Income Tax Amendments Act, 2000 (S.C. 2001, c. 17)
Full Document:
Assented to 2001-06-14
65. (1) Subsection 87(1.2) of the Act is replaced by the following:
Marginal note:New corporation continuation of a predecessor
(1.2) Where there has been an amalgamation of corporations described in paragraph (1.1)(a) or of two or more corporations each of which is a subsidiary wholly-owned corporation of the same person, the new corporation is, for the purposes of section 29 of the Income Tax Application Rules, subsection 59(3.3) and sections 66, 66.1, 66.2, 66.21, 66.4 and 66.7, deemed to be the same corporation as, and a continuation of, each predecessor corporation, except that this subsection does not affect the determination of any predecessor corporation’s fiscal period, taxable income or tax payable.
(2) Subparagraph 87(2)(u)(ii) of the Act is replaced by the following:
(ii) for the purposes of subsections 93(2) to (2.3), any exempt dividend received by the predecessor corporation on any such share is deemed to be an exempt dividend received by the new corporation on the share;
(3) The portion of subsection 87(8) of the Act before paragraph (a) is replaced by the following:
Marginal note:Foreign merger
(8) Subject to subsection 95(2), where there has been a foreign merger in which a taxpayer’s shares or options to acquire shares of the capital stock of a corporation that was a predecessor foreign corporation immediately before the merger were exchanged for or became shares or options to acquire shares of the capital stock of the new foreign corporation or the foreign parent corporation, unless the taxpayer elects in the taxpayer’s return of income for the taxation year in which the foreign merger took place not to have this subsection apply, subsections (4) and (5) apply to the taxpayer as if the references in those subsections to
(4) Subsection 87(8.1) of the Act is replaced by the following:
Definition of “foreign merger”
(8.1) For the purposes of this section, “foreign merger” means a merger or combination of two or more corporations each of which was, immediately before the merger or combination, resident in a country other than Canada (each of which is in this section referred to as a “predecessor foreign corporation”) to form one corporate entity resident in a country other than Canada (in this section referred to as the “new foreign corporation”) in such a manner that, and otherwise than as a result of the distribution of property to one corporation on the winding-up of another corporation,
(a) all or substantially all the property (except amounts receivable from any predecessor foreign corporation or shares of the capital stock of any predecessor foreign corporation) of the predecessor foreign corporations immediately before the merger or combination becomes property of the new foreign corporation as a consequence of the merger or combination;
(b) all or substantially all the liabilities (except amounts payable to any predecessor foreign corporation) of the predecessor foreign corporations immediately before the merger or combination become liabilities of the new foreign corporation as a consequence of the merger or combination; and
(c) all or substantially all of the shares of the capital stock of the predecessor foreign corporations (except any shares or options owned by any predecessor foreign corporation) are exchanged for or become, because of the merger or combination,
(i) shares of the capital stock of the new foreign corporation, or
(ii) if, immediately after the merger, the new foreign corporation was controlled by another corporation (in this section referred to as the “foreign parent corporation”) that was resident in a country other than Canada, shares of the capital stock of the foreign parent corporation.
(5) The portion of subsection 87(10) of the Act after paragraph (f) is replaced by the following:
the new share is deemed, for the purposes of subsection 116(6), the definitions “qualified investment” in subsections 146(1), 146.1(1), and 146.3(1) and in section 204, and the definition “taxable Canadian property” in subsection 248(1), to be listed on the exchange until the earliest time at which it is so redeemed, acquired or cancelled.
(6) Subsection (1) applies to amalgamations that occur after 2000.
(7) Subsection (2) applies after November 1999.
(8) Subsections (3) and (4) apply to mergers and combinations that occur after 1995 and, where a taxpayer notifies the Minister of National Revenue in writing before the taxpayer’s filing-due date for the taxation year in which this Act receives royal assent that the taxpayer makes the election referred to in subsection 87(8) of the Act, as enacted by subsection (3), in respect of a merger or combination that occurred before 1999, the election is deemed to have been validly made in respect of the merger or combination.
(9) Subsection (5) applies after October 1, 1996.
66. (1) The portion of subclause 88(1)(c)(vi)(B)(III) of the Act before sub-subclause 1 is replaced by the following:
(III) a corporation (other than a specified person or the subsidiary)
(2) Clause 88(1)(c.2)(iii)(A) of the Act is replaced by the following:
(A) the reference in the definition “specified shareholder” in subsection 248(1) to “the issued shares of any class of the capital stock of the corporation or of any other corporation that is related to the corporation” shall be read as “the issued shares of any class (other than a specified class) of the capital stock of the corporation or of any other corporation that is related to the corporation and that has a significant direct or indirect interest in any issued shares of the capital stock of the corporation”, and
(3) Subsection 88(1) of the Act is amended by adding the following after paragraph (c.7):
(c.8) for the purpose of clause (c.2)(iii)(A), a specified class of the capital stock of a corporation is a class of shares of the capital stock of the corporation where
(i) the paid-up capital in respect of the class was not, at any time, less than the fair market value of the consideration for which the shares of that class then outstanding were issued,
(ii) the shares are non-voting in respect of the election of the board of directors of the corporation, except in the event of a failure or default under the terms or conditions of the shares,
(iii) under neither the terms and conditions of the shares nor any agreement in respect of the shares are the shares convertible into or exchangeable for shares other than shares of a specified class of the capital stock of the corporation, and
(iv) under neither the terms and conditions of the shares nor any agreement in respect of the shares is any holder of the shares entitled to receive on the redemption, cancellation or acquisition of the shares by the corporation or by any person with whom the corporation does not deal at arm’s length an amount (excluding any premium for early redemption) greater than the total of the fair market value of the consideration for which the shares were issued and the amount of any unpaid dividends on the shares;
(4) Subsection 88(1.5) of the Act is replaced by the following:
Marginal note:Parent continuation of subsidiary
(1.5) For the purposes of section 29 of the Income Tax Application Rules, subsection 59(3.3) and sections 66, 66.1, 66.2, 66.21, 66.4 and 66.7, where the rules in subsection (1) applied to the winding-up of a subsidiary, its parent is deemed to be the same corporation as, and a continuation of, the subsidiary.
(5) The portion of subsection 88(4) of the Act before paragraph (a) is replaced by the following:
Marginal note:Amalgamation deemed not to be acquisition of control
(4) For the purposes of paragraphs (1)(c), (c.2), (d) and (d.2) and, for greater certainty, paragraphs (c.3) to (c.8) and (d.3),
(6) Subsections (1) to (3) and (5) apply to windings-up that begin after November 1994.
(7) Subsection (4) applies to windings-up that occur after 2000.
67. (1) Clause (a)(i)(A) of the definition “capital dividend account” in subsection 89(1) of the Act is replaced by the following:
(A) the amount of the corporation’s capital gain from a disposition (other than a disposition that is the making of a gift after December 8, 1997 that is not a gift described in subsection 110.1(1)) of a property in the period beginning at the beginning of its first taxation year (that began after the corporation last became a private corporation and that ended after 1971) and ending immediately before the particular time (in this definition referred to as “the period”)
(2) Paragraph (c) of the definition “capital dividend account” in subsection 89(1) of the Act is replaced by the following:
(c) the total of all amounts each of which is an amount required to have been included under this paragraph as it read in its application to a taxation year that ended before February 28, 2000,
(c.1) the amount, if any, by which
(i) 1/2 of the total of all amounts each of which is an amount required by paragraph 14(1)(b) to be included in computing the corporation’s income in respect of a business carried on by the corporation for a taxation year that is included in the period and that ended after February 27, 2000 and before October 18, 2000,
exceeds
(ii) where the corporation has deducted an amount under subsection 20(4.2) in respect of a debt established by it to have become a bad debt in a taxation year that is included in the period and that ended after February 27, 2000 and before October 18, 2000, or has an allowable capital loss for such a year because of the application of subsection 20(4.3), the amount determined by the formula
V + W
where
- V
- is 1/2 of the value determined for A under subsection 20(4.2) in respect of the corporation for the last such taxation year that ended in the period, and
- W
- is 1/3 of the value determined for B under subsection 20(4.2) in respect of the corporation for the last such taxation year that ended in the period, and
(iii) in any other case, nil,
(c.2) the amount, if any, by which
(i) the total of all amounts each of which is an amount required by paragraph 14(1)(b) to be included in computing the corporation’s income in respect of a business carried on by the corporation for a taxation year that is included in the period and that ends after October 17, 2000,
exceeds
(ii) where the corporation has deducted an amount under subsection 20(4.2) in respect of a debt established by it to have become a bad debt in a taxation year that is included in the period and that ends after October 17, 2000, or has an allowable capital loss for such a year because of the application of subsection 20(4.3), the amount determined by the formula
X + Y
where
- X
- is the value determined for A under subsection 20(4.2) in respect of the corporation for the last such taxation year that ended in the period, and
- Y
- is 1/3 of the value determined for B under subsection 20(4.2) in respect of the corporation for the last such taxation year that ended in the period, and
(iii) in any other case, nil,
(3) The definition “capital dividend account” in subsection 89(1) of the Act is amended by striking out the word “and” at the end of paragraph (d) and by adding the following after paragraph (e):
(f) all amounts each of which is an amount in respect of a distribution made in the period by a trust to the corporation in respect of capital gains of the trust equal to the lesser of
(i) the amount, if any, by which
(A) the amount of the distribution
exceeds
(B) the amount designated under subsection 104(21) by the trust (other than a designation to which subsection 104(21.4) applies) in respect of the net taxable capital gains of the trust attributable to those capital gains, and
(ii) 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 clause (i) (B), and
(g) all amounts each of which is an amount in respect of a distribution made by a trust to the corporation in the period in respect of a dividend (other than a taxable dividend) paid on a share of the capital stock of another corporation resident in Canada to the trust during a taxation year of the trust throughout which the trust was resident in Canada equal to the lesser of
(i) the amount of the distribution, and
(ii) the amount designated under subsection 104(20) by the trust in respect of the corporation in respect of that dividend,
(4) Subsection (1) applies to dispositions made after December 8, 1997, other than a disposition made under a written agreement made before December 9, 1997.
(5) Subsection (2) applies in respect of taxation years that end after February 27, 2000.
(6) Subsection (3) applies to elections in respect of capital dividends that become payable after 1997.
- Date modified: