Budget Implementation Act, 2016, No. 2 (S.C. 2016, c. 12)
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Assented to 2016-12-15
PART 1Amendments to the Income Tax Act and to Related Legislation (continued)
R.S., c. 1 (5th Supp.)Income Tax Act (continued)
11 (1) Paragraph 28(1)(d) of the Act is replaced by the following:
(d) the total of all amounts each of which is an amount included in computing the taxpayer’s income for the year from the business because of subsection 13(1), 80(13) or 80.3(3) or (5),
(2) Paragraph 28(1)(g) of the Act is replaced by the following:
(g) the total of all amounts each of which is an amount deducted for the year under paragraph 20(1)(a) or (uu), subsection 20(16), section 30 or subsection 80.3(2) or (4) in respect of the business,
(3) Subsections (1) and (2) come into force or are deemed to have come into force on January 1, 2017.
12 (1) Clause 38(a.1)(ii)(B) of the Act is replaced by the following:
(B) the subject of a gift to which subsection 118.1(5.1) applies and that is made by the taxpayer’s estate to a qualified donee, or
(2) Clause 38(a.2)(ii)(B) of the Act is replaced by the following:
(B) the subject of a gift to which subsection 118.1(5.1) applies and that is made by the taxpayer’s estate to a qualified donee (other than a private foundation);
(3) Subsections (1) and (2) apply to the 2016 and subsequent taxation years.
(2) Clause 39(1)(a)(i.1)(B) of the Act is replaced by the following:
(B) the disposition is deemed by section 70 to have occurred and the object is the subject of a gift to which subsection 118.1(5.1) applies and that is made by the taxpayer’s estate to an institution that would be described in clause (A) if the disposition were made at the time the estate makes the gift,
(3) Subparagraph 39(1)(b)(ii) of the Act is replaced by the following:
(ii) property described in any of subparagraphs 39(1)(a)(ii) to (iii) and (v); and
(4) Section 39 of the Act is amended by adding the following after subsection (2):
Marginal note:Deemed gain — parked obligation
(2.01) For the purposes of subsection (2), if a debt obligation owing by a taxpayer (referred to in this subsection and subsections (2.02) and (2.03) as the debtor) is denominated in a foreign currency and the debt obligation has become a parked obligation at a particular time, the debtor is deemed at that time to have made the gain, if any, that the debtor otherwise would have made if it had paid an amount at the particular time in satisfaction of the debt obligation equal to
(a) if the debt obligation has become a parked obligation at the particular time as a result of its acquisition by the holder of the debt obligation, the amount paid by the holder to acquire the debt obligation; and
(b) in any other case, the fair market value of the debt obligation at the particular time.
Marginal note:Parked obligation
(2.02) For the purposes of subsection (2.01), a debt obligation owing by a debtor is a parked obligation at a particular time if
(a) both
(i) at that time, the holder of the debt obligation does not deal at arm’s length with the debtor or, if the debtor is a corporation, has a significant interest in the debtor, and
(ii) at any previous time, a person who held the debt obligation dealt at arm’s length with the debtor and, where the debtor is a corporation, did not have a significant interest in the debtor; and
(b) it can reasonably be considered that one of the main purposes of the transaction or event or series of transactions or events that resulted in the debt obligation meeting the condition in subparagraph (a)(i) is to avoid the application of subsection (2).
Marginal note:Interpretation
(2.03) For the purposes of subsections (2.01) and (2.02),
(5) Subsections (1) and (3) come into force or are deemed to have come into force on January 1, 2017.
(6) Subsection (2) applies to the 2016 and subsequent taxation years.
(7) Subsection (4) is deemed to have come into force on March 22, 2016. However, subsection 39(2.01) of the Act, as enacted by subsection (4), does not apply to a debtor in respect of a debt obligation owing by that debtor at the time that the obligation meets the conditions to become a parked obligation under subsection 39(2.02) of the Act, as enacted by subsection (4), because of a written agreement entered into before March 22, 2016, if that time is before 2017.
14 (1) Paragraph (b) of the description of B in subsection 39.1(2) of the Act is replaced by the following:
(b) if the entity is a partnership, twice the amount, if any, claimed under subsection (4) by the individual for the year in respect of the entity, and
(2) Subsection 39.1(5) of the Act is repealed.
(3) Subsections (1) and (2) apply in respect of taxation years that begin after 2016.
15 (1) Section 40 of the Act is amended by adding the following after subsection (12):
Marginal note:Class 14.1 — transitional rules
(13) Subsection (14) applies in respect of a disposition by a taxpayer of a property that is included in Class 14.1 of Schedule II to the Income Tax Regulations in respect of a business of the taxpayer if
(a) the property was an eligible capital property of the taxpayer immediately before January 1, 2017;
(b) the amount determined for Q in the definition cumulative eligible capital in subsection 14(5) in respect of the business immediately before January 1, 2017 is greater than nil;
(c) the amount determined for B in that definition in respect of the business immediately before January 1, 2017 is nil; and
(d) no amount is included in the taxpayer’s income for a taxation year because of paragraph 13(38)(d).
Marginal note:Class 14.1 — transitional rules
(14) If this subsection applies in respect of a disposition at any time by a taxpayer of a property, the taxpayer’s capital gain from the disposition is to be reduced by such amount as the taxpayer claims, not exceeding the amount by which
(a) 2/3 of the amount determined for Q in the definition cumulative eligible capital in subsection 14(5) in respect of the business immediately before 2017
exceeds
(b) the total of all amounts each of which is an amount claimed under this subsection in respect of another disposition at or before that time.
Marginal note:Class 14.1 — transitional rules
(15) Subsection (16) applies in respect of a disposition by an individual of a property that is included in Class 14.1 of Schedule II to the Income Tax Regulations in respect of a business of the individual if
Marginal note:Class 14.1 — transitional rules
(16) If this subsection applies in respect of a disposition at any time by an individual of a property, the individual’s capital gain from the disposition is to be reduced by such amount as the individual claims, not exceeding the amount by which
(a) twice the amount of the individual’s exempt gains balance in respect of the business for the taxation year that includes January 1, 2017
exceeds
(b) the total of
(i) if paragraph 13(38)(d) applies in respect of the business for the individual’s taxation year that includes January 1, 2017, the amount determined for D in paragraph 14(1)(b) for the purposes of paragraph 13(38)(d), and
(ii) the total of all amounts each of which is an amount claimed under this subsection in respect of another disposition at or before that time.
(2) Subsection (1) comes into force or is deemed to have come into force on January 1, 2017.
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