Budget Implementation Act, 2017, No. 2 (S.C. 2017, c. 33)
Full Document:
Assented to 2017-12-14
26 (1) The portion of paragraph (a) of the definition capital dividend account in subsection 89(1) of the Act before subparagraph (i) is replaced by the following:
(a) the amount, if any, by which the total of
(2) Paragraph (a) of the definition capital dividend account in subsection 89(1) of the Act is amended by adding “and” at the end of subparagraph (i) and by adding the following after that subparagraph:
(i.1) all amounts each of which is an amount in respect of a distribution made, in the period and after September 15, 2016, by a trust to the corporation in respect of capital gains of the trust equal to the lesser of
(A) the amount, if any, by which
(I) the amount of the distribution
exceeds
(II) the amount designated under subsection 104(21) by the trust in respect of the net taxable capital gains of the trust attributable to those capital gains, and
(B) the amount determined by the formula
A × B
where
- A
- is the fraction or whole number determined when 1 is subtracted from the reciprocal of the fraction under paragraph 38(a) applicable to the trust for the year, and
- B
- is the amount referred to in subclause (A)(II),
(3) The portion of paragraph (f) of the definition capital dividend account in subsection 89(1) of the Act before subparagraph (i) is replaced by the following:
(f) all amounts each of which is an amount in respect of a distribution made, in the period and before September 16, 2016, by a trust to the corporation in respect of capital gains of the trust equal to the lesser of
27 (1) Section 90 of the Act is amended by adding the following after subsection (6):
Marginal note:Upstream loan continuity — reorganizations
(6.1) Subsection (6.11) applies at any time if
(a) immediately before that time, a person or partnership (referred to in this subsection and subsection (6.11) as the “original debtor”) owes an amount in respect of a loan or indebtedness (referred to in this subsection and subsection (6.11) as the “pre-transaction loan”) to another person or partnership (referred to in this subsection and subsection (6.11) as the “original creditor”);
(b) the pre-transaction loan was, at the time it was made or entered into, a loan or indebtedness that is described in subsection (6); and
(c) in the course of an amalgamation, a merger, a winding-up or a liquidation and dissolution,
(i) the amount owing in respect of the pre-transaction loan becomes owing at that time by another person or partnership (the amount owing after that time and the other person or partnership are referred to in subsection (6.11) as the “post-transaction loan payable” and the “new debtor”, respectively),
(ii) the amount owing in respect of the pre-transaction loan becomes owing at that time to another person or partnership (the amount owing after that time and the other person or partnership are referred to in subsection (6.11) as the “post-transaction loan receivable” and the “new creditor”, respectively), or
(iii) the taxpayer in respect of which the original debtor was a specified debtor at the time referred to in paragraph (b)
Marginal note:Upstream loan continuity — reorganizations
(6.11) If this subsection applies at any time, for the purposes of subsections (6) and (7) to (15) and 39(2.1) and (2.2) and paragraph 95(2)(g.04),
(a) if the condition in subparagraph (6.1)(c)(i) is met,
(b) if the condition in subparagraph (6.1)(c)(ii) is met,
(c) if the condition in clause (6.1)(c)(iii)(A) is met,
(i) subject to subparagraph (ii), each entity that held an equity interest in the taxpayer immediately before the winding-up (referred to in this paragraph as a “successor entity”) is deemed to be the same entity as, and a continuation of, the taxpayer, and
(ii) for the purposes of applying subsection (13) and the description of A in subsection (14), an amount is deemed, in respect of a loan or indebtedness, to have been included under subsection (6) in computing the income of each successor entity equal to
(A) if the taxpayer is a partnership, the amount that may reasonably be considered to be the successor entity’s share (determined in a manner consistent with the determination of the successor entity’s share of the income of the partnership under subsection 96(1) for the taxpayer’s final fiscal period) of the specified amount that was required to be included in computing the income of the taxpayer under subsection (6) in respect of the loan or indebtedness, and
(B) in any other case, the proportion of the specified amount included in computing the taxpayer’s income under subsection (6), in respect of the loan or indebtedness, that the fair market value of the successor entity’s equity interest in the taxpayer, immediately before the distribution of the taxpayer’s assets on the winding-up, is of the total fair market value of all equity interests in the taxpayer at that time; and
(d) if the condition in clause (6.1)(c)(iii)(B) is met, the new corporation is deemed to be the same corporation as, and a continuation of, the taxpayer.
(2) The portion of subsection 90(7) of the Act before paragraph (a) is replaced by the following:
Marginal note:Back-to-back loans
(7) For the purposes of this subsection and subsections (6), (8) to (15) and 39(2.1) and (2.2) and paragraph 95(2)(g.04), if at any time a person or partnership (referred to in this subsection as the “intermediate lender”) makes a loan to another person or partnership (in this subsection referred to as the “intended borrower”) because the intermediate lender received a loan from another person or partnership (in this subsection referred to as the “initial lender”)
(3) Subparagraph 90(9)(a)(ii) of the Act is replaced with the following:
(ii) the income of the corporation under subsection 91(5), in respect of the taxable surplus of a foreign affiliate of the corporation, unless the specified debtor is a person or partnership described in subclause (i)(D)(I) or (II);
(4) Paragraph (b) of the definition specified debtor in subsection 90(15) of the Act is replaced by the following:
(b) a person with which the taxpayer does not, at that time, deal at arm’s length, other than
(i) a non-resident corporation that is at that time a controlled foreign affiliate, within the meaning assigned by section 17, of the taxpayer, or
(ii) a non-resident corporation (other than a corporation that is described in subparagraph (i)) that is, at that time, a foreign affiliate of the taxpayer, if each share of the capital stock of the affiliate is owned at that time by any of
(A) the taxpayer,
(B) persons resident in Canada,
(C) non-resident persons that deal at arm’s length with the taxpayer,
(D) persons described in subparagraph (i),
(E) partnerships, each member of which is described in any of clauses (A) to (F), and
(F) a corporation each shareholder of which is described in any of clauses (A) to (F);
(5) Subsection (1) applies to transactions and events that occur after September 15, 2016. However, if a taxpayer files an election with the Minister before 2017, subsection (1) applies in respect of the taxpayer as of August 20, 2011.
(6) Subsection (2) applies in respect of loans received and indebtedness incurred after August 19, 2011. However, subsection 90(7) of the Act, as amended by subsection (2), also applies in respect of any portion of a particular loan received or a particular indebtedness incurred before August 20, 2011 that remains outstanding on August 19, 2014 as if that portion were a separate loan or indebtedness that was received or incurred, as the case may be, on August 20, 2014 in the same manner and on the same terms as the particular loan or indebtedness.
(7) Subsection (3) applies in respect of loans received and indebtedness incurred after August 19, 2011; however, subparagraph 90(9)(a)(ii) of the Act, as enacted by subsection (3), also applies in respect of any portion of a particular loan received or a particular indebtedness incurred before August 20, 2011 that remains outstanding on August 19, 2014 as if that portion were a separate loan or indebtedness that was received or incurred, as the case may be, on August 20, 2014 in the same manner and on the same terms as the particular loan or indebtedness. In respect of loans received and indebtedness incurred prior to September 16, 2016, subparagraph 90(9)(a)(ii) of the Act, as enacted by subsection (3), is to be read without reference to “unless the specified debtor is a person or partnership described in subclause (i)(D)(I) or (II)”.
(8) Subsection (4) applies in respect of loans received and indebtedness incurred after August 19, 2011 and in respect of any portion of a particular loan received or indebtedness incurred before August 20, 2011 that remained outstanding on August 19, 2014.
- Date modified: