Economic Action Plan 2013 Act, No. 2 (S.C. 2013, c. 40)

• (ii) all amounts each of which is the proceeds of a life insurance policy (other than an LIA policy) of which the corporation was not a beneficiary on or before June 28, 1982 received by the corporation in the period and after May 23, 1985 in consequence of the death of any person

exceeds the total of all amounts each of which is

• (iii) the adjusted cost basis (within the meaning assigned by subsection 148(9)) of a policy referred to in subparagraph (i) or (ii) to the corporation immediately before the death, or

• (iv) if the policy is a 10/8 policy immediately before the death and the death occurs after 2013, the amount outstanding, immediately before the death, of the borrowing that is described in subparagraph (a)(i) of the definition “10/8 policy” in subsection 248(1) in respect of the policy,

• (vi) a payment made before 2002 to a trust, to a corporation controlled by a trust or to a partnership of which a trust is a majority-interest partner in repayment of or otherwise in respect of a loan made by a trust, corporation or partnership to the transferor, or

• (vii) a payment made after 2001 to a trust, to a corporation controlled by the trust or to a partnership of which the trust is a majority-interest partner, in repayment of or otherwise in respect of a particular loan made by the trust, corporation or partnership to the transferor and either

• (ii) would be a controlled foreign affiliate of a partnership, of which the particular person is a majority-interest partner, if the partnership were a person resident in Canada at that time;

• (c) a person, or a partnership of which the particular person is a majority-interest partner, for which it is reasonable to conclude that the benefit referred to in subparagraph (8)(a)(iv) was conferred

• (d) a corporation in which the particular person, or partnership of which the particular person is a majority-interest partner, is a shareholder if

• (b) subsections (8.1) and (8.2), paragraph (14)(a), subsections 70(6) and 73(1), the definition “Canadian partnership” in subsection 102(1), paragraph 107.4(1)(c) and paragraph (a) of the definition “mutual fund trust” in subsection 132(6);

• (h) determining whether subsection 75(2) applies.

• Marginal note:Application of subsection (8.2)

  (8.1) Subsection (8.2) applies at any time to a particular person, and to a particular property, in respect of a non-resident trust, if at that time

  • (a) the particular person is resident in Canada; and

  • (b) the trust holds the particular property on condition that the particular property or property substituted for the particular property

    • (i) may

      • (A) revert to the particular person, or

      • (B) pass to one or more persons or partnerships to be determined by the particular person, or

    • (ii) shall not be disposed of by the trust during the existence of the particular person, except with the particular person’s consent or in accordance with the particular person’s direction.

• Marginal note:Deemed transfer of restricted property

  (8.2) If this subsection applies at any time to a particular person, and to a particular property, in respect of a non-resident trust, then in applying this section in respect of the trust for a taxation year of the trust that includes that time

  • (a) every transfer or loan made at or before that time by the particular person (or by a trust or partnership of which the particular person was a beneficiary or member, as the case may be) of the particular property, of another property for which the particular property is a substitute, or of property from which the particular property derives, or the other property derived, its value in whole or in part, directly or indirectly, is deemed to be a transfer or loan, as the case may be, by the particular person

    • (i) that is not an arm’s length transfer, and

    • (ii) that is, for the purposes of paragraph (2)(c) and subsection (9), a transfer or loan of restricted property; and

  • (b) paragraph (2)(c) is to be read without reference to subparagraph (2)(c)(iii) in its application to each transfer and loan described in paragraph (a).

• Marginal note:Members deemed carrying on business

  (1.6) If a partnership carries on a business in Canada at any time, each taxpayer who is deemed by paragraph (1.1)(a) to be a member of the partnership at that time is deemed to carry on the business in Canada at that time for the purposes of subsection 2(3), sections 34.1 and 150 and (subject to subsection 34.2(18)) section 34.2.

• (b) subsection 75(2) was applicable (determined without its reference to “while the person is resident in Canada” and as if subsection 75(3) as it read before March 21, 2013 were read without reference to its paragraph (c.2)), or subsection 94(8.2) was applicable (determined without reference to paragraph 94(8.1)(a)), at a particular time in respect of any property of

• Marginal note:Ceasing to be qualifying environmental trust

  (3) If at any time a trust ceases to be a qualifying environmental trust,

  • (a) for the purposes of subsections 111(5.5) and 149(10), the trust is deemed to cease at that time to be exempt from tax under this Part on its taxable income;

  • (b) each beneficiary under the trust immediately before that time is deemed to receive at that time from the trust an amount equal to the percentage of the fair market value of the properties of the trust immediately after that time that can reasonably be considered to be the beneficiary’s interest in the trust; and

  • (c) each beneficiary under the trust is deemed to acquire immediately after that time an interest in the trust at a cost equal to the amount deemed by paragraph (b) to be received by the beneficiary from the trust.

• Marginal note:Reserve limit

  (31) If an amount is included in an individual’s income for a particular taxation year because of subparagraph 40(1)(a)(ii) in respect of a disposition of property in a preceding taxation year that is qualified farm property, qualified fishing property or a qualified small business corporation share, the total of all amounts deductible by the individual for the particular year under this section is reduced by the amount, if any, determined by the formula

  A – B

  where

  A 

  is the total of all amounts each of which is an amount deductible under this section by the individual for the particular year or a preceding taxation year, computed without reference to this subsection; and

  B 

  is the total of all amounts each of which is an amount that would be deductible under this section by the individual for the particular year or a preceding taxation year if the individual had not for any preceding taxation year claimed a reserve under subparagraph 40(1)(a)(iii) and had claimed, for each taxation year ending before the particular year, the amount that would have been deductible under this section.

• Marginal note:Loss restriction event  —  capital losses

  (4) Notwithstanding subsection (1), and subject to subsection (5.5), if at any time (in this subsection referred to as “that time”) a taxpayer is subject to a loss restriction event,

  • (a) no amount in respect of a net capital loss for a taxation year that ended before that time is deductible in computing the taxpayer’s taxable income for a taxation year that ends after that time;

  • (b) no amount in respect of a net capital loss for a taxation year that ends after that time is deductible in computing the taxpayer’s taxable income for a taxation year that ends before that time;

  • (c) in computing the adjusted cost base to the taxpayer at and after that time of each capital property, other than a depreciable property, of the taxpayer immediately before that time, there is to be deducted the amount, if any, by which the adjusted cost base to the taxpayer of the property immediately before that time exceeds its fair market value immediately before that time;

  • (d) each amount required by paragraph (c) to be deducted in computing the adjusted cost base to the taxpayer of a property is deemed to be a capital loss of the taxpayer for the taxation year that ended immediately before that time from the disposition of the property;

  • (e) if the taxpayer designates  —  in its return of income under this Part for the taxation year that ended immediately before that time or in a prescribed form filed with the Minister on or before the day that is 90 days after the day on which a notice of assessment of tax payable for the year or notification that no tax is payable for the year is sent to the taxpayer  —  a property that was a capital property of the taxpayer immediately before that time (other than a property in respect of which an amount would, but for this paragraph, be required by paragraph (c) to be deducted in computing its adjusted cost base to the taxpayer or a depreciable property of a prescribed class to which, but for this paragraph, subsection (5.1) would apply),

    • (i) the taxpayer is deemed to have disposed of the property at the time that is immediately before the time that is immediately before that time for proceeds of disposition equal to the lesser of

      • (A) the fair market value of the property immediately before that time, and

      • (B) the greater of the adjusted cost base to the taxpayer of the property immediately before the disposition and such amount as is designated by the taxpayer in respect of the property,

    • (ii) subject to subparagraph (iii), the taxpayer is deemed to have reacquired the property at that time at a cost equal to those proceeds of disposition, and

    • (iii) if the property is depreciable property of the taxpayer the capital cost of which to the taxpayer immediately before the disposition exceeds those proceeds of disposition, for the purposes of sections 13 and 20 and any regulations made for the purposes of paragraph 20(1)(a),

      • (A) the capital cost of the property to the taxpayer at that time is deemed to be the amount that was its capital cost immediately before the disposition, and

      • (B) the excess is deemed to have been allowed to the taxpayer in respect of the property under regulations made for the purposes of paragraph 20(1)(a) in computing the taxpayer’s income for taxation years that ended before that time; and

  • (f) for the purposes of the definition “capital dividend account” in subsection 89(1), each amount that because of paragraph (d) or (e) is a capital loss or gain of the taxpayer from a disposition of a property for the taxation year that ended immediately before that time is deemed to be a capital loss or gain, as the case may be, of the taxpayer from the disposition of the property immediately before the time that a capital property of the taxpayer in respect of which paragraph (e) would be applicable would be deemed by that paragraph to have been disposed of by the taxpayer.

• Marginal note:Loss restriction event  —  non-capital losses and farm losses

  (5) If at any time a taxpayer is subject to a loss restriction event,

  • (a) no amount in respect of the taxpayer’s non-capital loss or farm loss for a taxation year that ended before that time is deductible by the taxpayer for a taxation year that ends after that time, except that the portion of the taxpayer’s non-capital loss or farm loss, as the case may be, for a taxation year that ended before that time as may reasonably be regarded as the taxpayer’s loss from carrying on a business and, if a business was carried on by the taxpayer in that year, the portion of the non-capital loss as may reasonably be regarded as being in respect of an amount deductible under paragraph 110(1)(k) in computing the taxpayer’s taxable income for that year is deductible by the taxpayer for a particular taxation year that ends after that time

    • (i) only if that business was carried on by the taxpayer for profit or with a reasonable expectation of profit throughout the particular year, and

    • (ii) only to the extent of the total of the taxpayer’s income for the particular year from

      • (A) that business, and

      • (B) if properties were sold, leased, rented or developed or services rendered in the course of carrying on that business before that time, 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

  • (b) no amount in respect of the taxpayer’s non-capital loss or farm loss for a taxation year that ends after that time is deductible by the taxpayer for a taxation year that ended before that time, except that the portion of the taxpayer’s non-capital loss or farm loss, as the case may be, for a taxation year that ended after that time as may reasonably be regarded as the taxpayer’s loss from carrying on a business and, if a business was carried on by the taxpayer in that year, the portion of the non-capital loss as may reasonably be regarded as being in respect of an amount deductible under paragraph 110(1)(k) in computing the taxpayer’s taxable income for that year is deductible by the taxpayer for a particular taxation year that ends before that time

    • (i) only if throughout the taxation year and in the particular year that business was carried on by the taxpayer for profit or with a reasonable expectation of profit, and

    • (ii) only to the extent of the taxpayer’s income for the particular year from

      • (A) that business, and

      • (B) if properties were sold, leased, rented or developed or services rendered in the course of carrying on that business before that time, 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.

• Marginal note:Loss restriction event  —  UCC computation

  (5.1) Subject to subsection (5.5), if at any time a taxpayer is subject to a loss restriction event and, if this Act were read without reference to subsection 13(24), the undepreciated capital cost to the taxpayer of depreciable property of a prescribed class immediately before that time would have exceeded the total of

  • (a) the fair market value of all the property of that class immediately before that time, and

  • (b) the amount in respect of property of that class otherwise allowed under regulations made under paragraph 20(1)(a) or deductible under subsection 20(16) in computing the taxpayer’s income for the taxation year that ended immediately before that time,

  the excess is to be deducted in computing the taxpayer’s income for the taxation year that ended immediately before that time and is deemed to have been allowed in respect of property of that class under regulations made under paragraph 20(1)(a).

• Marginal note:Loss restriction event  —  CEC computation

  (5.2) Subject to subsection (5.5), if at any time a taxpayer is subject to a loss restriction event and immediately before that time the taxpayer’s cumulative eligible capital in respect of a business exceeds the total of

  • (a) 3/4 of the fair market value of the eligible capital property in respect of the business, and

  • (b) the amount otherwise deducted under paragraph 20(1)(b) in computing the taxpayer’s income from the business for the taxation year that ended immediately before that time,

  the excess is to be deducted under paragraph 20(1)(b) in computing the taxpayer’s income for the taxation year that ended immediately before that time.

• Marginal note:Loss restriction event  —  doubtful debts and bad debts

  (5.3) Subject to subsection (5.5), if at any time a taxpayer is subject to a loss restriction event,

  • (a) no amount may be deducted under paragraph 20(1)(l) in computing the taxpayer’s income for the taxation year that ended immediately before that time; and

  • (b) in respect of each debt owing to the taxpayer immediately before that time

    • (i) the amount that is the greatest amount that would, but for this subsection and subsection 26(2) of this Act and subsection 33(1) of the Income Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, have been deductible under paragraph 20(1)(l)

      • (A) is deemed to be a separate debt, and

      • (B) notwithstanding any other provision of this Act, is to be deducted as a bad debt under paragraph 20(1)(p) in computing the taxpayer’s income for its taxation year that ended immediately before that time, and

    • (ii) the amount by which the debt exceeds that separate debt is deemed to be a separate debt incurred at the same time and under the same circumstances as the debt was incurred.

• Marginal note:Loss restriction event  —  special rules

  (5.5) If at any time a taxpayer is subject to a loss restriction event,

  • (a) paragraphs (4)(c) to (f) and subsections (5.1) to (5.3) do not apply to the taxpayer in respect of the loss restriction event if at that time the taxpayer becomes or ceases to be exempt from tax under this Part on its taxable income; and

  • (b) if it can reasonably be considered that the main reason that the taxpayer is subject to the loss restriction event is to cause paragraph (4)(d) or any of subsections (5.1) to (5.3) to apply with respect to the loss restriction event, the following do not apply with respect to the loss restriction event:

    • (i) that provision and paragraph (4)(e), and

    • (ii) if that provision is paragraph (4)(d), paragraph (4)(c).

• (b) the amount that would be the taxpayer’s non-capital loss for the year if the amount determined for D in the definition “non-capital loss” in this subsection were nil, and

• (c) if the taxpayer was subject to a loss restriction event before the end of the year and after the end of the taxpayer’s tenth preceding taxation year, nil, and

• Marginal note:Foreign currency debt on loss restriction event

  (12) For the purposes of subsection (4), if at any time a taxpayer owes a foreign currency debt in respect of which the taxpayer would have had, if the foreign currency debt had been repaid at that time, a capital loss or gain, the taxpayer is deemed to own at the time (in this subsection referred to as the “measurement time”) that is immediately before that time a property

  • (a) the adjusted cost base of which at the measurement time is the amount determined by the formula

    A + B – C

    where

    A 

    is the amount of principal owed by the taxpayer under the foreign currency debt at the measurement time, calculated, for greater certainty, using the exchange rate applicable at the measurement time,

    B 

    is the portion of any gain, previously recognized in respect of the foreign currency debt because of this section, that is reasonably attributable to the amount described in A, and

    C 

    is the portion of any capital loss previously recognized in respect of the foreign currency debt because of this section, that is reasonably attributable to the amount described in A; and

  • (b) the fair market value of which is the amount that would be the amount of the principal owed by the taxpayer under the foreign currency debt at the measurement time if that amount were calculated using the exchange rate applicable at the time of the original borrowing.