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

Assented to 2001-06-14

  •  (1) Subparagraph 66.8(1)(a)(i) of the Act is amended by striking out the word “or” at the end of clause (C) and by replacing clause (D) with the following:

    • (D) the foreign resource expenses in respect of a country (in this subsection referred to as “country-specific foreign expenses”), or

    • (E) the foreign exploration and development expenses (in this subsection referred to as “global foreign expenses”),

  • (2) Paragraph 66.8(1)(b) of the Act is amended by striking out the word “and” at the end of subparagraph (iii) and by replacing subparagraph (iv) with the following:

    • (iv) if any remains unapplied, then to reduce (in the order specified by the taxpayer in writing filed with the Minister on or before the taxpayer’s filing-due date for the taxpayer’s taxation year in which the fiscal period ends or, where no such specification is made, in the order determined by the Minister) the taxpayer’s share of country-specific foreign expenses, and

    • (v) if any remains unapplied, then to reduce the taxpayer’s share of global foreign expenses; and

  • (3) Subsections (1) and (2) apply to fiscal periods that begin after 2000.

  •  (1) Paragraph 69(1)(b) of the Act is amended by striking out the word “or” at the end of subparagraph (i), by adding the word “or” at the end of subparagraph (ii) and by adding the following after subparagraph (ii):

    • (iii) to a trust because of a disposition of a property that does not result in a change in the beneficial ownership of the property; and

  • (2) Paragraph 69(1)(c) of the Act is replaced by the following:

    • (c) where a taxpayer acquires a property by way of gift, bequest or inheritance or because of a disposition that does not result in a change in the beneficial ownership of the property, the taxpayer is deemed to acquire the property at its fair market value.

  • (3) Paragraph 69(5)(c) of the Act is replaced by the following:

    • (c) subsections 52(1) and (2) do not apply for the purposes of determining the cost to the shareholder of the property; and

  • (4) Subsection (1) applies to dispositions that occur after December 23, 1998.

  • (5) Subsection (2) applies to acquisitions that occur after December 23, 1998.

  • (6) Subsection (3) applies to dispositions that occur after 1999.

  •  (1) The portion of paragraph 70(5.1)(d) of the Act before the formula is replaced by the following:

    • (d) for the purpose of determining, after that time, the amount required by paragraph 14(1)(b) to be included in computing the income of the beneficiary in respect of any subsequent disposition of the property of the business, there shall be added to the amount determined for Q in the definition “cumulative eligible capital” in subsection 14(5) the amount determined by the formula

  • (2) Paragraph 70(5.2)(a) of the Act is replaced by the following:

    • (a) the taxpayer is deemed to have, immediately before the taxpayer’s death, disposed of each Canadian resource property and foreign resource property of the taxpayer and received proceeds of disposition for that property equal to its fair market value immediately before the death;

    • (a.1) subject to subparagraph (b)(ii), any particular person who as a consequence of the taxpayer’s death acquires any property that is deemed by paragraph (a) to have been disposed of by the taxpayer is deemed to have acquired the property at the time of the death at a cost equal to the fair market value of the property immediately before the death;

  • (3) Subparagraph 70(5.2)(b)(ii) of the Act is replaced by the following:

    • (ii) the spouse, common-law partner or trust, as the case may be, is deemed to have acquired the property at the time of the death at a cost equal to the amount determined in respect of the disposition under subparagraph (i);

  • (4) Paragraph 70(5.2)(c) of the Act is replaced by the following:

    • (c) the taxpayer is deemed to have, immediately before the taxpayer’s death, disposed of each property that was land included in the inventory of a business of the taxpayer and received proceeds of disposition for that property equal to its fair market value immediately before the death;

    • (c.1) subject to subparagraph (d)(ii), any particular person who as a consequence of the taxpayer’s death acquires any property that is deemed by paragraph (c) to have been disposed of by the taxpayer is deemed to have acquired the property at the time of the death at a cost equal to the fair market value of the property immediately before the death; and

  • (5) Subsection 70(5.3) of the Act is replaced by the following:

    • Marginal note:Fair market value

      (5.3) For the purposes of subsections (5) and 104(4) and section 128.1, the fair market value at any time of any property deemed to have been disposed of at that time as a consequence of a particular individual’s death or as a consequence of the particular individual becoming or ceasing to be resident in Canada shall be determined as though the fair market value at that time of any life insurance policy, under which the particular individual (or any other individual not dealing at arm’s length with the particular individual at that time or at the time the policy was issued) was a person whose life was insured, were the cash surrender value (as defined in subsection 148(9)) of the policy immediately before the particular individual died or became or ceased to be resident in Canada, as the case may be.

  • (6) The portion of subsection 70(9.1) of the Act before paragraph (a) is replaced by the following:

    • Marginal note:Transfer of farm property from trust to settlor’s children

      (9.1) Where any property in Canada of a taxpayer that is land or depreciable property of a prescribed class has been transferred or distributed to a trust described in subsection (6) or 73(1) (as that subsection applied to transfers before 2000) or a trust to which subparagraph 73(1.01)(c)(i) applies and the property or a replacement property for that property in respect of which the trust has made an election under subsection 13(4) or 44(1) was, immediately before the death of the taxpayer’s spouse or common-law partner who was a beneficiary under the trust, used in the business of farming and has, on the death of the spouse or common-law partner and as a consequence of the death, been transferred or distributed to and vested indefeasibly in an individual who was a child of the taxpayer and who was resident in Canada immediately before the death of the spouse or common-law partner, the following rules apply:

  • (7) The portion of subsection 70(9.3) of the Act before paragraph (a) is replaced by the following:

    • Marginal note:Transfer of family farm corporation or partnership from trust to children of settlor

      (9.3) Where property of a taxpayer has been transferred or distributed to a trust described in subsection (6) or 73(1) (as that subsection applied to transfers before 2000) or a trust to which subparagraph 73(1.01)(c)(i) applies and the property was,

  • (8) Subsection (1) applies in respect of taxation years that end after February 27, 2000.

  • (9) Paragraphs 70(5.2)(a) and (c) of the Act, as enacted by subsections (2) and (4), respectively, and subsection (3) apply to taxation years that begin after 2000.

  • (10) Paragraphs 70(5.2)(a.1) and (c.1) of the Act, as enacted by subsections (2) and (4), respectively, apply to acquisitions that occur after 1992.

  • (11) Subsection (5) applies to dispositions that occur after October 1, 1996.

  • (12) Subsections (6) and (7) apply to transfers and distributions from trusts that occur after 1999.

  • (13) Where a particular transfer or distribution to a trust referred to in subsection 70(9.1) or (9.3) of the Act, as enacted by subsections (6) and (7), respectively, occurred before 2001, in applying that subsection 70(9.1) or (9.3) to a transfer or distribution from the trust that occurs after 1997, that subsection shall be read without reference to the words “or common-law partner” and to the Modernization of Benefits and Obligations Act, unless

    • (a) the particular transfer or distribution occurred after 1997;

    • (b) the death referred to in that subsection occurs after 1997; and

    • (c) either

      • (i) at the time of the particular transfer or distribution referred to in paragraph (a), the taxpayer was a spouse of the individual whose death is referred to in paragraph (b), or

      • (ii) because of an election under section 144 of the Modernization of Benefits and Obligations Act, sections 130 to 142 of that Act applied, at the time of the particular transfer or distribution referred to in paragraph (a), to the taxpayer and the individual whose death is referred to in paragraph (b).

  •  (1) Subsections 73(1) and (1.1) of the Act are replaced by the following:

    Marginal note:Inter vivos transfers by individuals
    • 73. (1) For the purposes of this Part, where at any time any particular capital property of an individual (other than a trust) has been transferred in circumstances to which subsection (1.01) applies and both the individual and the transferee are resident in Canada at that time, unless the individual elects in the individual’s return of income under this Part for the taxation year in which the property was transferred that the provisions of this subsection not apply, the particular property is deemed

      • (a) to have been disposed of at that time by the individual for proceeds equal to,

        • (i) where the particular property is depreciable property of a prescribed class, that proportion of the undepreciated capital cost to the individual immediately before that time of all property of that class that the fair market value immediately before that time of the particular property is of the fair market value immediately before that time of all of that property of that class, and

        • (ii) in any other case, the adjusted cost base to the individual of the particular property immediately before that time; and

      • (b) to have been acquired at that time by the transferee for an amount equal to those proceeds.

    • Marginal note:Qualifying transfers

      (1.01) Subject to subsection (1.02), property is transferred by an individual in circumstances to which this subsection applies where it is transferred to

      • (a) the individual’s spouse or common-law partner;

      • (b) a former spouse or common-law partner of the individual in settlement of rights arising out of their marriage or common-law partnership; or

      • (c) a trust created by the individual under which

        • (i) the individual’s spouse or common-law partner is entitled to receive all of the income of the trust that arises before the spouse’s or common-law partner’s death and no person except the spouse or common-law partner may, before the spouse’s or common-law partner’s death, receive or otherwise obtain the use of any of the income or capital of the trust,

        • (ii) the individual is entitled to receive all of the income of the trust that arises before the individual’s death and no person except the individual may, before the individual’s death, receive or otherwise obtain the use of any of the income or capital of the trust, or

        • (iii) either

          • (A) the individual or the individual’s spouse is, in combination with the other, entitled to receive all of the income of the trust that arises before the later of the death of the individual and the death of the spouse and no other person may, before the later of those deaths, receive or otherwise obtain the use of any of the income or capital of the trust, or

          • (B) the individual or the individual’s common-law partner is, in combination with the other, entitled to receive all of the income of the trust that arises before the later of the death of the individual and the death of the common-law partner and no other person may, before the later of those deaths, receive or otherwise obtain the use of any of the income or capital of the trust.

    • Marginal note:Exception for transfers

      (1.02) Subsection (1.01) applies to a transfer of property by an individual to a trust the terms of which satisfy the conditions in subparagraph (1.01)(c)(ii) or (iii) only where

      • (a) the trust was created after 1999;

      • (b) either

        • (i) the individual had attained 65 years of age at the time the trust was created, or

        • (ii) the transfer does not result in a change in beneficial ownership of the property and there is immediately after the transfer no absolute or contingent right of a person (other than the individual) or partnership as a beneficiary (determined with reference to subsection 104(1.1)) under the trust; and

      • (c) in the case of a trust the terms of which satisfy the conditions in subparagraph (1.01)(c)(ii), the trust does not make an election under subparagraph 104(4)(a)(ii.1).

    • Marginal note:Interpretation

      (1.1) For greater certainty, a property is, for the purposes of subsections (1) and (1.01), deemed to be property of the individual referred to in subsection (1) that has been transferred to a particular transferee where,

      • (a) under the laws of a province or because of a decree, order or judgment of a competent tribunal made in accordance with those laws, the property

        • (i) is acquired or is deemed to have been acquired by the particular transferee,

        • (ii) is deemed or declared to be property of, or is awarded to, the particular transferee, or

        • (iii) has vested in the particular transferee; and

      • (b) the property was or would, but for those laws, have been a capital property of the individual referred to in subsection (1).

  • (2) Subsection (1) applies to transfers that occur after 1999 except that,

    • (a) in respect of transfers that occur in 2000 or 2001, for the purpose of subsection 73(1) of the Act, as enacted by subsection (1), the residence of a transferee trust shall be determined without reference to section 94 of the Act, as it reads before 2002;

    • (b) in respect of transfers that occur in 2000 and subject to paragraph (c),

      • (i) subsection 73(1.01) of the Act, as enacted by subsection (1), shall be read without reference to the words “or common-law partner”, “or common-law partner’s” and “or common-law partnership”, and

      • (ii) subparagraph 73(1.01)(c)(iii) of the Act, as enacted by subsection (1), shall be read as follows:

        • (iii) the individual or the individual’s spouse is, in combination with the other, entitled to receive all of the income of the trust that arises before the later of the death of the individual and the death of the spouse and no other person may, before the later of those deaths, receive or otherwise obtain the use of any of the income or capital of the trust.

    • (c) paragraph (b) does not apply to a transfer at any time by an individual to or for the benefit of another individual where, because of an election under section 144 of the Modernization of Benefits and Obligations Act, sections 130 to 142 of that Act applied at that time to those individuals; and

    • (d) in respect of transfers that occur before March 16, 2001, subparagraph 73(1.02)(b)(ii) of the Act, as enacted by subsection (1), shall be read as follows:

      • (ii) no person (other than the individual) or partnership has any absolute or contingent right as a beneficiary under the trust (determined with reference to subsection 104(1.1)); and

 

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