Budget Implementation Act, 2017, No. 2 (S.C. 2017, c. 33)

• (A) the trust’s income for the particular taxation year (other than income — not including dividends or interest — from sources in Canada) is deemed to be from sources in that country and not to be from any other source, and

trust company

trust company includes a corporation that is resident in Canada and that is a loan company as defined in subsection 2(1) of the Canadian Payments Act. (société de fiducie)

unless more than 90% of the gross revenue of the affiliate for the year from the sale of property (other than a property the income from the sale of which is not included in computing the income from a business other than an active business of the affiliate under this paragraph because of subsection (2.31)) is derived from the sale of such property (other than a property described in subparagraph (ii) the cost of which to any person is a cost referred to in subparagraph (i)) to persons with whom the affiliate deals at arm’s length (which, for this purpose, includes a sale of property to a non-resident corporation with which the affiliate does not deal at arm’s length for sale to persons with whom the affiliate deals at arm’s length) and, where this paragraph applies to include income of the affiliate from the sale of property in the income of the affiliate from a business other than an active business,

• (a.23) for the purposes of paragraphs (a.2), (a.21) and (a.24), specified Canadian risk means a risk in respect of

• (a.24) for the purposes of paragraph (a.2),

  • (i) a risk is deemed to be a specified Canadian risk of a particular foreign affiliate of a taxpayer if

    • (A) as part of a transaction or series of transactions, the particular affiliate insured or reinsured the risk,

    • (B) the risk would not be a specified Canadian risk if this Act were read without reference to this paragraph, and

    • (C) it can reasonably be concluded that one of the purposes of the transaction or series of transactions was to avoid the application of any of paragraphs (a.2) to (a.22), and

  • (ii) if the particular affiliate — or a foreign affiliate of another taxpayer, if that other taxpayer or affiliate, or a partnership of which that other taxpayer or affiliate is a member, does not deal at arm’s length with the particular affiliate — enters into one or more agreements or arrangements in respect of the risk,

    • (A) activities performed in connection with those agreements or arrangements are deemed to be a separate business, other than an active business, carried on by the particular affiliate or other affiliate, as the case may be, and

    • (B) any income of the particular affiliate or other affiliate, as the case may be, from the business (including income that pertains to or is incident to the business) is deemed to be income from a business other than an active business;

• (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 on the day on which the disposition was made, or another rate of exchange that is acceptable to the Minister;

• (f.15) for the purposes of applying subparagraph (f)(i), the references in subsection 39(2) to “Canadian currency” are to be read as “the taxpayer’s calculating currency”

  • (i) in respect of a debt obligation owing by a foreign affiliate of a taxpayer, or a partnership of which the foreign affiliate is a member, that is a debt referred to in subparagraph (i)(i) or (ii), and

  • (ii) in respect of an agreement described in subparagraph (i)(iii) entered into by a foreign affiliate of a taxpayer, or a partnership of which the foreign affiliate is a member;

• (g.04) if at any time a corporation resident in Canada or a partnership of which such a corporation is a member (such corporation or partnership referred to in this paragraph as the “borrowing party”) has received a loan from, or become indebted to, a creditor that is a foreign affiliate (referred to in this paragraph as a “creditor affiliate”) of a qualifying entity (in this paragraph within the meaning assigned by subsection 39(2.2)), or that is a partnership (referred to in this paragraph as a “creditor partnership”) of which such an affiliate is a member, and the loan or indebtedness is at a later time repaid, in whole or in part, then the amount of the creditor affiliate’s or creditor partnership’s capital gain or capital loss, as the case may be, determined in the absence of this paragraph, in respect of the repayment, is to be reduced

  • (i) in the case of a capital loss

    • (A) if the creditor is a creditor affiliate, by an amount, not exceeding the amount of that capital loss so determined, that is determined by the formula

      A/B

      where

      A

      is the amount by which the borrowing party’s capital gain is reduced under paragraph 39(2.1)(a) in respect of that repayment, and

      B

      is the total of all participating percentages, determined at the end of the taxation year of the creditor affiliate that includes the later time, of shares of the capital stock of a foreign affiliate that are owned by qualifying entities and on which an amount would be included under subsection 91(1), on the assumptions that

      • (I) the capital loss of the creditor affiliate, determined in the absence of this paragraph, in respect of the repayment of the loan or indebtedness were a capital gain of the creditor affiliate, and

      • (II) neither the creditor affiliate nor any other foreign affiliate of a qualifying entity had any other income, gain or loss for any taxation year, and

    • (B) if the creditor is a creditor partnership, by an amount, not exceeding the capital loss so determined, that is equal to the amount determined by the formula

      A/(B × C)

      where

      A

      is the amount by which the borrowing party’s capital gain is reduced under paragraph 39(2.1)(a) in respect of that repayment,

      B

      is the proportion that the amount of the capital loss of the creditor partnership in respect of the repayment of the loan or indebtedness, determined in the absence of this paragraph, that would be included in the determination of the income, gain or loss of the members of the creditor partnership that are foreign affiliates of qualifying entities is of the amount of the capital loss so determined, and

      C

      is the total of all participating percentages, each of which is the participating percentage in respect of a share of the capital stock of a foreign affiliate of a qualifying entity, and that is owned by a qualifying entity, that is relevant in determining the amount that would be included in computing a qualifying entity’s income under subsection 91(1), on the assumptions that

      • (I) the capital loss of the creditor partnership, determined in the absence of this paragraph, in respect of the repayment of the loan or indebtedness were a capital gain of the creditor partnership, and

      • (II) neither the creditor partnership nor any foreign affiliate of a qualifying entity had any other income, gain or loss for any taxation year, and

  • (ii) in the case of a capital gain,

    • (A) if the creditor is a creditor affiliate, by an amount, not exceeding that capital gain so determined, that is equal to the amount determined by the formula

      A/B

      where

      A

      is the amount by which the borrowing party is required to reduce its capital loss under paragraph 39(2.1)(b) in respect of that repayment, and

      B

      is the total of all participating percentages, determined at the end of the taxation year of the creditor affiliate that includes the later time, of shares of the capital stock of a foreign affiliate that are owned by qualifying entities and on which an amount would be included under subsection 91(1), on the assumption that neither the creditor affiliate nor any foreign affiliate of a qualifying entity had any other income, gain or loss for any taxation year other than its capital gain, determined in the absence of this paragraph, in respect of the repayment of the loan or indebtedness, and

    • (B) if the creditor is a creditor partnership, by an amount, not exceeding the capital loss so determined, that is equal to the amount determined by the following formula

      A/(B × C)

      where

      A

      is the amount by which the borrowing party is required to reduce its capital loss under paragraph 39(2.1)(b) in respect of that repayment,

      B

      is the proportion that the amount of the capital gain of the creditor partnership in respect of the repayment of the loan or indebtedness, determined in the absence of this paragraph, that would be included in the determination of the income, gain or loss of the members of the creditor partnership that are foreign affiliates of qualifying entities is of the amount of the capital gain so determined, and

      C

      is the total of all participating percentages, each of which is the participating percentage in respect of a share of the capital stock of a foreign affiliate of a qualifying entity, and that is owned by a qualifying entity, that is relevant in determining the amount that would be included in computing a qualifying entity’s income under subsection 91(1), on the assumption that neither the creditor partnership nor any foreign affiliate of a qualifying entity had any other income, gain or loss for any taxation year;

• Marginal note:Agreement or election of partnership members

  (3) If a taxpayer who was a member of a partnership at any time in a fiscal period has, for any purpose relevant to the computation of the taxpayer’s income from the partnership for the fiscal period, made or executed an agreement, designation or election under or in respect of the application of any of subsections 10.1(1), 13(4), (4.2) and (16), section 15.2, subsections 20(9) and 21(1) to (4), section 22, subsection 29(1), section 34, clause 37(8)(a)(ii)(B), subsections 44(1) and (6), 50(1) and 80(5) and (9) to (11), section 80.04, subsections 86.1(2), 88(3.1), (3.3) and (3.5) and 90(3), the definition relevant cost base in subsection 95(4) and subsections 97(2), 139.1(16) and (17) and 249.1(4) and (6) that, if this Act were read without reference to this subsection, would be a valid agreement, designation or election,

• (2) Notwithstanding any other provision of this Act other than subsections (3) and 13(21.2), where a taxpayer at any time disposes of any property (other than an eligible derivative, as defined in subsection 10.1(5), of the taxpayer if subsection 10.1(6) applies to the taxpayer) that is a capital property, Canadian resource property, foreign resource property or inventory of the taxpayer to a partnership that immediately after that time is a Canadian partnership of which the taxpayer is a member, if the taxpayer and all the other members of the partnership jointly so elect in prescribed form within the time referred to in subsection 96(4),

• Marginal note:Depreciable property — leasehold interests and options

  (7) For the purposes of paragraphs (3)(c) and (5)(c), a leasehold interest in a depreciable property and an option to acquire a depreciable property are depreciable properties.

• (a) 1/2 of such portion of the taxpayer’s capital gain for the year from the disposition as may reasonably be regarded as attributable to increases in the value of any partnership property of the partnership that is capital property (other than depreciable property) held directly by the partnership or held indirectly by the partnership through one or more other partnerships, and

• Marginal note:Deemed disposition by trust

  (4) Every trust is, at the end of each of the following days, deemed to have disposed of each property of the trust (other than exempt property) that was capital property (other than depreciable property) or land included in the inventory of a business of the trust for proceeds equal to its fair market value (determined with reference to subsection 70(5.3)) at the end of that day and to have reacquired the property immediately after that day for an amount equal to that fair market value, and for the purposes of this Act those days are

• Marginal note:Trust transfers

  (5.8) Where capital property, land included in inventory, Canadian resource property or foreign resource property is transferred at a particular time by a trust (in this subsection referred to as the “transferor trust”) to another trust (in this subsection referred to as the “transferee trust”) in circumstances in which subsection 107(2) or 107.4(3) or paragraph (f) of the definition disposition in subsection 248(1) applies,

• Marginal note:Where subsection 75(2) applicable to trust

  (4.1) Subsection (2.1) applies (and subsection (2) does not apply) in respect of a distribution of any property of a particular personal trust or prescribed trust (other than an excluded property of the particular trust) by the particular trust to a taxpayer who was a beneficiary under the particular trust where

excluded property

excluded property, of a trust, means property owned by the trust at, and distributed by the trust after, the end of 2016, if

• (a) the trust is not in its first taxation year that begins after 2016 a trust described in subparagraph (c.1)(iii.1) of the definition principal residence in section 54, and

• (b) the property is a property that would be the trust’s principal residence (as defined in section 54) for the taxation year in which the distribution occurs if

  • (i) that definition were read without reference to its subparagraph (c.1)(iii.1), and

  • (ii) the trust designated the property under that definition as its principal residence for the taxation year; (bien exclu)

eligible taxable capital gains,

eligible taxable capital gains, of a trust for a taxation year, means the lesser of

• Marginal note:Trust not disqualified

  (4) For the purposes of the definition pre-1972 spousal trust in subsection (1), subparagraphs 70(6)(b)(ii) and (6.1)(b)(ii) and paragraphs 73(1.01)(c) and 104(4)(a), if a trust was created by a taxpayer whether by the taxpayer’s will or otherwise, no person is deemed to have received or otherwise obtained or to be entitled to receive or otherwise obtain the use of any income or capital of the trust solely because of

  • (a) the payment, or provision for payment, as the case may be, by the trust of

    • (i) any estate, legacy, succession or inheritance duty payable, in consequence of the death of the taxpayer, or a spouse or common-law partner of the taxpayer who is a beneficiary under the trust, in respect of any property of, or interest in, the trust, or

    • (ii) any income or profits tax payable by the trust in respect of any income of the trust; or

  • (b) the inhabiting at any time by an individual of a housing unit that is, or is in respect of, property that is owned at that time by the trust, if

    • (i) the property is described in the definition principal residence in section 54 in respect of the trust for the trust’s taxation year that includes that time, and

    • (ii) the individual is

      • (A) the taxpayer, or

      • (B) the taxpayer’s

        • (I) spouse or common-law partner,

        • (II) former spouse or common-law partner, or

        • (III) child.