Economic Action Plan 2013 Act, No. 2 (S.C. 2013, c. 40)
Full Document:
Assented to 2013-12-12
12. Subclause 20.01(2)(b)(i)(A)(II) of the English version of the Act is replaced by the following:
(II) a partnership of which the individual is a majority-interest partner, or
13. Subparagraph 28(1)(a)(ii) of the English version of the Act is replaced by the following:
(ii) were in payment of or on account of an amount that would, if the income from the business were not computed in accordance with the cash method, be included in computing income from the business for that or any other year,
14. (1) The portion of subsection 31(1) of the Act before paragraph (a) is replaced by the following:
Marginal note:Restricted farm loss
31. (1) If a taxpayer’s chief source of income for a taxation year is neither farming nor a combination of farming and some other source of income that is a subordinate source of income for the taxpayer, then for the purposes of sections 3 and 111 the taxpayer’s loss, if any, for the year from all farming businesses carried on by the taxpayer is deemed to be the total of
(2) Subparagraph 31(1)(a)(i) of the Act is replaced by the following:
(i) the amount by which the total of the taxpayer’s losses for the year, determined without reference to this section and before making any deduction under section 37, from all farming businesses carried on by the taxpayer exceeds the total of the taxpayer’s incomes for the year, so determined from all such businesses, and
(3) Clause 31(1)(a)(ii)(B) of the Act is replaced by the following:
(B) $15,000, and
(4) Subparagraph 31(1)(b)(i) of the Act is replaced by the following:
(i) the amount that would be determined under subparagraph (a)(i) if it were read without reference to “and before making any deduction under section 37”,
(5) Subsection 31(2) of the Act is replaced by the following:
Marginal note:Farming and manufacturing or processing
(2) Subsection (1) does not apply to a taxpayer for a taxation year if the taxpayer’s chief source of income for the year is a combination of farming and manufacturing or processing in Canada of goods for sale and all or substantially all output from all farming businesses carried on by the taxpayer is used in the manufacturing or processing.
(6) Subsections (1) to (5) apply to taxation years that end after March 20, 2013.
15. Subsections 34.1(4) to (7) of the Act are repealed.
16. (1) Subsection 34.2(4) of the Act is replaced by the following:
Marginal note:Treatment in following year
(4) If an amount was included in computing the income of a corporation in respect of a partnership for the immediately preceding taxation year under subsection (2) or (3),
(a) the portion of the amount that, because of subparagraph (5)(a)(i) or (ii), was income for that preceding year is deductible in computing the income of the corporation for the current taxation year; and
(b) the portion of the amount that, because of subparagraph (5)(a)(i) or (ii), was taxable capital gains for that preceding year is deemed to be an allowable capital loss of the corporation for the current taxation year from the disposition of property.
(2) Subparagraphs 34.2(5)(a)(i) to (v) of the Act are replaced by the following:
(i) an adjusted stub period accrual included under subsection (2) in respect of a partnership for the year is deemed to be income, and taxable capital gains from the disposition of property, having the same character and to be in the same proportions as any income and taxable capital gains that were allocated by the partnership to the corporation for all fiscal periods of the partnership ending in the year,
(ii) an amount included under subsection (3) in respect of a partnership for the year is deemed to be income, and taxable capital gains from the disposition of property, having the same character and to be in the same proportions as any income and taxable capital gains that were allocated by the partnership to the corporation for the particular period referred to in that subsection,
(iii) an amount, a portion of which is deductible or is an allowable capital loss under subsection (4) in respect of a partnership for the year, is deemed to have the same character and to be in the same proportions as the income and taxable capital gains included in the corporation’s income for the immediately preceding taxation year under subsection (2) or (3) in respect of the partnership,
(iv) an amount claimed as a reserve under subsection (11) in respect of a partnership for the year is deemed to have the same character and to be in the same proportions as the qualifying transitional income in respect of the partnership for the year, and
(v) an amount, a portion of which is included in income under paragraph (12)(a), or is deemed to be a taxable capital gain under paragraph (12)(b), in respect of a partnership for the year, is deemed to have the same character and to be in the same proportions as the amount claimed as a reserve under subsection (11) in respect of the partnership for the immediately preceding taxation year;
(3) Paragraph 34.2(5)(b) of the Act is replaced by the following:
(b) a corporation’s capital dividend account, as defined in subsection 89(1), is to be determined without reference to this section; and
(c) the reference in subparagraph 53(2)(c)(i.4) to an amount deducted under subsection (11) by a taxpayer includes an amount deemed to be an allowable capital loss under subparagraph (11)(b)(ii).
(4) Subsection 34.2(11) of the Act is replaced by the following:
Marginal note:Transitional reserve
(11) If a corporation has qualifying transitional income in respect of a partnership for a particular taxation year,
(a) the corporation may, in computing its income for the particular year, claim an amount, as a reserve, not exceeding the least of
(i) the specified percentage for the particular year of the corporation’s qualifying transitional income in respect of the partnership,
(ii) if, for the immediately preceding taxation year, an amount was claimed under this subsection in computing the corporation’s income in respect of the partnership, the amount that is the total of
(A) the amount included under subsection (12) in computing the corporation’s income for the particular year in respect of the partnership, and
(B) the amount by which the corporation’s qualifying transitional income in respect of the partnership is increased in the particular year because of the application of subsections (16) and (17), and
(iii) the amount determined by the formula
A – B
where
- A
- is the corporation’s income for the particular year computed before deducting or claiming any amount under this subsection in respect of the partnership or under section 61.3 and 61.4, and
- B
- is the total of all amounts each of which is an amount deductible by the corporation for the year under section 112 or 113 in respect of a dividend received by the corporation after December 20, 2012; and
(b) the portion of the amount claimed under paragraph (a) for the particular year that, because of subparagraph (5)(a)(iv), has
(i) a character other than capital is deductible in computing the income of the corporation for the particular year, and
(ii) the character of capital is deemed to be an allowable capital loss of the corporation for the particular year from the disposition of property.
(5) Subsection 34.2(12) of the Act is replaced by the following:
Marginal note:Inclusion of prior year reserve
(12) Subject to subsection (5), if a reserve was claimed by a corporation under subsection (11) in respect of a partnership for the immediately preceding taxation year,
(a) the portion of the reserve that was deducted under subparagraph (11)(b)(i) for that preceding year is to be included in computing the income of the corporation for the current taxation year; and
(b) the portion of the reserve that was deemed by subparagraph (11)(b)(ii) to be an allowable capital loss of the corporation for that preceding year is deemed to be a taxable capital gain of the corporation for the current taxation year from the disposition of property.
(6) The portion of subsection 34.2(13) of the Act that is before paragraph (a) is replaced by the following
Marginal note:No reserve
(13) No claim shall be made under subsection (11) in computing a corporation’s income for a taxation year in respect of a partnership
(7) The portion of subsection 34.2(14) of the Act that is before paragraph (a) is replaced by the following:
Marginal note:Deemed partner
(14) A corporation that cannot claim an amount under subsection (11) for a taxation year in respect of a partnership solely because it has disposed of its interest in the partnership is deemed for the purposes of paragraph (13)(a) to be a member of a partnership continuously until the end of the taxation year if
(8) The portion of subsection 34.2(16) of the Act that is before paragraph (a) is replaced by the following:
Marginal note:Qualifying transition income adjustment — conditions for application
(16) Subsection (17) applies for a particular taxation year of a corporation and for each subsequent taxation year for which the corporation may claim an amount under subsection (11) in respect of a partnership if the particular year is the first taxation year
(9) The description of C in paragraph 34.2(17)(b) of the Act is replaced by the following:
- C
- is nil,
(10) Subsections (1) to (9) apply to taxation years that end after March 22, 2011.
17. (1) Section 36 of the Act is repealed.
(2) Subsection (1) applies in respect of expenditures incurred in taxation years that begin after December 21, 2012.
18. (1) Paragraph 37(1)(h) of the Act is replaced by the following:
(h) if the taxpayer was subject to a loss restriction event before the end of the year, the amount determined for the year under subsection (6.1) with respect to the taxpayer.
(2) The portion of subsection 37(6.1) of the Act before paragraph (a) is replaced by the following:
Marginal note:Loss restriction event
(6.1) If a taxpayer was, at any time (in this subsection referred to as “that time”) before the end of a taxation year of the taxpayer, last subject to a loss restriction event, the amount determined for the purposes of paragraph (1)(h) for the year with respect to the taxpayer in respect of a business is the amount, if any, by which
(3) Clauses 37(6.1)(a)(i)(A) to (C) of the Act are replaced by the following:
(A) an expenditure described in paragraph (1)(a) or (c) that was made by the taxpayer before that time,
(B) the lesser of the amounts determined immediately before that time in respect of the taxpayer under subparagraphs (1)(b)(i) and (ii), as those paragraphs read on March 29, 2012, in respect of expenditures made, and property acquired, by the taxpayer before 2014, or
(C) an amount determined in respect of the taxpayer under paragraph (1)(c.1) for its taxation year that ended immediately before that time
(4) Subparagraphs 37(6.1)(a)(ii) and (iii) of the Act are replaced by the following:
(ii) the total of all amounts determined in respect of the taxpayer under paragraphs (1)(d) to (g) for its taxation year that ended immediately before that time, or
(iii) the amount deducted under subsection (1) in computing the taxpayer’s income for its taxation year that ended immediately before that time
(5) Subparagraphs 37(6.1)(b)(i) and (ii) of the Act are replaced by the following:
(i) if the business to which the amounts described in any of clauses (a)(i)(A) to (C) can reasonably be considered to have been related was carried on by the taxpayer for profit or with a reasonable expectation of profit throughout the year, the total of
(A) the taxpayer’s income for the year from the business before making any deduction under subsection (1), and
(B) if properties were sold, leased, rented or developed, or services were rendered, in the course of carrying on the business before that time, the taxpayer’s income for the year, before making any deduction under subsection (1), from any other business substantially all the income of which was derived from the sale, leasing, rental or development, as the case may be, of similar properties or the rendering of similar services, and
(ii) the total of all amounts each of which is an amount determined in respect of a preceding taxation year of the taxpayer that ended after that time equal to the lesser of
(A) the amount determined under subparagraph (i) with respect to the taxpayer in respect of the business for that preceding year, and
(B) the amount in respect of the business deducted under subsection (1) in computing the taxpayer’s income for that preceding year.
(6) The portion of paragraph 37(9.5)(b) of the English version of the Act before subparagraph (i) is replaced by the following:
(b) partnership of which a majority-interest partner is
(7) Subsections (1) to (5) are deemed to have come into force on March 21, 2013, except that, before January 1, 2014, clause 37(6.1)(a)(i)(B) of the Act, as enacted by subsection (3), is to be read as follows:
(B) the lesser of the amounts determined immediately before that time in respect of the taxpayer under subparagraphs (1)(b)(i) and (ii), as those paragraphs read on March 29, 2012, in respect of expenditures made, and property acquired, by the taxpayer before that time, or
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