acquired for use by the patient only with the intervention of a medical practitioner.

• (2) Subsection (1) is deemed to have come into force on February 27, 2008.

• 111. (1) Subsection 5906(2) of the Regulations is replaced by the following:

  • (2) For the purposes of subsection (1), the expression “permanent establishment” has:

    • (a) if the expression is given a particular meaning in a tax treaty with a country, the meaning assigned by that tax treaty with respect to a business carried on in that country; and

    • (b) in any other case, the meaning that would be assigned by subsection 400(2) if that subsection were read without reference to its paragraph (e.1).

• (2) Subsection (1) applies to the 2009 and subsequent taxation years.

• 112. (1) Subsection 5907(11) of the Regulations is replaced by the following:

  • (11) For the purposes of this Part, a sovereign state or other jurisdiction is a “designated treaty country” for a taxation year of a foreign affiliate of a corporation if Canada has entered into a comprehensive agreement or convention for the elimination of double taxation on income, or a comprehensive tax information exchange agreement, in respect of that sovereign state or jurisdiction, that has entered into force and has effect for that taxation year, but any territory, possession, department, dependency or area of that sovereign state or jurisdiction to which that agreement or convention does not apply is not considered to be part of that sovereign state or jurisdiction for the purpose of determining whether it is a designated treaty country.

• (2) Section 5907 of the Regulations is further amended by adding the following after subsection (11.1):

  • (11.11) For the purpose of applying subsection (11) in respect of a foreign affiliate of a corporation, where a comprehensive tax information exchange agreement enters into force on a particular day, the agreement is deemed to enter into force and to come into effect on the first day of the foreign affiliate’s taxation year that includes the particular day.

• (3) Subsections (1) and (2) apply after 2007.

• 113. (1) Paragraphs 7305.1(a) and (b) of the Regulations are replaced by the following:

  • (a) if a taxpayer is employed in a taxation year by a particular person principally in selling or leasing automobiles and an automobile is made available in the year to the taxpayer or a person related to the taxpayer by the particular person or a person related to the particular person, 21 cents; and

  • (b) in any other case, 24 cents.

• (2) Subsection (1) applies to taxation years that end after 2007.

• 114. (1) Paragraph 7306(a) of the Regulations is replaced by the following:

  • (a) the product of 46 cents multiplied by the number of those kilometres;

• (2) Subsection (1) applies to kilometres driven after 2007.

• 115. (1) Section 8308.1 of the Regulations is amended by adding the following after subsection (2):

  Pension Credit — Tax Treaty

  •  (2.1) For the purposes of applying subsection (2) in determining an individual’s pension credit for a calendar year with respect to an employer under a foreign plan, if any contributions made to, or benefits accruing under, the plan in respect of the individual and the calendar year benefit from the application of paragraph 8 of Article XVIII of the Canada-United States Tax Convention signed at Washington on September 26, 1980, or from the application of a similar provision in another tax treaty,

    • (a) subparagraph (2)(b)(ii) shall be read without reference to the words “was resident in Canada and”; and

    • (b) the portion of subsection (2) after subparagraph (b)(iv) shall be read as “the lesser of the money purchase limit for the year and 18% of the individual’s resident compensation from the employer for the year”.

• (2) Subsection (1) applies in determining pension credits for the 2009 and subsequent calendar years.

• 116. (1) Section 8308.2 of the Regulations is replaced by the following:

  • 8308.2 (1) For the purposes of the descriptions of B in the definitions “RRSP deduction limit” and “unused RRSP deduction room” in subsection 146(1) of the Act and the description of B in paragraph 204.2(1.1)(b) of the Act, there is prescribed in respect of an individual for a calendar year the lesser of the money purchase limit for the preceding calendar year (in this section referred to as the “service year”) and the amount determined by subsection (2), if the individual

    • (a) rendered services to an employer (excluding services that were primarily services rendered in Canada or services rendered in connection with a business carried on by the employer in Canada, or a combination of those services) throughout a period in the service year in which the individual was resident in Canada;

    • (b) became entitled, either absolutely or contingently, in the service year to benefits under a foreign plan (as defined in subsection 8308.1(1)) in respect of the services; and

    • (c) continued to be entitled at the end of the service year, either absolutely or contingently, to all or part of the benefits.

  • (2) The amount determined for the purpose of subsection (1) is,

    • (a) if the only benefits to which the individual became entitled in the service year under the foreign plan were provided under one or more money purchase provisions of the foreign plan, the total of all amounts each of which is the individual’s pension credit for the service year with respect to the employer under a money purchase provision of the foreign plan, determined

      • (i) as though the foreign plan were a registered pension plan,

      • (ii) without regard to any contributions made by the individual, and

      • (iii) if, under the laws of the country in which the foreign plan is established, any contributions made after the end of the service year are treated as having been made in the service year, as though those contributions were made in the service year and not when the contributions were actually made; and

    • (b) in any other case, the greater of

      • (i) the total that would be determined under paragraph (a) if the individual had not become entitled in the service year to any benefits under a defined benefit provision of the foreign plan, and

      • (ii) 10% of the portion of the individual’s resident compensation from the employer for the service year that is attributable to services rendered to the employer and included under paragraph (1)(a).

• (2) Subsection (1) applies in determining prescribed amounts for the 2009 and subsequent calendar years except that in determining prescribed amounts for 2009, the amount of the money purchase limit for 2008 is deemed to be reduced by $600.

• 117. (1) Subsection 8506(7) of the Regulations and the heading before it are replaced by the following:

  Special Rules for Minimum Amount

  • (7) The minimum amount for a member’s account under a money purchase provision of a registered pension plan for a calendar year is

    • (a) nil, if an individual who is either the member or the specified beneficiary of the member for the year in relation to the provision

      • (i) is alive at the beginning of the year, and

      • (ii) had not attained 71 years of age at the end of the preceding calendar year; and

    • (b) if paragraph (a) does not apply and the year is 2008, 75 per cent of the amount that would, in the absence of this subsection, be the minimum amount for the account for the year.

• (2) Section 8506 of the Regulations is amended by adding the following after subsection (8):

  Recontribution — Adjusted Minimum Amount for 2008

  • (9) If a contribution made by a member of a registered pension plan and credited to the member’s account under a money purchase provision of the plan complies with the conditions in subsection (10), the contribution

    • (a) is deemed to have been made in accordance with the plan as registered;

    • (b) is to be disregarded for the purposes of paragraph (2)(c.1); and

    • (c) is deemed to be an excluded contribution for the purposes of paragraph 8301(4)(a).

  Conditions Referred to in Subsection (9)

  • (10) The conditions referred to in subsection (9) are as follows:

    • (a) the contribution is made in 2008;

    • (b) the contribution is designated for the purposes of this subsection in a manner acceptable to the Minister; and

    • (c) the amount of the contribution does not exceed the amount determined by the formula

      A – B – C

      where

      A

      is the lesser of

      • (i) the total of all amounts each of which is the amount of a retirement benefit (other than a retirement benefit permissible under any of paragraphs (1)(a) to (e)) paid from the plan in 2008 in respect of the account and included, because of paragraph 56(1)(a) of the Act, in computing the taxpayer’s income for the taxation year, and

      • (ii) the amount that would, in the absence of paragraph (7)(b), be the minimum amount for the account for 2008,

      B

      is the minimum amount for the account for 2008, and

      C

      is the total of all other contributions made by the member under the money purchase provision at or before the time of the contribution and designated for the purposes of this subsection.

• (3) Contributions described in subsections 8506(9) and (10) of the Regulations, as enacted by subsection (2), that are made during the period that begins after 2008 and ends on the day that is 30 days after the day on which this Act is assented to (or such longer period as is acceptable to the Minister of National Revenue) are deemed for the purpose of subsection 8506(10) of the Regulations, as enacted by subsection (2), to have been made on December 31, 2008 and not when they were actually made, except that the amounts so deemed shall not exceed the amount that would be determined in respect of the account under paragraph 8506(10)(c) of the Regulations, as enacted by subsection (2), if the value of C in the formula in that paragraph were nil.