Income Tax Amendments Act, 2000 (S.C. 2001, c. 17)
Full Document:
Assented to 2001-06-14
74. (1) Paragraph 96(1)(d) of the Act is replaced by the following:
(d) each income or loss of the partnership for a taxation year were computed as if
(i) this Act were read without reference to paragraphs 12(1)(z.5) and 20(1)(v.1), section 34.1, subsection 59(1), paragraph 59(3.2)(c.1) and subsections 66.1(1), 66.2(1) and 66.4(1), and
(ii) no deduction were permitted under any of section 29 of the Income Tax Application Rules, subsections 34.2(4) and 65(1) and sections 66, 66.1, 66.2, 66.21 and 66.4;
(2) The portion of subsection 96(1.7) of the Act before the formula is replaced by the following:
Marginal note:Gains and losses
(1.7) Notwithstanding subsection (1) or section 38, where in a particular taxation year of a taxpayer, the taxpayer is a member of a partnership with a fiscal period that ends in the particular year, the amount of a taxable capital gain (other than that part of the amount that can reasonably be attributed to an amount deemed under subsection 14(1.1) to be a taxable capital gain of the partnership), allowable capital loss or allowable business investment loss of the taxpayer for the particular year determined in respect of the partnership is the amount determined by the formula
(3) The descriptions of A and B in subsection 96(1.7) of the Act are replaced by the following:
- A
- is the amount of the taxpayer’s taxable capital gain (other than that part of the amount that can be attributed to an amount deemed under subsection 14(1.1) to be a taxable capital gain of the partnership), allowable capital loss or allowable business investment loss, as the case may be, for the particular year otherwise determined under this section in respect of the partnership;
- B
- is the relevant fraction that applies under paragraph 38(a), (a.1), (a.2), (b) or (c) for the particular year in respect of the taxpayer; and
(4) Section 96 of the Act is amended by adding the following after subsection (1.7):
Marginal note:Application
(1.71) Where the fraction referred to in the description of C in subsection (1.7) cannot be determined by a taxpayer in respect of a fiscal period of a partnership that ended before February 28, 2000, or includes February 28, 2000 or October 17, 2000, for the purposes of subsection (1.7), the fraction is deemed to be
(a) where the fiscal period ended before or began before February 28, 2000, 3/4;
(b) where the fiscal period began after February 27, 2000 and before October 18, 2000, 2/3; and
(c) in any other case, 1/2.
(5) Clause 96(2.1)(b)(iv)(A) of the Act is replaced by the following:
(A) the foreign resource pool expenses, if any, incurred by the partnership in the fiscal period,
(6) Paragraph 96(2.4)(a) of the Act is replaced by the following:
(a) by operation of any law governing the partnership arrangement, the liability of the member as a member of the partnership is limited (except by operation of a provision of a statute of Canada or a province that limits the member’s liability only for debts, obligations and liabilities of the partnership, or any member of the partnership, arising from negligent acts or omissions or misconduct that another member of the partnership or an employee, agent or representative of the partnership commits in the course of the partnership business while the partnership is a limited liability partnership);
(7) The portion of subsection 96(3) of the Act before paragraph (a) is replaced by the following:
Marginal note:Agreement or election of partnership members
(3) Where 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 13(4) and (16) and 14(6), 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), (9), (10) and (11), section 80.04, subsections 86.1(2), 97(2), 139.1(16) and (17) and 249.1(4) and (6) that, but for this subsection, would be a valid agreement, designation or election,
(8) Subsections (1), (3), (4) and (5) apply to fiscal periods that begin after 2000.
(9) Subsection (2) applies to taxation years that end after February 27, 2000.
(10) Subsection (6) applies after 1997.
(11) Subsection (7) applies after 1999.
75. (1) Subparagraph 98(3)(g)(iii) of the Act is replaced by the following:
(iii) for the purpose of determining after the particular time the amount required by paragraph 14(1)(b) to be included in computing the person’s income in respect of any subsequent disposition of property of the business, the value determined for Q in the definition “cumulative eligible capital” in subsection 14(5) is deemed to be the amount, if any, of that person’s percentage of the value determined for Q in that definition in respect of the partnership’s business immediately before the particular time.
(2) Subparagraph 98(5)(h)(ii) of the Act is replaced by the following:
(ii) for the purpose of determining after the particular time the amount required by paragraph 14(1)(b) to be included in computing the proprietor’s income in respect of any subsequent disposition of property of the business, the value determined for Q in the definition “cumulative eligible capital” in subsection 14(5) is deemed to be the value, if any, determined for Q in that definition in respect of the partnership’s business immediately before the particular time.
(3) Subsections (1) and (2) apply in respect of taxation years that end after February 27, 2000.
76. (1) Paragraph 100(1)(a) of the Act is amended by replacing the reference to the fraction “3/4” with a reference to the fraction “1/2”.
(2) Subsection (1) applies to taxation years that end after February 27, 2000 except that, where a taxation year of a taxpayer includes February 28, 2000 or October 17, 2000, or began after February 28, 2000 and ended before October 17, 2000, the reference to the fraction “1/2” in paragraph 100(1)(a) of the Act, as enacted by subsection (1), shall be read as a reference to the fraction in paragraph 38(a) of the Act, as enacted by subsection 22(1), that applies to the taxpayer for the year.
77. (1) Section 101 of the Act is amended by replacing the reference to the fraction “3/4” with a reference to the fraction “1/2” and by replacing the reference to the expression “4/3 of” with a reference to the word “twice”.
(2) Subsection (1) applies to taxation years that end after February 27, 2000 except that, in applying section 101 of the Act, as enacted by subsection (1), to a taxpayer’s taxation year that includes February 28, 2000 or October 17, 2000, or began after February 28, 2000 and ended before October 17, 2000,
(a) the reference to the fraction “1/2” in section 101 of the Act, as enacted by subsection (1), shall be read as a reference to the fraction in paragraph 38(a) of the Act, as enacted by subsection 22(1), that applies to the taxpayer for the year; and
(b) the reference to the word “twice” in section 101 of the Act, as enacted by subsection (1), shall be read as a reference to the expression “the fraction that is the reciprocal of the fraction in paragraph 38(a), as enacted by subsection 22(1) of the Income Tax Amendments Act, 2000, that applies to the taxpayer for the year, multiplied by”.
78. (1) Subsection 104(1) of the Act is replaced by the following:
Marginal note:Reference to trust or estate
104. (1) In this Act, a reference to a trust or estate (in this subdivision referred to as a “trust”) shall, unless the context otherwise requires, be read to include a reference to the trustee, executor, administrator, liquidator of a succession, heir or other legal representative having ownership or control of the trust property, but, except for the purposes of this subsection, subsection (1.1), subparagraph (b)(v) of the definition “disposition” in subsection 248(1) and paragraph (k) of that definition, a trust is deemed not to include an arrangement under which the trust 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).
Restricted meaning of “beneficiary”
(1.1) Notwithstanding subsection 248(25.1) and for the purposes of subsection (1), paragraph (4)(a.4), subparagraph 73(1.02)(b)(ii) and paragraph 107.4(1)(e), a person or partnership is deemed not to be a beneficiary under a trust at a particular time where the person or partnership is beneficially interested in the trust at the particular time solely because of
(a) a right that may arise as a consequence of the terms of the will or other testamentary instrument of an individual who, at the particular time, is a beneficiary under the trust;
(b) a right that may arise as a consequence of the law governing the intestacy of an individual who, at that time, is a beneficiary under the trust;
(c) a right as a shareholder under the terms of the shares of the capital stock of a corporation that, at the particular time, is a beneficiary under the trust;
(d) a right as a member of a partnership under the terms of the partnership agreement, where, at the particular time, the partnership is a beneficiary under the trust; or
(e) any combination of rights described in paragraphs (a) to (d).
(2) The portion of subsection 104(4) of the Act before paragraph (a) is replaced by the following:
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 excluded property or 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
(3) Paragraph 104(4)(a) of the Act is amended by striking out the word “or” at the end of subparagraph (i.1), by adding the word “or” at the end of subparagraph (ii) and by replacing the portion after subparagraph (ii) with the following:
(ii.1) is a trust (other than a trust the terms of which are described in clause (iv)(A) that elects in its return of income under this Part for its first taxation year that this subparagraph not apply) that was created after 1999 by a taxpayer during the taxpayer’s lifetime and that, at any time after 1999, was a trust
under which
(iii) the taxpayer’s spouse or common-law partner was entitled to receive all of the income of the trust that arose before the spouse’s or common-law partner’s death and no person except the spouse or common-law partner could, 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, or
(iv) in the case of a trust described in subparagraph (ii.1) created by a taxpayer who had attained 65 years of age at the time the trust was created,
(A) the taxpayer was entitled to receive all of the income of the trust that arose before the taxpayer’s death and no person except the taxpayer could, before the taxpayer’s death, receive or otherwise obtain the use of any of the income or capital of the trust,
(B) the taxpayer or the taxpayer’s spouse was, in combination with the spouse or the taxpayer, as the case may be, entitled to receive all of the income of the trust that arose before the later of the death of the taxpayer and the death of the spouse and no other person could, before the later of those deaths, receive or otherwise obtain the use of any of the income or capital of the trust, or
(C) the taxpayer or the taxpayer’s common-law partner was, in combination with the common-law partner or the taxpayer, as the case may be, entitled to receive all of the income of the trust that arose before the later of the death of the taxpayer and the death of the common-law partner and no other person could, before the later of those deaths, receive or otherwise obtain the use of any of the income or capital of the trust,
the day on which the death or the later death, as the case may be, occurs;
(4) Subsection 104(4) of the Act is amended by adding the following after paragraph (a.1):
(a.2) where the trust makes a distribution to a beneficiary in respect of the beneficiary’s capital interest in the trust, it is reasonable to conclude that the distribution was financed by a liability of the trust and one of the purposes of incurring the liability was to avoid taxes otherwise payable under this Part as a consequence of the death of any individual, the day on which the distribution is made (determined as if a day ends for the trust immediately after the time at which each distribution is made by the trust to a beneficiary in respect of the beneficiary’s capital interest in the trust);
(a.3) where property (other than property described in any of subparagraphs 128.1(4)(b)(i) to (iii)) has been transferred by a taxpayer after December 17, 1999 to the trust in circumstances to which subsection 73(1) applied, it is reasonable to conclude that the property was so transferred in anticipation that the taxpayer would subsequently cease to reside in Canada and the taxpayer subsequently ceases to reside in Canada, the first day after that transfer during which the taxpayer ceases to reside in Canada (determined as if a day ends for the trust immediately after each time at which the taxpayer ceases to be resident in Canada);
(a.4) where the trust is a trust to which property was transferred by a taxpayer who is an individual (other than a trust) in circumstances in which section 73 or subsection 107.4(3) applied, the transfer did not result in a change in beneficial ownership of that property and no person (other than the taxpayer) or partnership has any absolute or contingent right as a beneficiary under the trust (determined with reference to subsection (1.1)), the day on which the death of the taxpayer occurs;
(5) Subparagraph 104(4)(b)(iii) of the Act is replaced by the following:
(iii) where applicable, the day determined under paragraph (a), (a.1) or (a.4) as those paragraphs applied from time to time after 1971; and
(6) Paragraph 104(4)(c) of the Act is replaced by the following:
(c) the day that is 21 years after any day (other than a day determined under any of paragraphs (a) to (a.4)) that is, because of this subsection, a day on which the trust is deemed to have disposed of each such property.
(7) The portion of subsection 104(5) of the Act before paragraph (a) is replaced by the following:
Marginal note:Depreciable property
(5) Every trust is, at the end of each day determined under subsection (4) in respect of the trust, deemed to have disposed of each property of the trust (other than exempt property) that was a depreciable property of a prescribed class of the trust for proceeds equal to its fair market value at the end of that day and to have reacquired the property immediately after that day at a capital cost (in this subsection referred to as the “deemed capital cost”) equal to that fair market value, except that
(8) The portion of subsection 104(5.2) of the Act before paragraph (b) is replaced by the following:
Marginal note:Resource property
(5.2) Where at the end of a day determined under subsection (4) in respect of a trust, the trust owns a Canadian resource property (other than an exempt property) or a foreign resource property (other than an exempt property),
(a) for the purposes of determining the amounts under subsection 59(1), paragraphs 59(3.2)(c) and (c.1), subsections 66(4) and 66.2(1), the definition “cumulative Canadian development expense” in subsection 66.2(5), the definition “cumulative foreign resource expense” in subsection 66.21(1), subsection 66.4(1) and the definition “cumulative Canadian oil and gas property expense” in subsection 66.4(5), the trust is deemed
(i) to have a taxation year (in this subsection referred to as the “old taxation year”) that ended at the end of that day and a new taxation year that begins immediately after that day, and
(ii) to have disposed, immediately before the end of the old taxation year, of each of those properties for proceeds that became receivable at that time equal to its fair market value at that time and to have reacquired, at the beginning of the new taxation year, each such property for an amount equal to that fair market value; and
(9) Paragraph 104(5.2)(b) of the Act is amended by striking out the word “and” at the end of subparagraph (i) and by adding the following after subparagraph (i):
(i.1) include in computing its income for the particular taxation year the amount, if any, determined under paragraph 59(3.2)(c.1) in respect of the old taxation year and the amount so included is, for the purpose of determining the value of B in the definition “cumulative foreign resource expense” in subsection 66.21(1), deemed to have been included in computing its income for a preceding taxation year, and
(10) Subsection 104(5.3) of the Act is amended by adding the word “and” at the end of paragraph (b.1) and by replacing the portion of paragraph (c) before subparagraph (i) with the following:
(c) subsection 107.4(3) does not apply to a disposition by the trust during the period
(11) Subsection 104(5.3) of the Act is amended by striking out the word “and” at the end of paragraph (c) and by repealing paragraph (d).
(12) The portion of subsection 104(5.8) of the Act before paragraph (a) is replaced by the following:
Marginal note:Trust transfers
(5.8) Where capital property (other than excluded 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,
(13) The portion of subparagraph 104(5.8)(a)(i) of the Act before clause (A) is replaced by the following:
(i) subject to paragraphs (b) to (b.3), the first day (in this subsection referred to as the “disposition day”) that ends at or after the particular time that would, if this section were read without reference to paragraphs (4)(a.2) and (a.3), be determined in respect of the transferee trust is deemed to be the earliest of
(14) Clause 104(5.8)(a)(i)(C) of the Act is replaced by the following:
(C) the first day that ends at or after the particular time, where
(I) the transferor trust is a joint spousal or common-law partner trust, a post-1971 spousal or common-law partner trust or a trust described in the definition “pre-1972 spousal trust” in subsection 108(1), and
(II) the spouse or common-law partner referred to in paragraph (4)(a) or in the definition “pre-1972 spousal trust” in subsection 108(1) is alive at the particular time,
(C.1) the first day that ends at or after the particular time, where
(I) the transferor trust is an alter ego trust, a trust to which paragraph (4)(a.4) applies or a joint spousal or common-law partner trust, and
(II) the taxpayer referred to in paragraph (4)(a) or (a.4), as the case may be, is alive at the particular time, and
(15) Paragraph 104(5.8)(b) of the Act is replaced by the following:
(b) paragraph (a) does not apply in respect of the transfer where
(i) the transferor trust is a post-1971 spousal or common-law partner trust or a trust described in the definition “pre-1972 spousal trust” in subsection 108(1),
(ii) the spouse or common-law partner referred to in paragraph (4)(a) or in the definition “pre-1972 spousal trust” in subsection 108(1) is alive at the particular time, and
(iii) the transferee trust is a post-1971 spousal or common-law partner trust or a trust described in the definition “pre-1972 spousal trust” in subsection 108(1);
(b.1) paragraph (a) does not apply in respect of the transfer where
(i) the transferor trust is an alter ego trust,
(ii) the taxpayer referred to in paragraph (4)(a) is alive at the particular time, and
(iii) the transferee trust is an alter ego trust;
(b.2) paragraph (a) does not apply in respect of the transfer where
(i) the transferor trust is a joint spousal or common-law partner trust,
(ii) either the taxpayer referred to in paragraph (4)(a), or the spouse or common-law partner referred to in that paragraph, is alive at the particular time, and
(iii) the transferee trust is a joint spousal or common-law partner trust;
(b.3) paragraph (a) does not apply in respect of the transfer where
(i) the transferor trust is a trust to which paragraph (4)(a.4) applies,
(ii) the taxpayer referred to in paragraph (4)(a.4) is alive at the particular time, and
(iii) the transferee trust is a trust to which paragraph (4)(a.4) applies; and
(16) Subsection 104(6) of the Act is amended by striking out the word “and” at the end of paragraph (a.2) and by adding the following after paragraph (a.2):
(a.3) in the case of 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, such part of its income for the year as became payable in the year to a beneficiary; and
(17) Clauses 104(6)(b)(ii)(A) and (B) of the Act are replaced by the following:
(A) is a post-1971 spousal or common-law partner trust that was created after December 20, 1991, or
(B) would be a post-1971 spousal or common-law partner trust if the reference in paragraph (4)(a) to “at the time it was created” were read as “on December 20, 1991”,
(18) Paragraph 104(6)(b) of the Act is amended by striking out the word “and” at the end of subparagraph (ii) and by replacing subparagraph (iii) with the following:
(ii.1) where the trust is an alter ego trust or a joint spousal or common-law partner trust and the death or later death, as the case may be, referred to in subparagraph (4)(a)(iv) has not occurred before the end of the year, such part of the amount that, but for this subsection and subsections (12), 12(10.2) and 107(4), would be its income as became payable in the year to a beneficiary (other than a taxpayer, spouse or common-law partner referred to in clause (4)(a)(iv)(A), (B) or (C)) or was included under subsection 105(2) in computing the income of a beneficiary (other than such a taxpayer, spouse or common-law partner), and
(iii) where the trust is an alter ego trust, a joint spousal or common-law partner trust, a trust to which paragraph (4)(a.4) applies or a post-1971 spousal or common-law partner trust and the death or the later death, as the case may be, referred to in paragraph (4)(a) or (a.4) in respect of the trust occurred on a day in the year, the amount, if any, by which
(A) the maximum amount that would be deductible under this subsection in computing the trust’s income for the year if this subsection were read without reference to this subparagraph
exceeds the total of
(B) the amount that, but for this subsection and subsections (12), 12(10.2) and 107(4), would be its income that became payable in the year to the taxpayer, spouse or common-law partner referred to in subparagraph (4)(a)(iii), clause (4)(a)(iv)(A), (B) or (C) or paragraph (4)(a.4), as the case may be, and
(C) the amount that would be the trust’s income for the year if that income were computed without reference to this subsection and subsection (12) and as if the year began immediately after the end of the day.
(19) Subsection 104(13) of the Act is replaced by the following:
Marginal note:Income of beneficiary
(13) There shall be included in computing the income for a particular taxation year of a beneficiary under a trust such of the following amounts as are applicable:
(a) in the case of a trust (other than a trust referred to in paragraph (a) of the definition “trust” in subsection 108(1)), such part of the amount that, but for subsections (6) and (12), would be the trust’s income for the trust’s taxation year that ended in the particular year as became payable in the trust’s year to the beneficiary; and
(b) in the case of a trust governed by an employee benefit plan to which the beneficiary has contributed as an employer, such part of the amount that, but for subsections (6) and (12), would be the trust’s income for the trust’s taxation year that ended in the particular year as was paid in the trust’s year to the beneficiary.
(20) Paragraphs 104(15)(a) and (b) of the Act are replaced by the following:
(a) where the trust is an alter ego trust, a joint spousal or common-law partner trust, a post-1971 spousal or common-law partner trust or a trust described in the definition “pre-1972 spousal trust” in subsection 108(1) at the end of the year and a beneficiary, referred to in paragraph (4)(a) or in that definition, is alive at the end of the year, an amount equal to
(i) if the preferred beneficiary is a beneficiary so referred to, the trust’s accumulating income for the year, and
(ii) in any other case, nil;
(b) where paragraph (a) does not apply and the preferred beneficiary’s interest in the trust is not solely contingent on the death of another beneficiary who has a capital interest in the trust and who does not have an income interest in the trust, the trust’s accumulating income for the year; and
(21) The portion of subsection 104(19) of the Act after paragraph (b) is replaced by the following:
is, if so designated by the trust in respect of the beneficiary in its return of income for the year, deemed, for the purposes of paragraphs 82(1)(b) and 107(1)(c) and (d) and section 112, not to have been received by the trust, and for the purposes of this Act (other than Part XIII), to be a taxable dividend on the share received by the beneficiary in the particular year from the corporation.
(22) The portion of subsection 104(21.2) of the Act before paragraph (a) is replaced by the following:
Marginal note:Beneficiaries’ taxable capital gain
(21.2) Where, for the purposes of subsection (21), a personal trust or a trust referred to in subsection 7(2) designates an amount in respect of a beneficiary in respect of its net taxable capital gains for a taxation year (in this subsection referred to as the “designation year”),
(23) Section 104 of the Act is amended by adding the following after subsection (21.3):
Marginal note:Deemed gains
(21.4) Where an amount is designated in respect of a beneficiary by a trust for a particular taxation year of the trust that includes February 28, 2000 or October 17, 2000 and that amount is, because of subsection (21), deemed to be a taxable capital gain of the beneficiary from the disposition of capital property for the taxation year of the beneficiary in which the particular taxation year of the trust ends (in this subsection referred to as the “allocated gain”),
(a) the beneficiary is deemed to have realized capital gains (in this subsection referred to as the “deemed gains”) from the disposition of capital property in the beneficiary’s taxation year in which the particular taxation year ends equal to the amount, if any, by which
(i) the amount determined when the amount of the allocated gain is divided by the fraction in paragraph 38(a) that applies to the trust for the particular taxation year
exceeds
(ii) the amount claimed by the beneficiary not exceeding the beneficiary’s exempt capital gains balance for the year in respect of the trust;
(b) notwithstanding subsection (21) and except as a consequence of the application of paragraph (a), the amount of the allocated gain shall not be included in computing the beneficiary’s income for the beneficiary’s taxation year in which the particular taxation year ends;
(c) the trust shall disclose to the beneficiary in prescribed form the portion of the deemed gains that are in respect of capital gains realized on dispositions of property that occurred before February 28, 2000, after February 27, 2000 and before October 18, 2000, and after October 17, 2000 and, if it does not do so, the deemed gains are deemed to be in respect of capital gains realized on dispositions of property that occurred before February 28, 2000;
(d) where a trust so elects under this paragraph in its return of income for the year,
(i) the portion of the deemed gains that are in respect of capital gains from dispositions of property that occurred before February 28, 2000 is deemed to be that proportion of the deemed gains that the number of days that are in the particular year and before February 28, 2000 is of the number of days that are in the particular year,
(ii) the portion of the deemed gains that are in respect of capital gains from dispositions of property that occurred in the year and in the period that began at the beginning of February 28, 2000 and ended at the end of October 17, 2000, is deemed to be that proportion of the deemed gains that the number of days that are in the year and in that period is of the number of days that are in the particular year, and
(iii) the portion of the deemed gains that are in respect of capital gains from dispositions of property that occurred in the year and in the period that begins at the beginning of October 18, 2000 and ends at the end of the particular year, is deemed to be that proportion of the deemed gains that the number of days that are in the year and in that period is of the number of days that are in the particular year; and
(e) no amount may be claimed by the beneficiary under subsection 39.1(3) in respect of the allocated gain.
Marginal note:Deemed gains
(21.5) Where no amount is designated by a trust under subsection (21) in respect of its net taxable capital gains for a taxation year that includes February 28, 2000 or October 17, 2000, the trust has net capital gains or net capital losses from the disposition of property in the year and the trust so elects under this subsection in its return of income for the year,
(a) the portion of the net capital gains or net capital losses that are in respect of capital gains and losses from dispositions of property that occurred before February 28, 2000 is deemed to be that proportion of the net capital gains or net capital losses, as the case may be, that the number of days that are in the year and before February 28, 2000 is of the number of days that are in the year,
(b) the portion of the net capital gains or net capital losses that are in respect of capital gains and losses from dispositions of property that occurred in the year and in the period that began at the beginning of February 28, 2000 and ended at the end of October 17, 2000, is deemed to be that proportion of the net capital gains or net capital losses, as the case may be, that the number of days that are in the year and in that period is of the number of days that are in the year, and
(c) the portion of the net capital gains or net capital losses that are in respect of capital gains and losses from dispositions of property that occurred in the year and in the period that began at the beginning of October 18, 2000 and ended at the end of the year, is deemed to be that proportion of the net capital gains or net capital losses, as the case may be, that the number of days that are in the year and in that period is of the number of days that are in the year,
and, for the purpose of this subsection,
(d) the net capital gains of a trust from dispositions of property in a year is the amount, if any, by which the trust’s capital gains from dispositions of property in the year exceeds the trust’s capital losses from dispositions of property in the year, and
(e) the net capital losses of a trust from dispositions of property in a year is the amount, if any, by which the trust’s capital losses from dispositions of property in the year exceeds the trust’s capital gains from dispositions of property in the year.
Marginal note:Deemed gains — subsection (21.4) applies
(21.6) Where a taxpayer is deemed by subsection (21.4) to have realized capital gains from the disposition of capital property in a taxation year of the taxpayer in respect of dispositions of property by a trust of which the taxpayer is a beneficiary,
(a) if the deemed gains are in respect of capital gains of the trust from dispositions of property before February 28, 2000 and the taxation year of the taxpayer includes February 27, 2000, the deemed gains are deemed to be a capital gain of the taxpayer from the disposition by the taxpayer of capital property in the taxpayer’s taxation year and before February 28, 2000;
(b) if the deemed gains are in respect of capital gains of the trust from dispositions of property before February 28, 2000 and the taxation year of the taxpayer began after February 27, 2000 and ended before October 18, 2000, 9/8 of the deemed gains is deemed to be a capital gain of the taxpayer from the disposition by the taxpayer of capital property in the taxpayer’s taxation year;
(c) if the deemed gains are in respect of capital gains of the trust from dispositions of property before February 28, 2000 and the taxation year of the taxpayer began after February 27, 2000 and ended after October 17, 2000, 9/8 of the deemed gains is deemed to be a capital gain of the taxpayer from the disposition by the taxpayer of capital property in the taxpayer’s taxation year and before October 18, 2000;
(d) if the deemed gains are in respect of capital gains of the trust from dispositions of property before February 28, 2000 and the taxation year of the taxpayer began after October 17, 2000, 3/2 of the deemed gains is deemed to be a capital gain of the taxpayer from the disposition by the taxpayer of capital property in the taxpayer’s taxation year;
(e) if the deemed gains are in respect of capital gains of the trust from dispositions of property after February 27, 2000 and before October 18, 2000, and the taxation year of the taxpayer began after October 17, 2000, 4/3 of the deemed gains is deemed to be a capital gain of the taxpayer from the disposition by the taxpayer of capital property in the taxpayer’s taxation year;
(f) if the deemed gains are in respect of capital gains of the trust from dispositions of property after February 27, 2000 and before October 18, 2000 and the taxation year of the taxpayer includes February 28, 2000 and October 17, 2000, the deemed gains are deemed to be a capital gain of the taxpayer from the disposition by the taxpayer of capital property in the taxpayer’s taxation year and in the period that began after February 27, 2000 and ended before October 18, 2000;
(g) if the deemed gains are in respect of capital gains of the trust from dispositions of property after February 27, 2000 and before October 17, 2000 and the taxation year of the taxpayer began after February 27, 2000 and ended before October 17, 2000, the deemed gains are deemed to be a capital gain of the taxpayer from the disposition by the taxpayer of capital property in the taxpayer’s taxation year; and
(h) in any other case, the deemed gains are deemed to be a capital gain of the taxpayer from the disposition of capital property by the taxpayer in the taxpayer’s taxation year and after October 17, 2000.
Marginal note:Deemed gains — subsection (21.4) does not apply
(21.7) Where an amount is designated under subsection (21) in respect of a beneficiary by a trust for a particular taxation year of the trust that ends in a taxation year of the beneficiary that includes February 28, 2000 or October 17, 2000 and subsection (21.4) does not apply in respect of the designated amount,
(a) notwithstanding subsection (21) and except as a consequence of the application of paragraph (b), the designated amount shall not be included in computing the beneficiary’s income;
(b) the beneficiary is deemed to have a capital gain from the disposition by the beneficiary of capital property on the day on which the particular taxation year ends equal to the amount, if any, by which
(i) the amount determined by dividing the designated amount by the fraction in paragraph 38(a) that applies to the trust for the particular taxation year
exceeds
(ii) the amount claimed by the beneficiary, which amount may not be greater than the beneficiary’s exempt capital gains balance for the year in respect of the trust; and
(c) no amount may be claimed under subsection 39.1(3) by the beneficiary in respect of the designated amount.
(24) Subsection (1) applies to the 1998 and subsequent taxation years except that, in connection with transfers of property that occur before December 24, 1998, subsection 104(1) of the Act, as enacted by subsection (1), shall be read as follows:
104. (1) In this Act, a reference to a trust or estate (in this subdivision referred to as a “trust”) shall, unless the context otherwise requires, be read to include a reference to the trustee, executor, administrator, liquidator of the succession, heir or other legal representative having ownership or control of the trust property.
(25) Subsection (2) applies
(a) to days after December 23, 1998 that are determined in respect of a trust under subsection 104(4) of the Act, as enacted by this section; and
(b) for the purpose of determining the cost amount to a trust after December 23, 1998 of property, to days after 1992 that are determined in respect of the trust under subsection 104(4) of the Act, as enacted by this section.
(26) Subsections (3), (6) and (17) to (19) apply to the 2000 and subsequent taxation years except that, with regard to a trust created by a taxpayer at a particular time in 2000 for the benefit of another individual,
(a) subparagraph 104(4)(a)(iii) of the Act, as enacted by subsection (3), shall be read without reference to the words “or common-law partner” and “or common-law partner’s”; and
(b) subparagraph 104(4)(a)(iv) of the Act, as enacted by subsection (3), shall be read without reference to clause (C),
unless, because of an election made under section 144 of the Modernization of Benefits and Obligations Act, sections 130 to 142 of that Act applied at the particular time to the taxpayer and the other individual.
(27) Paragraphs 104(4)(a.2) and (a.3) of the Act, as enacted by subsection (4), apply to days after December 17, 1999 that are determined in respect of the trust under subsection 104(4) of the Act, as enacted by this section.
(28) Paragraph 104(4)(a.4) of the Act, as enacted by subsection (4), and subsection (5) apply to the 2000 and subsequent taxation years, and, where a trust elects in writing and files the election with the Minister of National Revenue on or before March 31, 2001 (or at any later time that is acceptable to the Minister), both of those provisions apply after December 23, 1998.
(29) Subsections (7) and (8) apply to days after December 23, 1998 that are determined under subsection 104(4) of the Act, as enacted by this section, except that in applying paragraph 104(5.2)(a) of the Act, as enacted by subsection (8), to days that are in taxation years that begin before 2001 and that are determined under subsection 104(4) of the Act, that paragraph shall be read without the references to paragraph 59(3.2)(c.1) of the Act and the definition “cumulative foreign resource expense” in subsection 66.21(1) of the Act.
(30) Subsection (9) applies to taxation years that begin after 2000.
(31) Subsections (10) and (11) apply to transfers made after December 23, 1998.
(32) Subsection (12) applies to transfers made after February 11, 1991 except that, for transfers made before December 24, 1998, the portion of subsection 104(5.8) of the Act before paragraph (a), as enacted by subsection (12), shall be read as follows:
(5.8) Where capital property (other than excluded 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 paragraph (e) of the definition “disposition” in section 54 or subsection 107(2) applies and the transferee trust is not described in paragraph (g) of the definition “trust” in subsection 108(1),
(33) Subsection (13) applies to transfers made after December 17, 1999.
(34) Subsections (14) and (15) apply to transfers made after 1999.
(35) Subsection (16) applies to the 1998 and subsequent taxation years.
(36) Subsection (20) applies to the 2000 and subsequent taxation years.
(37) Subsection (21) applies to taxation years that end after 2000.
(38) Subsection (22) applies to taxation years, of trusts, that begin after February 22, 1994.
(39) Subsection (23) applies to taxation years that end after February 27, 2000.
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