Budget Implementation Act, 2006, No. 2 (S.C. 2007, c. 2)
Full Document:
Assented to 2007-02-21
11. (1) Paragraph 73(3)(c) of the Act is replaced by the following:
(c) subsection 69(1) does not apply in determining the proceeds of disposition of the depreciable property, the land or the eligible capital property;
(2) Paragraph 73(4)(b) of the Act is replaced by the following:
(b) subsection 69(1) does not apply in determining the proceeds of disposition of the property; and
(3) Subsections 73(3) and (4) of the Act, as amended by subsections (1) and (2), respectively, are replaced by the following:
Marginal note:When subsection (3.1) applies
(3) Subsection (3.1) applies to a taxpayer and a child of the taxpayer in respect of property that has been transferred, at any time, by the taxpayer to the child, where
(a) the property was, immediately before the transfer, land in Canada or depreciable property in Canada of a prescribed class, of the taxpayer, or any eligible capital property in respect of a fishing or farming business carried on in Canada by the taxpayer;
(b) the child of the taxpayer was resident in Canada immediately before the transfer; and
(c) the property has been used principally in a fishing or farming business in which the taxpayer, the taxpayer’s spouse or common-law partner, a child of the taxpayer or a parent of the taxpayer was actively engaged on a regular and continuous basis (or in the case of property used in the operation of a woodlot, was engaged to the extent required by a prescribed forest management plan in respect of that woodlot).
Marginal note:Inter vivos transfer of farm or fishing property to child
(3.1) If, because of subsection (3), this subsection applies to the taxpayer and a child of the taxpayer in respect of a property transferred by the taxpayer to the child of the taxpayer, the following rules apply:
(a) where, immediately before the transfer, the property was depreciable property of a prescribed class, the taxpayer is deemed to have disposed of the property, at the time of the transfer, for proceeds of disposition equal to
(i) in any case to which neither subparagraph (ii) nor (iii) applies, the taxpayer’s proceeds of disposition otherwise determined,
(ii) the greater of the amounts referred to in clauses (A) and (B), if the taxpayer’s proceeds of disposition otherwise determined exceed the greater of
(A) the fair market value of the property immediately before the time of the transfer, and
(B) the lesser of
(I) the capital cost to the taxpayer of the property, and
(II) the amount, determined immediately before the time of the disposition of the property, that is that proportion of the undepreciated capital cost of property of that class to the taxpayer that the capital cost to the taxpayer of the property is of the capital cost to the taxpayer of all property of that class that had not, at or before that time, been disposed of, or
(iii) if the taxpayer’s proceeds of disposition otherwise determined are less than the lesser of the amounts referred to in clauses (ii)(A) and (B), the lesser of those amounts;
(b) where the property transferred was land, the taxpayer is deemed to have disposed of the property at the time of the transfer for proceeds of disposition equal to,
(i) in any case to which neither subparagraph (ii) nor (iii) applies, the taxpayer’s proceeds of disposition otherwise determined,
(ii) the greater of the amounts referred to in clauses (A) and (B), if the taxpayer’s proceeds of disposition otherwise determined exceed the greater of
(A) the fair market value of the land immediately before the time of the transfer, and
(B) the adjusted cost base to the taxpayer of the land immediately before the time of the transfer, or
(iii) if the taxpayer’s proceeds of disposition otherwise determined are less than the lesser of the amounts referred to in clauses (ii)(A) and (B), the lesser of those amounts;
(c) where, immediately before the transfer, the property was eligible capital property, the taxpayer is deemed to have disposed of the property, at the time of the transfer, for proceeds of disposition equal to,
(i) in any case to which neither subparagraph (ii) nor (iii) applies, the taxpayer’s proceeds of disposition otherwise determined,
(ii) the greater of the amounts referred to in clauses (A) and (B), if the taxpayer’s proceeds of disposition otherwise determined exceed the greater of
(A) the fair market value of the property immediately before the time of the transfer, and
(B) the amount determined by the formula
4/3 (A × B/C)
where
- A
- is the taxpayer’s cumulative eligible capital in respect of the business,
- B
- is the fair market value of the property immediately before the transfer, and
- C
- is the fair market value immediately before the transfer of all the taxpayer’s eligible capital property in respect of the business, or
(iii) if the taxpayer’s proceeds of disposition otherwise determined are less than the lesser of the amounts referred to in clauses (ii)(A) and (B), the lesser of those amounts;
(d) subsection 69(1) does not apply to the taxpayer and the child in respect of the property;
(e) the child is deemed to have acquired the property at a cost equal to the taxpayer’s proceeds of disposition in respect of the disposition of the property determined under
(i) where the property is depreciable property of the taxpayer, paragraph (a), and
(ii) where the property is land of the taxpayer, paragraph (b);
(f) if the property was, immediately before the transfer, an eligible capital property of the taxpayer in respect of a business, the child is deemed to have acquired
(i) where the child does not continue to carry on the business, a capital property, immediately after the transfer, at a cost equal to the taxpayer’s proceeds of disposition in respect of the disposition of the property determined under paragraph (c),
(ii) where the child continues to carry on the business, an eligible capital property and to have made an eligible capital expenditure at a cost equal to the total of
(A) the taxpayer’s proceeds of disposition referred to in paragraph (c), and
(B) 4/3 of the amount determined by the formula
(A × B/C) - D
where
- A
- is the amount, if any, determined for F in the definition “cumulative eligible capital” in subsection 14(5) in respect of the business immediately before the transfer,
- B
- is the fair market value of the property immediately before the transfer,
- C
- is the fair market value immediately before the transfer of all the taxpayer’s eligible capital property in respect of the business, and
- D
- is the amount, if any, included under paragraph 14(1)(a) in computing the taxpayer’s income as a result of the disposition, and
(iii) for the purpose of determining at any subsequent time the child’s cumulative eligible capital in respect of the business, an amount equal to ¾ of the amount determined under subparagraph (ii) is to be added to the amount otherwise determined for P in the definition “cumulative eligible capital” in subsection 14(5);
(g) for the purpose of determining, in respect of any disposition of the property, after the time of the transfer, the amount deemed to be the child’s taxable capital gain, and the amount to be included in computing the child’s income, there shall be added to the amount otherwise determined for Q in respect of the business in the definition “cumulative eligible capital” in subsection 14(5), the amount determined by the formula,
A × B/C
where
- A
- is the amount, if any, determined for Q in that definition in respect of the business immediately before the time of the transfer,
- B
- is the fair market value, immediately before that time, of the transferred property , and
- C
- is the fair market value immediately before that time of all the taxpayer’s eligible capital property in respect of the business; and
(h) where the property is depreciable property of a prescribed class of the taxpayer and the capital cost to the taxpayer of the property exceeds the cost to the child of the property, for the purposes of sections 13 and 20 and any regulations made under paragraph 20(1)(a),
(i) the capital cost to the child of the property is deemed to be the amount that was the capital cost to the taxpayer of the property immediately before the transfer, and
(ii) the excess is deemed to have been allowed to the child in respect of the property under regulations made under paragraph 20(1)(a) in computing income for taxation years that ended before the the child acquired the property.
Marginal note:When subsection (4.1) applies
(4) Subsection (4.1) applies to a taxpayer and a child of the taxpayer in respect of property that has been transferred, at any time, to the child if
(a) the child was resident in Canada immediately before the transfer; and
(b) the property was, immediately before the transfer, a share of the capital stock of a family fishing corporation of the taxpayer, a share of the capital stock of a family farm corporation of the taxpayer, an interest in a family fishing partnership of the taxpayer or an interest in a family farm partnership of the taxpayer (within the meaning assigned by subsection 70(10)).
Marginal note:Inter vivos transfer of family farm or fishing corporations and partnerships
(4.1) If, because of subsection (4), this subsection applies to the taxpayer and the taxpayer’s child in respect of the transfer of the property by the taxpayer to the child,
(a) subject to paragraph (c), where the property was, immediately before the transfer, a share of the capital stock of a family fishing corporation of the taxpayer, a share of the capital stock of a family farm corporation of the taxpayer, an interest in a family fishing partnership of the taxpayer or an interest in a family farm partnership of the taxpayer, the taxpayer is deemed to have disposed of the property at the time of the transfer for proceeds of disposition equal to,
(i) in any case to which neither subparagraph (ii) nor (iii) applies, the taxpayer’s proceeds of disposition otherwise determined,
(ii) the greater of the amounts referred to in clauses (A) and (B), if the taxpayer’s proceeds of disposition otherwise determined exceed the greater of
(A) the fair market value of the property immediately before the time of the transfer, and
(B) the adjusted cost base to the taxpayer of the property immediately before the time of the transfer, or
(iii) if the taxpayer’s proceeds of disposition otherwise determined are less than the lesser of the amounts referred to in clauses (ii)(A) and (B), the lesser of those amounts;
(b) subject to paragraph (c), where the property is, immediately before the transfer, a share of the capital stock of a family fishing corporation of the taxpayer, a share of the capital stock of a family farm corporation of the taxpayer, an interest in a family fishing partnership of the taxpayer or an interest in a family farm partnership of the taxpayer, the child is deemed to have acquired the property for an amount equal to the taxpayer’s proceeds of disposition in respect of the disposition of the property determined under paragraph (a);
(c) where the property is, immediately before the transfer, an interest in a family fishing partnership of the taxpayer, or an interest in a family farm partnership of the taxpayer (other than a partnership interest to which subsection 100(3) applies), the taxpayer receives no consideration in respect of the transfer of the property and the taxpayer elects, in the taxpayer’s return of income under this Part for the taxation year which includes the time of the transfer, to have this paragraph apply in respect of the transfer of the property,
(i) the taxpayer is, except for the purpose of paragraph 98(5)(g), deemed not to have disposed of the property at the time of the transfer,
(ii) the child is deemed to have acquired the property at the time of the transfer at a cost equal to the cost to the taxpayer of the interest immediately before the transfer, and
(iii) each amount required by subsection 53(1) or (2) to be added or deducted in computing the adjusted cost base to the taxpayer, immediately before the transfer, of the property is deemed to be an amount required by subsection 53(1) or (2) to be added or deducted in computing at any time at or after the time of the transfer, the adjusted cost base to the child of the property; and
(d) subsection 69(1) does not apply to the taxpayer and the child in respect of the property.
(4) Subsections (1) and (2) apply to dispositions that occur after December 20, 2002.
(5) Subsection (3) applies to a disposition, that occurs on or after May 2, 2006, of a property unless the disposition of the property was before 2007 and the taxpayer elects in writing in the taxpayer’s return of income for the taxation year in which the disposition occurred to have subsection 73(3) or 73(4) of the Act, as that subsection read on May 1, 2006, apply to the disposition of the property.
- Date modified: