Income Tax Amendments Act, 2000 (S.C. 2001, c. 17)

Assented to 2001-06-14

  •  (1) The definitions “foreign resource property” and “net capital loss” in subsection 248(1) of the Act are replaced by the following:

    “foreign resource property”

    « avoir minier étranger »

    “foreign resource property” has the meaning assigned by subsection 66(15), and a foreign resource property in respect of a country means a foreign resource property that is

    • (a) a right, licence or privilege to explore for, drill for or take petroleum, natural gas or related hydrocarbons in that country,

    • (b) a right, licence or privilege to

      • (i) store underground petroleum, natural gas or related hydrocarbons in that country, or

      • (ii) prospect, explore, drill or mine for minerals in a mineral resource in that country,

    • (c) an oil or gas well in that country or real property in that country the principal value of which depends on its petroleum or natural gas content (but not including depreciable property),

    • (d) a rental or royalty computed by reference to the amount or value of production from an oil or gas well in that country or from a natural accumulation of petroleum or natural gas in that country,

    • (e) a rental or royalty computed by reference to the amount or value of production from a mineral resource in that country,

    • (f) a real property in that country the principal value of which depends upon its mineral resource content (but not including depreciable property), or

    • (g) a right to or interest in any property described in any of paragraphs (a) to (f), other than such a right or interest that the taxpayer has by reason of being a beneficiary of a trust;

    “net capital loss”

    « perte en capital nette »

    “net capital loss” has the meaning assigned by subsection 111(8), except as otherwise expressly provided;

  • (2) The definition “taxable Canadian property” in subsection 248(1) of the Act is replaced by the following:

    “taxable Canadian property”

    « bien canadien imposable »

    “taxable Canadian property” of a taxpayer at any time in a taxation year means a property of the taxpayer that is

    • (a) real property situated in Canada,

    • (b) property used or held by the taxpayer in, eligible capital property in respect of, or property described in an inventory of, a business carried on in Canada, other than

      • (i) property used in carrying on an insurance business, and

      • (ii) where the taxpayer is non-resident, ships and aircraft used principally in international traffic and personal property pertaining to their operation if the country in which the taxpayer is resident does not impose tax on gains of persons resident in Canada from dispositions of such property,

    • (c) if the taxpayer is an insurer, its designated insurance property for the year,

    • (d) a share of the capital stock of a corporation resident in Canada (other than a non-resident-owned investment corporation if, on the first day of the year, the corporation owns neither taxable Canadian property nor property referred to in any of paragraphs (m) to (o), or a mutual fund corporation) that is not listed on a prescribed stock exchange,

    • (e) a share of the capital stock of a non-resident corporation that is not listed on a prescribed stock exchange if, at any particular time during the 60-month period that ends at that time,

      • (i) the fair market value of all of the properties of the corporation each of which was

        • (A) a taxable Canadian property,

        • (B) a Canadian resource property,

        • (C) a timber resource property,

        • (D) an income interest in a trust resident in Canada, or

        • (E) an interest in or option in respect of a property described in any of clauses (B) to (D), whether or not the property exists,

        was greater than 50% of the fair market value of all of its properties, and

      • (ii) more than 50% of the fair market value of the share was derived directly or indirectly from one or any combination of

        • (A) real property situated in Canada,

        • (B) Canadian resource properties, and

        • (C) timber resource properties,

    • (f) a share that is listed on a prescribed stock exchange and that would be described in paragraph (d) or (e) if those paragraphs were read without reference to the words “that is not listed on a prescribed stock exchange”, or a share of the capital stock of a mutual fund corporation, if at any time during the 60-month period that ends at that time the taxpayer, persons with whom the taxpayer did not deal at arm’s length, or the taxpayer together with all such persons owned 25% or more of the issued shares of any class of the capital stock of the corporation that issued the share,

    • (g) an interest in a partnership if, at any particular time during the 60-month period that ends at that time, the fair market value of all of the properties of the partnership each of which was

      • (i) a taxable Canadian property,

      • (ii) a Canadian resource property,

      • (iii) a timber resource property,

      • (iv) an income interest in a trust resident in Canada, or

      • (v) an interest in or option in respect of a property described in any of subparagraphs (ii) to (iv), whether or not that property exists,

      was greater than 50% of the fair market value of all of its properties,

    • (h) a capital interest in a trust (other than a unit trust) resident in Canada,

    • (i) a unit of a unit trust (other than a mutual fund trust) resident in Canada,

    • (j) a unit of a mutual fund trust if, at any time during the 60-month period that ends at that time, not less than 25% of the issued units of the trust belonged to the taxpayer, to persons with whom the taxpayer did not deal at arm’s length, or to the taxpayer and persons with whom the taxpayer did not deal at arm’s length,

    • (k) an interest in a non-resident trust if, at any particular time during the 60-month period that ends at that time,

      • (i) the fair market value of all of the properties of the trust each of which was

        • (A) a taxable Canadian property,

        • (B) a Canadian resource property,

        • (C) a timber resource property,

        • (D) an income interest in a trust resident in Canada, or

        • (E) an interest in or option in respect of a property described in any of clauses (B) to (D), whether or not that property exists

        was greater than 50% of the fair market value of all of its properties, and

      • (ii) more than 50% of the fair market value of the interest was derived directly or indirectly from one or any combination of

        • (A) real property situated in Canada,

        • (B) Canadian resource properties, and

        • (C) timber resource properties, or

    • (l) an interest in or option in respect of a property described in any of paragraphs (a) to (k), whether or not that property exists,

    and, for the purposes of section 2, subsection 107(2.001) and sections 128.1 and 150, and for the purpose of applying paragraphs 85(1)(i) and 97(2)(c) to a disposition by a non-resident person, includes

    • (m) a Canadian resource property,

    • (n) a timber resource property,

    • (o) an income interest in a trust resident in Canada,

    • (p) a right to a share of the income or loss under an agreement referred to in paragraph 96(1.1)(a), and

    • (q) a life insurance policy in Canada;

  • (3) The portion of the definition “grandfathered share” in subsection 248(1) of the Act after paragraph (d) is replaced by the following:

    except that a share that is deemed under the definition “short-term preferred share”, “taxable preferred share” or “term preferred share” in this subsection or under subsection 112(2.22) to have been issued at any time is deemed after that time not to be a grandfathered share for the purposes of that provision;

  • (4) The portion of paragraph (b) of the definition “personal trust” in subsection 248(1) of the Act after subparagraph (ii) is replaced by the following:

    but, after 1999, does not include a unit trust;

  • (5) Subsection 248(1) of the Act is amended by adding the following in alphabetical order:

    “alter ego trust”

    « fiducie en faveur de soi-même »

    “alter ego trust” means a trust to which paragraph 104(4)(a) would apply if that paragraph were read without reference to subparagraph 104(4)(a)(iii) and clauses 104(4)(a)(iv)(B) and (C);

    “authorized foreign bank”

    « banque étrangère autorisée »

    “authorized foreign bank” has the meaning assigned by section 2 of the Bank Act;

    “bank”

    « banque »

    “bank” means a bank within the meaning assigned by section 2 of the Bank Act or an authorized foreign bank;

    “Canadian banking business”

    « entreprise bancaire canadienne »

    “Canadian banking business” means the business carried on by an authorized foreign bank through a permanent establishment (as defined by regulation) in Canada, other than business conducted through a representative office registered or required to be registered under section 509 of the Bank Act;

    “disposition”

    « disposition »

    “disposition” of any property, except as expressly otherwise provided, includes

    • (a) any transaction or event entitling a taxpayer to proceeds of disposition of the property,

    • (b) any transaction or event by which,

      • (i) where the property is a share, bond, debenture, note, certificate, mortgage, agreement of sale or similar property, or an interest in it, the property is redeemed in whole or in part or is cancelled,

      • (ii) where the property is a debt or any other right to receive an amount, the debt or other right is settled or cancelled,

      • (iii) where the property is a share, the share is converted because of an amalgamation or merger,

      • (iv) where the property is an option to acquire or dispose of property, the option expires, and

      • (v) a trust, that can reasonably be considered to act as agent for all the beneficiaries under the trust with respect to all dealings with all of the trust’s property (unless the trust is described in any of paragraphs (a) to (e.1) of the definition “trust” in subsection 108(1)), ceases to act as agent for a beneficiary under the trust with respect to any dealing with any of the trust’s property,

    • (c) any transfer of the property to a trust or, where the property is property of a trust, any transfer of the property to any beneficiary under the trust, except as provided by paragraph (f), (g) or (k), and

    • (d) where the property is, or is part of, a taxpayer’s capital interest in a trust, except as provided by paragraph (h) or (i), a payment made after 1999 to the taxpayer from the trust that can reasonably be considered to have been made because of the taxpayer’s capital interest in the trust,

    but does not include

    • (e) any transfer of the property as a consequence of which there is no change in the beneficial ownership of the property, except where the transfer is

      • (i) from a person or a partnership to a trust for the benefit of the person or the partnership,

      • (ii) from a trust to a beneficiary under the trust, or

      • (iii) from one trust maintained for the benefit of one or more beneficiaries under the trust to another trust maintained for the benefit of the same beneficiaries,

    • (f) any transfer of the property as a consequence of which there is no change in the beneficial ownership of the property, where

      • (i) the transferor and the transferee are trusts,

      • (ii) the transfer is not by a trust resident in Canada to a non-resident trust,

      • (iii) the transferee does not receive the property in satisfaction of the transferee’s right as a beneficiary under the transferor trust,

      • (iv) the transferee held no property immediately before the transfer (other than property the cost of which is not included, for the purposes of this Act, in computing a balance of undeducted outlays, expenses or other amounts in respect of the transferee),

      • (v) the transferee does not file a written election with the Minister on or before the filing-due date for its taxation year in which the transfer is made (or on such later date as is acceptable to the Minister) that this paragraph not apply,

      • (vi) if the transferor is an amateur athlete trust, a cemetery care trust, an employee trust, an inter vivos trust deemed by subsection 143(1) to exist in respect of a congregation that is a constituent part of a religious organization, a related segregated fund trust (in this paragraph having the meaning assigned by section 138.1), a trust described in paragraph 149(1)(o.4) or a trust governed by an eligible funeral arrangement, an employees profit sharing plan, a registered education savings plan or a registered supplementary unemployment benefit plan, the transferee is the same type of trust, and

      • (vii) the transfer results, or is part of a series of transactions or events that results, in the transferor ceasing to exist and, immediately before the time of the transfer or the beginning of that series, as the case may be, the transferee never held any property or held only property having a nominal value,

    • (g) any transfer of the property where

      • (i) the transferor is a trust governed by a registered retirement savings plan or a trust governed by a registered retirement income fund,

      • (ii) the transferee is a trust governed by a registered retirement savings plan or a trust governed by a registered retirement income fund,

      • (iii) the annuitant under the plan or fund that governs the transferor is also the annuitant under the plan or fund that governs the transferee,

      • (iv) the transferee held no property immediately before the transfer (other than property the cost of which is not included, for the purposes of this Act, in computing a balance of undeducted outlays, expenses or other amounts in respect of the transferee),

      • (v) the transferee does not file a written election with the Minister on or before the filing-due date for its taxation year in which the transfer is made (or on such later day as is acceptable to the Minister) that this paragraph not apply, and

      • (vi) the transfer results, or is part of a series of transactions or events that results, in the transferor ceasing to exist and, immediately before the time of the transfer or the beginning of that series, as the case may be, the transferee never held any property or held only property having a nominal value,

    • (h) where the property is part of a capital interest of a taxpayer in a trust (other than a personal trust or a trust prescribed for the purpose of subsection 107(2)) that is described by reference to units issued by the trust, a payment after 1999 from the trust in respect of the capital interest, where the number of units in the trust that are owned by the taxpayer is not reduced because of the payment,

    • (i) where the property is a taxpayer’s capital interest in a trust, a payment to the taxpayer after 1999 in respect of the capital interest to the extent that the payment

      • (i) is out of the income of the trust (determined without reference to subsection 104(6)) for a taxation year or out of the capital gains of the trust for the year, if the payment was made in the year or the right to the payment was acquired by the taxpayer in the year, or

      • (ii) is in respect of an amount designated in respect of the taxpayer by the trust under subsection 104(20),

    • (j) any transfer of the property for the purpose only of securing a debt or a loan, or any transfer by a creditor for the purpose only of returning property that had been used as security for a debt or a loan,

    • (k) any transfer of the property to a trust as a consequence of which there is no change in the beneficial ownership of the property, where the main purpose of the transfer is

      • (i) to effect payment under a debt or loan,

      • (ii) to provide assurance that an absolute or contingent obligation of the transferor will be satisfied, or

      • (iii) to facilitate either the provision of compensation or the enforcement of a penalty, in the event that an absolute or contingent obligation of the transferor is not satisfied,

    • (l) any issue of a bond, debenture, note, certificate, mortgage or hypothecary claim, and

    • (m) any issue by a corporation of a share of its capital stock, or any other transaction that, but for this paragraph, would be a disposition by a corporation of a share of its capital stock;

    “foreign currency”

    « monnaie étrangère »

    “foreign currency” means currency of a country other than Canada;

    “foreign resource expense”

    « frais relatifs à des ressources à l’étranger »

    “foreign resource expense” has the meaning assigned by subsection 66.21(1);

    “foreign resource pool expenses”

    « frais globaux relatifs à des ressources à l’étranger »

    “foreign resource pool expenses” of a taxpayer means the taxpayer’s foreign resource expenses in respect of all countries and the taxpayer’s foreign exploration and development expenses;

    “joint spousal or common-law partner trust”

    « fiducie mixte au profit de l’époux ou du conjoint de fait »

    “joint spousal or common-law partner trust” means a trust to which paragraph 104(4)(a) would apply if that paragraph were read without reference to subparagraph 104(4)(a)(iii) and clause 104(4)(a)(iv)(A);

    “OSFI risk-weighting guidelines”

    « lignes directrices du BSIF sur la pondération des risques »

    “OSFI risk-weighting guidelines” means the guidelines, issued by the Superintendent of Financial Institutions under the authority of section 600 of the Bank Act, requiring an authorized foreign bank to provide to the Superintendent on a periodic basis a return of the bank’s risk-weighted on-balance sheet assets and off-balance sheet exposures, that apply as of August 8, 2000;

    “post-1971 spousal or common-law partner trust”

    « fiducie au profit de l’époux ou du conjoint de fait postérieure à 1971 »

    “post-1971 spousal or common-law partner trust” means a trust that would be described in paragraph 104(4)(a) if that paragraph were read without reference to subparagraph 104(4)(a)(iv);

    “qualified donee”

    « donataire reconnu »

    “qualified donee” has the meaning assigned by subsection 149.1(1);

  • (6) Section 248 of the Act is amended by adding the following after subsection (25):

    • 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.

    • Marginal note:Trusts to ensure obligations fulfilled

      (25.2) Except for the purpose of this subsection, where at any time property is transferred to a trust in circumstances to which paragraph (k) of the definition “disposition” in subsection (1) applies, the trust is deemed to deal with the property as agent for the transferor throughout the period that begins at the time of the transfer and ends at the time of the first change after that time in the beneficial ownership of the property.

    • Marginal note:Cost of trust interest

      (25.3) The cost to a taxpayer of a particular unit of a trust is deemed to be equal to the amount described in paragraph (a) where

      • (a) the trust issues the particular unit to the taxpayer directly in satisfaction of a right to enforce payment of an amount by the trust in respect of the taxpayer’s capital interest in the trust;

      • (b) at the time that the particular unit is issued, the trust is neither a personal trust nor a trust prescribed for the purpose of subsection 107(2); and

      • (c) either

        • (i) the particular unit is capital property and subparagraph 53(2)(h)(i.1) applies in respect of the amount described in paragraph (a), or would apply if that subparagraph were read without reference to clauses 53(2)(h)(i.1) (A) and (B), or

        • (ii) the particular unit is not capital property and subparagraph 53(2)(h)(i.1) does not apply in respect of the amount described in paragraph (a) but would so apply if that subparagraph were read without reference to clauses 53(2)(h)(i.1)(A) and (B).

    • Marginal note:Where acquisition by another of right to enforce

      (25.4) If at a particular time a taxpayer’s capital interest in a trust includes a right to enforce payment of an amount by the trust, the amount shall be added at the particular time to the cost otherwise determined to the taxpayer of the capital interest where

      • (a) immediately after the particular time there is a disposition by the taxpayer of the capital interest;

      • (b) as a consequence of the disposition, the right to enforce payment of the amount is acquired by another person or partnership; and

      • (c) if the right to enforce payment of the amount had been satisfied by a payment to the taxpayer by the trust, there would have been no disposition of that right for the purposes of this Act because of the application of paragraph (i) of the definition “disposition” in subsection (1).

  • (7) Section 248 of the Act is amended by adding the following after subsection (28):

    • Marginal note:Prescribed stock exchange rule

      (29) A part, division or subdivision of a stock exchange that is prescribed for the purpose of any provision of this Act is deemed for that purpose to be a prescribed stock exchange.

  • (8) The definition “foreign resource property” in subsection 248(1) of the Act, as enacted by subsection (1), and the definitions “foreign resource expense” and “foreign resource pool expense” in subsection 248(1) of the Act, as enacted by subsection (5), apply after 2000.

  • (9) The definition “net capital loss” in subsection 248(1) of the Act, as enacted by subsection (1), applies to taxation years that end after February 27, 2000.

  • (10) Subsection (2) applies after October 1, 1996 except that, in its application before December 24, 1998, the portion of paragraph (b) of the definition “taxable Canadian property” in subsection 248(1) of the Act before subparagraph (i), as enacted by subsection (2), shall be read as follows:

    • (b) capital property used by the taxpayer in carrying on a business in Canada, other than

  • (11) Subsection (3) applies in respect of dividends received after 1998.

  • (12) Subsection (4) applies after December 23, 1998.

  • (13) The definitions “alter ego trust” and “joint spousal or common-law partner trust” in subsection 248(1) of the Act, as enacted by subsection (5), apply to trusts created after 1999.

  • (14) The definitions “authorized foreign bank”, “bank”, “Canadian banking business”, “foreign currency” and “OSFI risk-weighting guidelines” in subsection 248(1) of the Act, as enacted by subsection (5), apply after June 27, 1999.

  • (15) The definition “disposition” in subsection 248(1) of the Act, as enacted by subsection (5), applies to transactions and events that occur after December 23, 1998, except that paragraphs (f) and (g) of that definition, as enacted by subsection (5), shall not apply for the purposes of the Act (other than section 107.4 of the Act, as enacted by subsection 82(1)) to a transfer of property, that occurred before 2000, by a trust governed by a registered retirement savings plan or by a registered retirement income fund to a trust governed by a registered retirement income fund (or to a transfer by a trust governed by a registered retirement income fund to a trust governed by a registered retirement savings plan) unless the transferee trust files a written election with the Minister of National Revenue on or before the filing-due date for its taxation year in which the transfer is made (or on such later day as is acceptable to the Minister) that paragraph (f) or (g), as the case may be, of that definition apply.

  • (16) The definition “post-1971 spousal or common-law partner trust” in subsection 248(1) of the Act, as enacted by subsection (5), applies to trusts created after 1971.

  • (17) The definition “qualified donee” in subsection 248(1) of the Act, as enacted by subsection (5), applies after 1998.

  • (18) Subsections 248(25.1), (25.2) and (25.4) of the Act, as enacted by subsection (6), apply to transfers that occur after December 23, 1998.

  • (19) Subsection 248(25.3) of the Act, as enacted by subsection (6), applies to the 1999 and subsequent taxation years.

  • (20) Subsection (7) applies after October 1999.

 
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