C-63 1 42 64-65-66 Elizabeth II 2015-2016-2017

A second Act to implement certain provisions of the budget tabled in Parliament on March 22, 2017 and other measures

Budget Implementation Act, 2017, No. 2

Budget Implementation Act, 2017, No. 2 2017 12 14 33 2017 90858

RECOMMENDATION

Her Excellency the Governor General recommends to the House of Commons the appropriation of public revenue under the circumstances, in the manner and for the purposes set out in a measure entitled “ A second Act to implement certain provisions of the budget tabled in Parliament on March 22, 2017 and other measures ”.

SUMMARY

Part 1 implements certain income tax measures proposed in the March 22, 2017 budget by

(

a) removing the classification of the costs of drilling a discovery well as “Canadian exploration expenses”;

(

b) eliminating the ability for small oil and gas companies to reclassify up to $1 million of “Canadian development expenses” as “Canadian exploration expenses”;

(

c) revising the anti-avoidance rules for registered education savings plans and registered disability savings plans;

(

d) eliminating the use of billed-basis accounting by designated professionals;

(

e) providing enhanced tax treatment for eligible geothermal energy equipment;

(

f) extending the base erosion rules to foreign branches of Canadian insurers;

(

g) clarifying who has factual control of a corporation for income tax purposes;

(

h) introducing an election that would allow taxpayers to mark to market their eligible derivatives;

(

i) introducing a specific anti-avoidance rule that targets straddle transactions;

(

j) allowing tax-deferred mergers of switch corporations into multiple mutual fund trusts and allowing tax-deferred mergers of segregated funds; and

(

k) enhancing the protection of ecologically sensitive land donated to conservation charities and broadening the types of donations permitted.

It also implements other income tax measures by

(

a) closing loopholes surrounding the capital gains exemption on the sale of a principal residence;

(

b) providing additional authority for certain tax purposes to nurse practitioners;

(

c) ensuring that qualifying farmers and fishers selling to agricultural and fisheries cooperatives are eligible for the small business deduction;

(

d) extending the types of reverse takeover transactions to which the corporate acquisition of control rules apply;

(

e) improving the consistency of rules applicable for expenditures in respect of scientific research and experimental development;

(

f) ensuring that the taxable income of federal credit unions is allocated among provinces and territories using the same allocation formula as applicable to the taxable income of banks;

(

g) ensuring the appropriate application of Canada’s international tax rules; and

(

h) improving the accuracy and consistency of the income tax legislation and regulations.

Part 2 implements certain goods and services tax/harmonized sales tax (GST/HST) measures confirmed in the March 22, 2017 budget by

(

a) introducing clarifications and technical improvements to the GST/HST rules applicable to certain pension plans and financial institutions;

(

b) revising the GST/HST rules applicable to pension plans so that they apply to pension plans that use master trusts or master corporations;

(

c) revising and modernizing the GST/HST drop shipment rules to enhance the effectiveness of these rules and introduce technical improvements;

(

d) clarifying the application of the GST/HST to supplies of municipal transit services to accommodate the modern ways in which those services are provided and paid for; and

(

e) introducing housekeeping amendments to improve the accuracy and consistency of the GST/HST legislation.

It also implements a GST/HST measure announced on September 8, 2017 by revising the timing requirements for GST/HST rebate applications by public service bodies.

Part 3 amends the Excise Act to ensure that beer made from concentrate on the premises where it is consumed is taxed in a manner that is consistent with other beer products.

Part 4 amends the Federal-Provincial Fiscal Arrangements Act to allow the Minister of Finance on behalf of the Government of Canada, with the approval of the Governor in Council, to enter into coordinated cannabis taxation agreements with provincial governments. It also amends that Act to make related amendments.

Part 5 enacts and amends several Acts in order to implement various measures.

Division 1 of

Part 5 amends the Bretton Woods and Related Agreements Act to update and clarify certain powers of the Minister of Finance in relation to the Bretton Woods institutions.

Division 2 of

Part 5 enacts the Asian Infrastructure Investment Bank Agreement Act which provides the required authority for Canada to become a member of the Asian Infrastructure Investment Bank.

Division 3 of

Part 5 provides for the transfer from the Minister of Finance to the Minister of Foreign Affairs of the responsibility for three international development financing agreements entered into between Her Majesty in Right of Canada and the International Finance Corporation.

Division 4 of

Part 5 amends the Canada Deposit Insurance Corporation Act to clarify the treatment of, and protections for, eligible financial contracts in a bank resolution process. It also makes consequential amendments to the Payment Clearing and Settlement Act .

Division 5 of

Part 5 amends the Bank of Canada Act to specify that the Bank of Canada may make loans or advances to members of the Canadian Payments Association that are secured by real property or immovables situated in Canada and to allow such loans and advances to be secured by way of an assignment or transfer of a right, title or interest in real property or immovables situated in Canada. It also amends the Canada Deposit Insurance Corporation Act to specify that the Bank of Canada and the Canada Deposit Insurance Corporation are exempt from stays even where obligations are secured by real property or immovables.

Division 6 of

Part 5 amends the Payment Clearing and Settlement Act in order to expand and enhance the oversight powers of the Bank of Canada by further strengthening the Bank’s ability to identify and respond to risks to financial market infrastructures in a proactive and timely manner.

Division 7 of

Part 5 amends the Northern Pipeline Act to permit the Northern Pipeline Agency to annually recover from any company with a certificate of public convenience and necessity issued under that Act an amount equal to the costs incurred by that Agency with respect to that company.

Division 8 of

Part 5 amends the Canada Labour Code in order to, among other things,

(

a) provide employees with a right to request flexible work arrangements from their employers;

(

b) provide employees with a family responsibility leave for a maximum of three days, a leave for victims of family violence for a maximum of ten days and a leave for traditional Aboriginal practices for a maximum of five days; and

(

c) modify certain provisions related to work schedules, overtime, annual vacation, general holidays and bereavement leave, in order to provide greater flexibility in work arrangements.

Division 9 of

Part 5 amends the Economic Action Plan 2015 Act, No. 1 to repeal the paragraph 167(1.2)(

b) of the Canada Labour Code that it enacts, and to amend the related regulation-making provisions accordingly.

Division 10 of

Part 5 approves and implements the Canadian Free Trade Agreement entered into by the Government of Canada and the governments of each province and territory to reduce or eliminate barriers to the free movement of persons, goods, services and investments. It also makes related amendments to the Energy Efficiency Act in order to facilitate, with respect to energy-using products or classes of energy-using products, the harmonization of requirements set out in regulations with those of a jurisdiction.

Finally, it makes consequential amendments to the Financial Administration Act , the Department of Public Works and Government Services Act and the Procurement Ombudsman Regulations and it repeals the Timber Marking Act and the Agreement on Internal Trade Implementation Act .

Division 11 of

Part 5 amends the Judges Act

(

a) to allow for the payment of annuities, in certain circumstances, to judges and their survivors and children, other than by way of grant of the Governor in Council;

(

b) to authorize the payment of salaries to the new Associate Chief Justice of the Court of Queen’s Bench of Alberta; and

(

c) to change the title of “senior judge” to “chief justice” for the superior trial courts of the territories.

It also makes consequential amendments to other Acts.

Division 12 of

Part 5 amends the Business Development Bank of Canada Act to increase the maximum amount of the paid-in capital of the Business Development Bank of Canada.

Division 13 of

Part 5 amends the Financial Administration Act to authorize, in an increased number of cases, the entering into of contracts or other arrangements that provide for a payment if there is a sufficient balance to discharge any debt that will be due under them during the fiscal year in which they are entered into.

Her Majesty, by and with the advice and consent of the Senate and House of Commons of Canada, enacts as follows:

Short Title

Short title

This Act may be cited as the Budget Implementation Act, 2017, No. 2 .

PART 1

Amendments to the Income Tax Act and to Related Legislation

R.S., c. 1 (5th Supp.)

Income Tax Act

(1) Subsection 10(14) of the Income Tax Act is repealed.

(2) Section 10 of the Act is amended by adding the following before subsection (15):

Work in progress — transitional

(14.1) If paragraph 34(

a) applies in computing a taxpayer’s income from a business for the last taxation year of the taxpayer that begins before March 22, 2017, then

(

a) for the purpose of computing the income of the taxpayer from the business, at the end of the first taxation year that begins after March 21, 2017,

(

i) the amount of the cost of the taxpayer’s work in progress is deemed to be one-fifth of the amount of its cost determined without reference to this paragraph, and

(ii)

the amount of the fair market value of the taxpayer’s work in progress is deemed to be one-fifth of the amount of its fair market value determined without reference to this paragraph;

(

b) for the purpose of computing the income of the taxpayer from the business, at the end of the second taxation year that begins after March 21, 2017,

(

i) the amount of the cost of the taxpayer’s work in progress is deemed to be two-fifths of the amount of its cost determined without reference to this paragraph, and

(ii)

the amount of the fair market value of the taxpayer’s work in progress is deemed to be two-fifths of the amount of its fair market value determined without reference to this paragraph;

(

c) for the purpose of computing the income of the taxpayer from the business, at the end of the third taxation year that begins after March 21, 2017,

(

i) the amount of the cost of the taxpayer’s work in progress is deemed to be three-fifths of the amount of its cost determined without reference to this paragraph, and

(ii)

the amount of the fair market value of the taxpayer’s work in progress is deemed to be three-fifths of the amount of its fair market value determined without reference to this paragraph; and

(

d) for the purpose of computing the income of the taxpayer from the business, at the end of the fourth taxation year that begins after March 21, 2017,

(

i) the amount of the cost of the taxpayer’s work in progress is deemed to be four-fifths of the amount of its cost determined without reference to this paragraph, and

(ii)

the amount of the fair market value of the taxpayer’s work in progress is deemed to be four-fifths of the amount of its fair market value determined without reference to this paragraph.

(3) Subsection 10(14.1) of the Act, as enacted by subsection (2), is repealed.

(4) Subsections (1) and (3) come into force on January 1, 2024.

(5) Subsection (2) applies to taxation years ending after March 21, 2017.

(1) The Act is amended by adding the following after

section 10:

Mark-to-market election

10.1

(1) Subsection (4) applies to a taxpayer in respect of a taxation year and subsequent taxation years if the taxpayer elects to have subsection (4) apply to the taxpayer and has filed that election in prescribed form on or before its filing-due date for the taxation year.

Revocation

(2) The Minister may, on application by the taxpayer in prescribed form, grant permission to the taxpayer to revoke its election under subsection (1). The revocation applies to each taxation year of the taxpayer that begins after the day on which the taxpayer is notified in writing that the Minister concurs with the revocation, on such terms and conditions as are specified by the Minister.

Subsequent election

(3) Notwithstanding subsection (1), if a taxpayer has, under subsection (2), revoked an election, any subsequent election under subsection (1) shall result in subsection (4) applying to the taxpayer in respect of each taxation year that begins after the day on which the prescribed form in respect of the subsequent election is filed by the taxpayer.

Application

(4) If this subsection applies to a taxpayer in respect of a taxation year,

(

a) if the taxpayer is a financial institution (as defined in subsection 142.2(1)) in the taxation year, each eligible derivative held by the taxpayer at any time in the taxation year is, for the purpose of applying the provisions of this Act and with such modifications as the context requires, deemed to be mark-to-market property (as defined in subsection 142.2(1)) of the taxpayer for the taxation year; and

(

b) in any other case, subsection (6) applies to the taxpayer in respect of each eligible derivative held by the taxpayer at the end of the taxation year.

Definition of eligible derivative

(5) For the purposes of this section, an eligible derivative , of a taxpayer for a taxation year, means a swap agreement, a forward purchase or sale agreement, a forward rate agreement, a futures agreement, an option agreement or a similar agreement, held at any time in the taxation year by the taxpayer, if

(

a) the agreement is not a capital property, a Canadian resource property, a foreign resource property or an obligation on account of capital of the taxpayer;

(

b) either

(

i) the taxpayer has produced audited financial statements prepared in accordance with generally accepted accounting principles in respect of the taxation year, or

(ii)

if the taxpayer has not produced audited financial statements described in subparagraph (i), the agreement has a readily ascertainable fair market value; and

(

c) where the agreement is held by a financial institution (as defined in subsection 142.2(1)), the agreement is not a tracking property (as defined in subsection 142.2(1)), other than an excluded property (as defined in subsection 142.2(1)), of the financial institution.

Deemed disposition

(6) If this subsection applies to a taxpayer in respect of each eligible derivative held by the taxpayer at the end of a taxation year, for each eligible derivative held by the taxpayer at the end of the taxation year, the taxpayer is deemed

(

a) to have disposed of the eligible derivative immediately before the end of the year and received proceeds or paid an amount, as the case may be, equal to its fair market value at the time of disposition; and

(

b) to have reacquired, or reissued or renewed, the eligible derivative at the end of the year at an amount equal to the proceeds or the amount, as the case may be, determined under paragraph (a).

Election year — gains and losses

(7) If a taxpayer holds, at the beginning of its first taxation year in respect of which an election referred to in subsection (1) applies (in this subsection referred to as the “election year”), an eligible derivative and, in the taxation year immediately preceding the election year, the taxpayer did not compute its profit or loss in respect of that eligible derivative in accordance with a method of profit computation that produces a substantially similar effect to subsection (6), then

(

a) the taxpayer is deemed

(

i) to have disposed of the eligible derivative immediately before the beginning of the election year and received proceeds or paid an amount, as the case may be, equal to its fair market value at that time, and

(ii)

to have reacquired, or reissued or renewed, the eligible derivative at the beginning of the election year at an amount equal to the proceeds or the amount, as the case may be, determined under subparagraph (i);

(

b) the profit or loss that would arise (determined without reference to this paragraph) on the deemed disposition in subparagraph (a)(i)

(

i) is deemed not to arise in the taxation year immediately preceding the election year, and

(ii)

is deemed to arise in the taxation year in which the taxpayer disposes of the eligible derivative (otherwise than because of paragraphs (6)(

a) or 142.5(2)(a)); and

(

c) for the purpose of applying subsection 18(15) in respect of the disposition of the eligible derivative referred to in subparagraph (b)(ii), the profit or loss deemed to arise because of that subparagraph is included in determining the amount of the transferor’s loss, if any, from the disposition.

Default realization method

(8) If subsection (4) does not apply to a taxpayer referred to in paragraph (4)(

b) in respect of a taxation year, a method of profit computation that produces a substantially similar effect to subsection (6) shall not be used for the purpose of computing the taxpayer’s income from a business or property in respect of a swap agreement, a forward purchase or sale agreement, a forward rate agreement, a futures agreement, an option agreement or a similar agreement for the taxation year.

Interpretation

(9) For the purposes of subsections (4) to (7), if an agreement that is an eligible derivative of a taxpayer is not a property of the taxpayer, the taxpayer is deemed

(

a) to hold the eligible derivative at any time while the taxpayer is a party to the agreement; and

(

b) to have disposed of the eligible derivative when it is settled or extinguished in respect of the taxpayer.

(2) Subsection (1) applies to taxation years that begin after March 21, 2017.

(1) Subsection 12(1) of the Act is amended by adding the following after paragraph (d.1):

(d.2)

any amount deducted under paragraph 20(1)(m.3) as a reserve in computing the taxpayer’s income for the immediately preceding taxation year;

(2) Subparagraphs 12(1)(z.7)(

i) and (ii) of the Act are replaced by the following:

(

i) if the taxpayer acquires a property under a derivative forward agreement in the year, the portion of the amount by which the fair market value of the property at the time it is acquired by the taxpayer exceeds the cost to the taxpayer of the property that is attributable to an underlying interest other than an underlying interest referred to in subparagraphs (b)(

i) to (iii) of the definition derivative forward agreement in subsection 248(1), or

(ii)

if the taxpayer disposes of a property under a derivative forward agreement in the year, the portion of the amount by which the proceeds of disposition (within the meaning assigned by subdivision

c) of the property exceeds the fair market value of the property at the time the agreement is entered into by the taxpayer that is attributable to an underlying interest other than an underlying interest referred to in clauses (c)(i)(

A) to (

C) of the definition derivative forward agreement in subsection 248(1).

(3) Subsection (1) applies in respect of bonds issued after 2000.

(4) Subsection (2) applies to acquisitions and dispositions of property that occur after September 15, 2016.

(1) Paragraph 18(12)(

b) of the Act is replaced by the following:

(

b) if the conditions set out in subparagraph (a)(

i) or (ii) are met, the amount for the work space that is deductible in computing the individual’s income for the year from the business shall not exceed the individual’s income for the year from the business, computed without reference to the amount and

section 34.1; and

(2) Paragraph 18(14)(

c) of the Act is replaced by the following:

(

c) the disposition is not a disposition that is deemed to have occurred by subsection 10.1(6) or (7),

section 70, subsection 104(4),

section 128.1, paragraph 132.2(3)(

a) or (

c) or subsection 138(11.3) or 149(10);

(3) Paragraph 18(14)(

c) of the Act, as enacted by subsection (2), is replaced by the following:

(

c) the disposition is not a disposition that is deemed to have occurred by subsection 10.1(6) or (7),

section 70, subsection 104(4),

section 128.1, paragraph 132.2(3)(

a) or (

c) or subsection 138(11.3) or 138.2(4) or 149(10);

(4) Section 18 of the Act is amended by adding the following after subsection (16):

Definitions

(17) The following

definitions apply in this subsection and subsections (18) to (23).

offsetting position , in respect of a particular position of a person or partnership (in this definition referred to as the “holder”), means one or more positions that

(

a) are held by

(

i) the holder,

(ii)

a person or partnership that does not deal at arm’s length with, or is affiliated with, the holder (in this subsection and subsections (20), (22) and (23) referred to as the “connected person”), or

(iii)

for greater certainty, by any combination of the holder and one or more connected persons;

(

b) have the effect, or would have the effect if each of the positions held by a connected person were held by the holder, of eliminating all or substantially all of the holder’s risk of loss and opportunity for gain or profit in respect of the particular position; and

(

c) if held by a connected person, can reasonably be considered to have been held with the purpose of obtaining the effect described in paragraph (b). ( position compensatoire )

position , of a person or partnership, means one or more properties, obligations or liabilities of the person or partnership, if

(

a) each property, obligation or liability is

(

i) a share in the capital stock of a corporation,

(ii)

an interest in a partnership,

(iii)

an interest in a trust,

(iv)

a commodity,

(

v) foreign currency,

(vi)

a swap agreement, a forward purchase or sale agreement, a forward rate agreement, a futures agreement, an option agreement or a similar agreement,

(vii)

a debt owed to or owing by the person or partnership that, at any time,

(

A) is denominated in a foreign currency,

(

B) would be described in paragraph 7000(1)(

d) of the Income Tax Regulations if that paragraph were read without reference to the words “other than one described in paragraph (a), (

b) or (c)”, or

(

C) is convertible into or exchangeable for an interest, or for civil law a right, in any property that is described in any of subparagraphs (

i) to (iv),

(viii)

an obligation to transfer or return to another person or partnership a property identical to a particular property described in any of subparagraphs (

i) to (vii) that was previously transferred or lent to the person or partnership by that other person or partnership, or

(ix)

an interest, or for civil law a right, in any property that is described in any of subparagraphs (

i) to (vii); and

(

b) it is reasonable to conclude that, if there is more than one property, obligation or liability, each of them is held in connection with each other. ( position )

successor position , in respect of a position (in this definition referred to as the “initial position”), means a particular position if

(

a) the particular position is an offsetting position in respect of a second position;

(

b) the second position was an offsetting position in respect of the initial position that was disposed of at a particular time; and

(

c) the particular position was entered into during the period that begins 30 days before, and ends 30 days after, the particular time. ( position remplaçante )

unrecognized loss , in respect of a position of a person or partnership at a particular time in a taxation year, means the loss, if any, that would be deductible in computing the income of the person or partnership for the year with respect to the position if it were disposed of immediately before the particular time at its fair market value at the time of disposition. ( perte non constaté

e) unrecognized profit , in respect of a position of a person or partnership at a particular time in a taxation year, means the profit, if any, that would be included in computing the income of the person or partnership for the year with respect to the position if it were disposed of immediately before the particular time at its fair market value at the time of disposition. ( bénéfice non constaté )

Application of subsection (19)

(18) Subject to subsection (20), subsection (19) applies in respect of a disposition of a particular position by a person or partnership (in this subsection and subsections (19), (20) and (22) referred to as the “transferor”), if

(

a) the disposition is not a disposition that is deemed to have occurred by

section 70, subsection 104(4),

section 128.1 or subsection 138(11.3) or 149(10);

(

b) the transferor is not a financial institution (as defined in subsection 142.2(1)), a mutual fund corporation or a mutual fund trust; and

(

c) the particular position was, immediately before the disposition, not a capital property, or an obligation or liability on account of capital, of the transferor.

Straddle losses

(19) If this subsection applies in respect of a disposition of a particular position by a transferor, the portion of the transferor’s loss, if any, from the disposition of the particular position that is deductible in computing the transferor’s income for a particular taxation year is the amount determined by the formula

A + B − C where A

(

a) if the particular taxation year is the taxation year in which the disposition occurs, the amount of the loss determined without reference to this subsection (which is, for greater certainty, subject to subsection (15)), and

(

b) in any other taxation year, nil;

(

a) if the disposition occurred in a preceding taxation year, the amount determined for C in respect of the disposition for the immediately preceding taxation year, and

(

b) in any other case, nil; and

is the lesser of

(

a) the amount determined for A for the taxation year in which the disposition occurs, and

(

b) the amount determined by the formula

D − (E +

F) where D

is the total of all amounts each of which is the amount of unrecognized profit at the end of the particular taxation year in respect of

(

i) the particular position,

(ii)

positions that are offsetting positions in respect of the particular position (or would be, to the extent that there is no successor position in respect of the particular position, if the particular position continued to be held by the transferor),

(iii)

successor positions in respect of the particular position (for this purpose, a successor position in respect of a position includes a successor position that is in respect of a successor position in respect of the position), and

(iv)

positions that are offsetting positions in respect of any successor position referred to in subparagraph (iii) (or would be, if any such successor position continued to be held by the holder),

is the total of all amounts each of which is the amount of unrecognized loss at the end of the particular taxation year in respect of positions referred to in subparagraphs (

i) to (iv) of the description of D, and

is the total of all amounts each of which is an amount determined by the formula

G − H where G

is the amount determined for A for the taxation year in which the disposition occurs in respect of any position that was disposed of prior to the disposition of the particular position, if

(

i) the particular position was a successor position in respect of that position (for this purpose, a successor position in respect of a position includes a successor position that is in respect of a successor position in respect of the position), and

(ii)

that position was

(

A) an offsetting position in respect of the particular position,

(

B) an offsetting position in respect of a position in respect of which the particular position was a successor position (for this purpose, a successor position in respect of a position includes a successor position that is in respect of a successor position in respect of the position), or

(

C) the particular position, and

is the total of all amounts each of which is, in respect of a position described in G, an amount determined under the first formula in this subsection for the particular taxation year or a preceding taxation year.

Exceptions

(20) Subsection (19) does not apply in respect of a particular position of a transferor if

(

a) it is the case that

(

i) either the particular position, or the offsetting position in respect of the particular position, consists of

(

A) commodities that the holder of the position manufactures, produces, grows, extracts or processes, or

(

B) debt that the holder of the position incurs in the course of a business that consists of one or any combination of the activities described in clause (A), and

(ii)

it can reasonably be considered that the position not described in subparagraph (i) — the particular position if the offsetting position is described in subparagraph (

i) or the offsetting position if the particular position is described in that subparagraph — is held to reduce the risk, with respect to the position described in subparagraph (i), from

(

A) in the case of a position described in clause (i)(A), price changes or fluctuations in the value of currency with respect to the goods described in clause (i)(A), or

(

B) in the case of a position described in clause (i)(B), fluctuations in interest rates or in the value of currency with respect to the debt described in clause (i)(B);

(

b) the transferor or a connected person (in this paragraph referred to as the “holder”) continues to hold a position — that would be an offsetting position in respect of the particular position if the particular position continued to be held by the transferor — throughout a 30-day period beginning on the date of disposition of the particular position, and at no time during the period

(

i) is the holder’s risk of loss or opportunity for gain or profit with respect to the position reduced in any material respect by another position entered into or disposed of by the holder, or

(ii)

would the holder’s risk of loss or opportunity for gain or profit with respect to the position be reduced in any material respect by another position entered into or disposed of by a connected person, if the other position were entered into or disposed of by the holder; or

(

c) it can reasonably be considered that none of the main purposes of the series of transactions or events, or any of the transactions or events in the series, of which the holding of both the particular position and offsetting position are part, is to avoid, reduce or defer tax that would otherwise be payable under this Act.

Application

(21) For the purposes of subsections (17) to (23),

(

a) if a position of a person or partnership is not a property of the person or partnership, the person or partnership is deemed

(

i) to hold the position at any time while it is a position of the person or partnership, and

(ii)

to have disposed of the position when the position is settled or extinguished in respect of the person or partnership;

(

b) a disposition of a position is deemed to include a disposition of a portion of the position;

(

c) a position held by one or more persons or partnerships referred to in paragraph (

a) of the definition offsetting position in subsection (17) is deemed to be an offsetting position in respect of a particular position of a person or partnership if

(

i) there is a high degree of negative correlation between changes in value of the position and the particular position, and

(ii)

it can reasonably be considered that the principal purpose of the series of transactions or events, or any of the transactions in the series, of which the holding of both the position and the particular position are part, is to avoid, reduce or defer tax that would otherwise be payable under this Act; and

(

d) one or more positions held by one or more persons or partnerships referred to in paragraph (

a) of the definition offsetting position in subsection (17) are deemed to be a successor position in respect of a particular position of a person or partnership if

(

i) a portion of the particular position was disposed of at a particular time,

(ii)

the position is, or the positions include, as the case may be, a position that consists of the portion of the particular position that was not disposed of (in this paragraph referred to as the “remaining portion of the particular position”),

(iii)

where there is more than one position, the position or positions that do not consist of the remaining portion of the particular position were entered into during the period that begins 30 days before, and ends 30 days after, the particular time,

(iv)

the position is, or the positions taken together would be, as the case may be, an offsetting position in respect of a second position (within the meaning of the definition successor position in subsection (17)),

(

v) the second position was an offsetting position in respect of the particular position, and

(vi)

it can reasonably be considered that the principal purpose of the series of transactions or events, or any of the transactions in the series, of which the disposition of a portion of the particular position and the holding of one or more positions are part, is to avoid, reduce or defer tax that would otherwise be payable under this Act.

Different taxation years

(22) Subsection (23) applies if

(

a) at any time in a particular taxation year of a transferor, a position referred to in any of subparagraphs (ii) to (iv) of the description of D in subsection (19) (in this subsection and subsection (23) referred to as the “gain position”) is held by a connected person;

(

b) the connected person disposes of the gain position in the particular taxation year; and

(

c) the taxation year of the connected person in which the disposition referred to in paragraph (

b) occurs ends after the end of the particular taxation year.

Different taxation years

(23) If this subsection applies, for the purposes of the definition unrecognized profit in subsection (17) and subsection (19), the portion of the profit, if any, realized from the disposition of the gain position referred to in paragraph (22)(

b) that is determined by the following formula is deemed to be unrecognized profit in respect of the gain position until the end of the taxation year of the connected person in which the disposition occurs:

A × B/C where A

is the amount of the profit otherwise determined;

is the number of days in the taxation year of the connected person in which the disposition referred to in paragraph (22)(

b) occurs that are after the end of the particular taxation year; and

is the total number of days in the taxation year of the connected person in which the disposition referred to in paragraph (22)(

b) occurs.

(5) Subsection (1) applies to the 2011 and subsequent taxation years.

(6) Subsection (2) applies to taxation years that begin after March 21, 2017.

(7) Subsection (3) applies to taxation years that begin after 2017.

(8) Subsection (4) applies in respect of a position (as defined in subsection 18(17) of the Act, as enacted by subsection (4)) of a person or partnership if

(

a) the position is acquired, entered into, renewed or extended, or becomes owing, by the person or partnership after March 21, 2017; or

(

b) an offsetting position (as defined in subsection 18(17) of the Act, as enacted by subsection (4)) in respect of the position is acquired, entered into, renewed or extended, or becomes owing, by the person or partnership or a connected person (within the meaning of subsection 18(17) of the Act, as enacted by subsection (4)) after March 21, 2017.

(1) Subsection 20(1) of the Act is amended by adding the following after paragraph (m.2):

(m.3)

the unamortized amount at the end of the year in respect of the amount that was received in excess of the principal amount of a bond (in this paragraph referred to as the “premium”) received by the issuer in the year, or a previous year, for issuing the bond (in this paragraph referred to as the “new bond”) if

(

i) the terms of the new bond are identical to the terms of bonds previously issued by the taxpayer (in this paragraph referred to as the “old bonds”), except for the date of issuance and total principal amount of the bonds,

(ii)

the old bonds were part of an issuance (in this paragraph referred to as the “original issuance”) of bonds by the taxpayer,

(iii)

the interest rate on the old bonds was reasonable at the time of the original issuance,

(iv)

the new bond is issued on the re-opening of the original issuance,

(

v) the amount of the premium at the time of issuance of the new bond is reasonable, and

(vi)

the amount of the premium has been included in the taxpayer’s income for the year or a previous taxation year;

(2) Clauses (i)(

A) and (

B) of the description of A in paragraph 20(1)(xx) of the Act are replaced by the following:

(

A) if the taxpayer acquires a property under the agreement in the year or a preceding taxation year, the portion of the amount by which the cost to the taxpayer of the property exceeds the fair market value of the property at the time it is acquired by the taxpayer that is attributable to an underlying interest other than an underlying interest referred to in subparagraphs (b)(

i) to (iii) of the definition derivative forward agreement in subsection 248(1), or

(

B) if the taxpayer disposes of a property under the agreement in the year or a preceding taxation year, the portion of the amount by which the fair market value of the property at the time the agreement is entered into by the taxpayer exceeds the proceeds of disposition (within the meaning assigned by subdivision

c) of the property that is attributable to an underlying interest other than an underlying interest referred to in clauses (c)(i)(

A) to (

C) of the definition derivative forward agreement in subsection 248(1), and

(3) Subsection (1) applies in respect of bonds issued after 2000.

(4) Subsection (2) applies in respect of acquisitions and dispositions of property that occur after September 15, 2016.

(1) Paragraph 34(

a) of the Act is replaced by the following:

(

a) if the taxpayer so elects in the taxpayer’s return of income under this Part for the year and the year begins before March 22, 2017, there shall not be included any amount in respect of work in progress at the end of the year; and

(2) Section 34 of the Act, as amended by subsection (1), is repealed.

(3) Subsection (1) applies to taxation years ending after March 21, 2017.

(4) Subsection (2) comes into force on January 1, 2024.

(1) Subclause 37(8)(a)(ii)(B)(II) of the English version of the Act is replaced by the following:

(II)

an expenditure of a current nature for the prosecution of scientific research and experimental development in Canada directly undertaken on behalf of the taxpayer,

(2) Subsection 37(11) of the Act is replaced by the following:

Filing requirement

(11) A prescribed form must be filed by a taxpayer with the Minister in respect of any expenditure, that would be incurred by the taxpayer in a taxation year that begins after 1995 if this Act were read without reference to subsection 78(4), that is claimed by the taxpayer for the year as a deduction under this section, on or before the day that is 12 months after the taxpayer’s filing due-date for the taxation year, containing

(

a) prescribed information in respect of the expenditure; and

(

b) claim preparer information , as defined in subsection 162(5.3).

Failure to file

(11.1) Subject to subsection (12), if the prescribed information in respect of an expenditure referred to in paragraph (11)(

a) is not contained in the form referred to in subsection (11), no amount in respect of the expenditure may be deducted under subsection (1).

(3) Subsection (1) applies in respect of expenditures incurred after September 16, 2016.

(1) Clause 39(1)(c)(iv)(

B) of the Act is replaced by the following:

(

B) a bankrupt that was a small business corporation at the time it last became a bankrupt, or

(2) Subsection 39(2.1) of the Act is replaced by the following:

Upstream loan — transitional set-off

(2.1) If at any time a corporation resident in Canada or a partnership of which such a corporation is a member (such corporation or partnership referred to in this subsection and subsections (2.2) and (2.3) as the “borrowing party”) has received a loan from, or become indebted to, a creditor that is a foreign affiliate (referred to in this subsection and subsections (2.2) and (2.3) as a “creditor affiliate”) of a qualifying entity, or that is a partnership (referred to in this subsection and subsection (2.3) as a “creditor partnership”) of which such an affiliate is a member, and the loan or indebtedness is at a later time repaid, in whole or in part, then the amount of the borrowing party’s capital gain or capital loss determined, in the absence of this subsection, under subsection (2) in respect of the repayment, is to be reduced

(

a) in the case of a capital gain

(

i) if the creditor is a creditor affiliate, by an amount, not exceeding that capital gain, that is equal to twice the amount that would — in the absence of subparagraph 40(2)(g)(ii) and paragraph 95(2)(g.04) and on the assumption that the creditor affiliate’s capital loss in respect of the repayment of the loan or indebtedness were a capital gain of the creditor affiliate, the creditor affiliate had no other income, loss, capital gain or capital loss for any taxation year, and no other foreign affiliate of a qualifying entity had any income, loss, capital gain or capital loss for any taxation year — be the total of all amounts each of which is an amount that would be included in computing a qualifying entity’s income under subsection 91(1) for its taxation year that includes the last day of the taxation year of the creditor affiliate that includes the later time, or

(ii)

if the creditor is a creditor partnership, by an amount, not exceeding that capital gain, that is equal to twice the amount that is the total of each amount, determined in respect of a particular member of the creditor partnership that is a foreign affiliate of a qualifying entity, that would — in the absence of subparagraph 40(2)(g)(ii) and paragraph 95(2)(g.04) and on the assumption that the creditor partnership’s capital loss in respect of the repayment of the loan or indebtedness were a capital gain of the creditor partnership, the particular member had no other income, loss, capital gain or capital loss for any taxation year, and no other foreign affiliate of a qualifying entity had any income, loss, capital gain or capital loss for any taxation year — be the total of all amounts each of which is an amount that would be included in computing a qualifying entity’s income under subsection 91(1) for its taxation year that includes the last day of the taxation year of the particular member that includes the last day of the creditor partnership’s fiscal period that includes that later time; and

(

b) in the case of a capital loss

(

i) if the creditor is a creditor affiliate, by an amount, not exceeding that capital loss, that is equal to twice the amount, in respect of the creditor affiliate’s capital gain in respect of the repayment of the loan or indebtedness, that would — in the absence of paragraph 95(2)(g.04) and on the assumption that the creditor affiliate had no other income, loss, capital gain or capital loss for any taxation year, and no other foreign affiliate of a qualifying entity had any income, loss, capital gain or capital loss for any taxation year — be the total of all amounts each of which is an amount that would be included in computing a qualifying entity’s income under subsection 91(1) for its taxation year that includes the last day of the taxation year of the creditor affiliate that includes the later time, or

(ii)

if the creditor is a creditor partnership, by an amount, not exceeding that capital loss, that is equal to twice the amount, in respect of the creditor partnership’s capital gain in respect of the repayment of the loan or indebtedness, that is the total of each amount, determined in respect of a particular member of the creditor partnership that is a foreign affiliate of a qualifying entity, that would — in the absence of paragraph 95(2)(g.04) and on the assumption that the particular member had no other income, loss, capital gain or capital loss for any taxation year, and no other foreign affiliate of a qualifying entity had any income, loss, capital gain or capital loss for any taxation year — be the total of all amounts each of which is an amount that would be included in computing a qualifying entity’s income under subsection 91(1) for its taxation year that includes the last day of the taxation year of the particular member that includes the last day of the creditor partnership’s fiscal period that includes the later time.

Definition of qualifying entity

(2.2) For purposes of subsections (2.1) and (2.3), qualifying entity means

(

a) in the case of a borrowing party that is a corporation,

(

i) the borrowing party,

(ii)

a corporation resident in Canada of which

(

A) the borrowing party is a subsidiary wholly-owned corporation, or

(

B) a corporation described in this paragraph is a subsidiary wholly-owned corporation,

(iii)

a corporation resident in Canada

(

A) each share of the capital stock of which is owned by

(

I) the borrowing party, or

(II)

a corporation that is described in this subparagraph or subparagraph (ii), or

(

B) all or substantially all of the capital stock of which is owned by one or more corporations resident in Canada that are borrowing parties in respect of the creditor affiliate because of subsection 90(7), or

(iv)

a partnership each member of which is

(

A) a corporation described in any of subparagraphs (

i) to (iii), or

(

B) another partnership described in this subparagraph; and

(

b) in the case of a borrowing party that is a partnership,

(

i) the borrowing party,

(ii)

if each member — determined as if each member of a partnership that is a member of another partnership is a member of that other partnership — of the borrowing party is either a particular corporation resident in Canada (in this paragraph referred to as the “parent”) or a corporation resident in Canada that is a subsidiary wholly-owned corporation , as defined in subsection 87(1.4), of the parent,

(

A) the parent, or

(

B) a corporation resident in Canada that is a subsidiary wholly-owned corporation , as defined in subsection 87(1.4), of the parent, or

(iii)

a partnership each member of which is any of

(

A) the borrowing party,

(

B) a corporation described in subparagraph (ii), and

(

C) another partnership described in this subparagraph.

Upstream loan — transitional set-off election

(2.3) Subsection (2.1) and paragraph 95(2)(g.04) do not apply in respect of a repayment, in whole or in part, of a loan or indebtedness if an election has been filed with the Minister before 2019 jointly by

(

a) the borrowing party;

(

b) if the creditor is a creditor affiliate, each qualifying entity of which the creditor affiliate is a foreign affiliate; and

(

c) if the creditor is a creditor partnership, each qualifying entity of which a member of the creditor partnership is a foreign affiliate.

(3) Subsection (1) applies in respect of bankruptcies that occur after April 26, 1995.

(4) Subsection (2) applies in respect of portions of loans received and indebtedness incurred before August 20, 2011 that remain outstanding on August 19, 2011 and that are repaid, in whole or in part, before August 20, 2016.

(1) The description of B in paragraph 40(2)(

b) of the Act is replaced by the following:

(

i) if the taxpayer was resident in Canada during the year that includes the acquisition date, one plus the number of taxation years that end after the acquisition date for which the property is the taxpayer’s principal residence and during which the taxpayer was resident in Canada, or

(ii)

if it is not the case that the taxpayer was resident in Canada during the year that includes the acquisition date, the number of taxation years that end after the acquisition date for which the property was the taxpayer’s principal residence and during which the taxpayer was resident in Canada,

(2) Paragraphs 40(3)(

d) and (

e) of the Act are replaced by the following:

(

d) for the purposes of

section 93 and subsections 116(6) and (6.1), the property is deemed to have been disposed of by the taxpayer at that time, and

(

e) for the purposes of subsection 2(3) and sections 110.6 and 150, the property is deemed to have been disposed of by the taxpayer in the year.

(3) Paragraph 40(3.1)(

b) of the Act is replaced by the following:

(

b) for the purposes of subsection 2(3),

section 110.6, subsections 116(6) and (6.1) and

section 150, the interest is deemed to have been disposed of by the member at that time.

(4) The portion of subsection 40(6) of the Act before paragraph (

a) is replaced by the following:

Principal residence — property owned at end of 1981

(6) Subject to subsection (6.1), if a property was owned by a taxpayer, whether jointly with another person or otherwise, at the end of 1981 and continuously from the beginning of 1982 until disposed of by the taxpayer, the amount of the gain determined under paragraph (2)(

b) in respect of the disposition shall not exceed the amount, if any, by which the total of

(5) Section 40 of the Act is amended by adding the following after subsection (6):

Principal residence — property owned at end of 2016

(6.1) If a trust owns property at the end of 2016, the trust is not in its first taxation year that begins after 2016 a trust described in subparagraph (c.1)(iii.1) of the definition principal residence in

section 54, the trust disposes of the property after 2016, the disposition is the trust’s first disposition of the property after 2016 and the trust owns the property, whether jointly with another person or otherwise, continuously from the beginning of 2017 until the disposition,

(a)

subsection (6) does not apply to the disposition; and

(

b) the trust’s gain determined under paragraph (2)(

b) in respect of the disposition is the amount, if any, determined by the formula

A + B − C where A

is the trust’s gain calculated in accordance with paragraph (2)(

b) on the assumption that

(

i) the trust disposed of the property on December 31, 2016 for proceeds of disposition equal to its fair market value on that date, and

(ii)

paragraph (

a) did not apply in respect of the disposition described in subparagraph (i),

is the trust’s gain in respect of the disposition calculated in accordance with paragraph (2)(

b) on the assumption that

(

i) the description of B in that paragraph is read without reference to “one plus”, and

(ii)

the trust acquired the property on January 1, 2017 at a cost equal to its fair market value on December 31, 2016, and

is the amount, if any, by which the fair market value of the property on December 31, 2016 exceeds the proceeds of disposition of the property determined without reference to this subsection.

(6) Subsection (1) applies in respect of dispositions that occur after October 2, 2016.

(7) Subsections (2) and (3) apply in respect of gains from dispositions that occur after September 15, 2016.

(1) The portion of subsection 43(2) of the Act before the formula in paragraph (

a) is replaced by the following:

Ecological gifts

(2) For the purposes of subsection (1) and

section 53, if at any time a taxpayer disposes of a covenant or an easement to which land is subject or, in the case of land in the Province of Quebec, a real or personal servitude, in circumstances where subsection 110.1(5) or 118.1(12) applies,

(

a) the portion of the adjusted cost base to the taxpayer of the land immediately before the disposition that can reasonably be regarded as attributable to the covenant, easement or servitude, as the case may be, is deemed to be equal to the amount determined by the formula

(2) Subsection (1) applies in respect of gifts made after March 21, 2017.

(1) Clause 53(2)(c)(i)(

C) of the Act is replaced by the following:

(C)

subsections 100(4), 112(3.1), (4), (4.2) as it read in its application to dispositions of property that occurred before April 27, 1995 and (5.2),

(2) Subsection (1) is deemed to have come into force on September 16, 2016.

(1) Paragraph (c.1) of the definition principal residence in

section 54 of the Act is amended by striking out “and” at the end of subparagraph (iii) and by adding the following after that subparagraph:

(iii.1)

if the year begins after 2016, the trust is, in the year,

(

A) a trust

(

I) for which a day is to be determined under paragraph 104(4)(a), (a.1) or (a.4) by reference to the death or later death, as the case may be, that has not occurred before the beginning of the year, of an individual who is resident in Canada during the year, and

(II)

a specified beneficiary of which for the year is the individual referred to in subclause (I),

(

B) a trust

(

I) that is a qualified disability trust (as defined in subsection 122(3)) for the year, and

(II)

an electing beneficiary (in this clause, as defined in subsection 122(3)) of which for the year is

resident in Canada during the year,

a specified beneficiary of the trust for the year, and

a spouse, common-law partner, former spouse or common-law partner or child of the settlor (in this subparagraph, as defined in subsection 108(1)) of the trust, or

(

C) a trust

(

I) a specified beneficiary of which for the year is an individual

who is resident in Canada during the year,

who has not attained 18 years of age before the end of the year, and

a mother or father of whom is a settlor of the trust, and

(II)

in respect of which either of the following conditions is met:

no mother or father of the individual referred to in subclause (

I) is alive at the beginning of the year, or

the trust arose before the beginning of the year on and as a consequence of the death of a mother or father of the individual referred to in subclause (I), and

(2) Paragraph (

c) of the definition superficial loss in

section 54 of the Act is replaced by the following:

(

c) a disposition deemed to have been made by subsection 45(1),

section 48 as it read in its application before 1993,

section 50 or 70, subsection 104(4),

section 128.1, paragraph 132.2(3)(

a) or (c), subsection 138(11.3) or 138.2(4) or 142.5(2),

section 142.6 or any of subsections 144(4.1) and (4.2) and 149(10),

(3) Subsection (2) applies to taxation years that begin after 2017.

(1) Paragraph 56(1)(z.3) of the Act is replaced by the following:

Pooled registered pension plan

(z.3)

any amount required by

section 147.5 to be included in computing the taxpayer’s income for the year other than an amount distributed under a PRPP as a return of all or a portion of a contribution to the plan to the extent that the amount

(

i) is a payment described under clause 147.5(3)(d)(ii)(

A) or (B), and

(ii)

is not deducted in computing the taxpayer’s income for the year or a preceding taxation year; and

(2) Subsection (1) is deemed to have come into force on December 14, 2012.

(1) Clause 56.4(7)(b)(ii)(

A) of the Act is replaced by the following:

(

A) under which the vendor or the vendor’s eligible corporation disposes of property (other than property described in clause (

B) or subparagraph (i)) to the purchaser, or the purchaser’s eligible corporation, for consideration that is received or receivable by the vendor, or the vendor’s eligible corporation, as the case may be, or

(2) Subclause 56.4(7)(c)(i)(B)(

I) of the Act is replaced by the following:

(

I) under which the vendor or the vendor’s eligible corporation disposes of property (other than property described in subclause (II) or clause (A)) to the eligible individual, or the eligible individual’s corporation, for consideration that is received or receivable by the vendor, or the vendor’s eligible corporation, as the case may be, or

(3) Subparagraphs 56.4(7)(g)(

i) and (ii) of the Act are replaced by the following:

(

i) in the case of subparagraph (b)(i), the vendor, or the vendor’s eligible corporation, if it is required to include the goodwill amount in computing its income, and the purchaser, or the purchaser’s eligible corporation, if it incurs the expenditure that is the goodwill amount to the vendor or the vendor’s eligible corporation, as the case may be, or

(ii)

in the case of clause (c)(i)(A), the vendor, or the vendor’s eligible corporation, if it is required to include the goodwill amount in computing its income, and the eligible individual, or the eligible individual’s eligible corporation, if it incurs the expenditure that is the goodwill amount to the vendor or the vendor’s eligible corporation, as the case may be.

(4) Subsections (1) to (3) apply in respect of restrictive covenants granted after September 15, 2016.

(1) The definition eligible pension income in subsection 60.03(1) of the Act is amended by striking out “and” at the end of paragraph (a), by adding “and” at the end of paragraph (

b) and by adding the following after paragraph (b):

(

c) the lesser of

(

i) the total of all amounts received by the individual in the year on account of a retirement income security benefit payable to the individual under

Part 2 of the Canadian Forces Members and Veterans Re-establishment and Compensation Act , and

(ii)

the amount, if any, by which the defined benefit limit (as defined in subsection 8500(1) of the Income Tax Regulations ) for the year multiplied by 35 exceeds the total of the amounts determined under paragraphs (

a) and (b). ( revenu de pension déterminé )

(2) Subsection (1) applies to the 2015 and subsequent taxation years.

(1) Subsection 62(2) of the Act is replaced by the following:

Moving expenses of students

(2) There may be deducted in computing a taxpayer’s income for a taxation year the amount, if any, that the taxpayer would be entitled to deduct under subsection (1) if the definition eligible relocation in subsection 248(1) were read without reference to subparagraph (a)(

i) of that definition and if the word “both” in paragraph (

c) of that definition were read as “either or both”.

(2) Subsection (1) applies to taxation years that end after October 2011.

(1) The portion of clause (i)(

B) of the description of C in paragraph 63(2)(

b) of the Act before subclause (

I) is replaced by the following:

(

B) a person certified in writing by a medical doctor or a nurse practitioner to be a person who

(2) Subsection (1) applies in respect of certifications made after September 7, 2017.

(1) Paragraph 66(12.601)(

b) of the Act is replaced by the following:

(

b) during the period beginning on the particular day the agreement was entered into and ending on the earlier of December 31, 2018 and the day that is 24 months after the end of the month that included that particular day, the corporation incurred Canadian development expenses (excluding expenses that are deemed by subsection (12.66) to have been incurred on December 31, 2018) described in paragraph (

a) or (

b) of the definition Canadian development expense in subsection 66.2(5) or that would be described in paragraph (

f) of that definition if the words “paragraphs (

a) to (e)” in that paragraph were read as “paragraphs (

a) and (b)”,

(2) Subsection (1) comes into force on the day on which this Act receives royal assent except that, in its application in respect of agreements entered into after 2016 and before March 22, 2017, paragraph 66(12.601)(

b) of the Act, as enacted by subsection (1), is to be read without reference to the phrase “the earlier of December 31, 2018 and”.

Subparagraph (d)(

i) of the definition Canadian exploration expense in subsection 66.1(6) of the Act is amended by striking out “and” at the end of clause (A), by adding “and” at the end of clause (

B) and by adding the following after clause (B):

(

C) the expense is incurred

(

I) before 2021 (excluding an expense that is deemed by subsection 66(12.66) to have been incurred on December 31, 2020), if the expense is incurred in connection with an obligation that was committed to in writing (including a commitment to a government under the terms of a license or permit) by the taxpayer before March 22, 2017, or

(II)

before 2019 (excluding an expense that is deemed by subsection 66(12.66) to have been incurred on December 31, 2018), in any other case,

(1) Paragraph 75(3)(

d) of the Act is replaced by the following:

(

d) by a trust if

(

i) the trust acquired the property, or other property for which the property is a substitute, from a particular individual,

(ii)

the particular individual acquired the property or the other property, as the case may be, in respect of another individual as a consequence of the operation of subsection 122.61(1) or under

section 4 of the Universal Child Care Benefit Act , and

(iii)

the trust has no beneficiaries (as defined in subsection 108(1)) who may for any reason receive directly from the trust any of the income or capital of the trust other than individuals in respect of whom the particular individual acquired property as a consequence of the operation of a provision described in subparagraph (ii).

(2) Subsection (1) applies to taxation years that end after September 15, 2016.

(1) Section 80.03 of the English version of the Act is amended by adding the following before subsection (2):

Definitions

80.03

(1) In this section, commercial debt obligation , commercial obligation , distress preferred share , forgiven amount and person have the meanings assigned by subsection 80(1).

(2) Subsection (1) applies to taxation years that end after February 21, 1994.

(1) Section 85 of the Act is amended by adding the following after subsection (1.11):

Eligible derivatives

(1.12) Notwithstanding subsection (1.1), an eligible derivative (as defined in subsection 10.1(5)) of a taxpayer to which subsection 10.1(6) applies is not an eligible property of the taxpayer in respect of a disposition by the taxpayer to a corporation.

(2) The portion of paragraph 85(2)(

a) of the Act before subparagraph (

i) is replaced by the following:

(

a) a partnership has disposed, to a taxable Canadian corporation for consideration that includes shares of the corporation’s capital stock, of any partnership property (other than an eligible derivative , as defined in subsection 10.1(5), of the partnership if subsection 10.1(6) applies to the partnership) that was

(3) Subsections (1) and (2) apply to taxation years that begin after March 21, 2017.

(1) Subsection 87(2) of the Act is amended by adding the following after paragraph (e.4):

(e.41)

if subsection 10.1(6) applied to a predecessor corporation in its last taxation year, each eligible derivative (as defined in subsection 10.1(5)) of the predecessor corporation immediately before the end of its last taxation year is deemed to have been reacquired, or reissued or renewed, as the case may be, by the new corporation at its fair market value immediately before the amalgamation;

(e.42)

for the purposes of subsection 10.1(7), the new corporation is deemed to be the same corporation as, and a continuation of, each predecessor corporation;

(2) Section 87 of the Act is amended by adding the following after subsection (8.3):

Taxable Canadian property — conditions for rollover

(8.4) Subsection (8.5) applies at any time if

(

a) there is at that time a foreign merger of two or more predecessor foreign corporations (within the meaning assigned by subsection (8.1), if that subsection and subsection (8.2) were read without reference to the expression “otherwise than as a result of the distribution of property to one corporation on the winding-up of another corporation”) that were, immediately before that time,

(

i) resident in the same country, and

(ii)

related to each other (determined without reference to paragraph 251(5)(b));

(

b) because of the foreign merger,

(

i) a predecessor foreign corporation (referred to in this subsection and subsection (8.5) as the “disposing predecessor foreign corporation”) disposes of a property (referred to in this subsection and subsection (8.5) as the “subject property”) that is, at that time,

(

A) a taxable Canadian property (other than treaty-protected property) of the disposing predecessor foreign corporation, and

(

B) any of the following:

(

I) a share of the capital stock of a corporation,

(II)

an interest in a partnership, and

(III)

an interest in a trust, and

(ii)

the subject property becomes property of a corporation that is a new foreign corporation for the purposes of subsection (8.1);

(

c) no shareholder (except any predecessor foreign corporation) that owned shares of the capital stock of a predecessor foreign corporation immediately before the foreign merger received consideration for the disposition of those shares on the foreign merger, other than shares of the capital stock of the new foreign corporation;

(

d) if the subject property is a share of the capital stock of a corporation or an interest in a trust, the corporation or trust is not, at any time in the 24-month period beginning at that time, as part of a transaction or event, or series of transactions or events including the foreign merger, subject to a loss restriction event; and

(

e) the new foreign corporation and the disposing predecessor foreign corporation jointly elect in writing under this paragraph in respect of the foreign merger and file the election with the Minister on or before the filing-due date of the disposing predecessor foreign corporation (or the date that would be its filing-due date, if subsection (8.5) did not apply in respect of the disposition of the subject property) for the taxation year that includes that time.

Foreign merger — taxable Canadian property rollover

(8.5) If this subsection applies at any time,

(

a) if the subject property is an interest in a partnership,

(

i) the disposing predecessor foreign corporation is deemed not to dispose of the subject property (other than for the purposes of subsection (8.4)), and

(ii)

the new foreign corporation is deemed

(

A) to have acquired the subject property at a cost equal to the cost of the subject property to the disposing predecessor foreign corporation, and

(

B) to be the same corporation as, and a continuation of, the disposing predecessor foreign corporation in respect of the subject property; and

(

b) if the subject property is a share of the capital stock of a corporation or an interest in a trust,

(

i) the subject property is deemed to have been disposed of at that time by the disposing predecessor foreign corporation to the new foreign corporation (that is referred to in subparagraph (8.4)(b)(ii)) for proceeds of disposition equal to the adjusted cost base of the subject property to the disposing predecessor foreign corporation immediately before that time, and

(ii)

the cost of the subject property to the new foreign corporation is deemed to be the amount that is deemed by subparagraph (

i) to be the proceeds of disposition of the subject property.

(3) 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), 146.3(1) and 146.4(1), in

section 204 and in subsection 207.01(1), 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.

(4) Subsection (1) applies to taxation years that begin after March 21, 2017.

(5) Subsection (2) applies to foreign mergers that occur after September 15, 2016, except that an election referred to in paragraph 87(8.4)(

e) of the Act, as enacted by subsection (2), is deemed to have been filed on a timely basis if it is filed on or before the day that is six months after the day on which this Act receives royal assent.

(6) Subsection (3) is deemed to have come into force on March 23, 2017.

(1) The portion of paragraph 88(1)(e.2) of the Act before subparagraph (

i) is replaced by the following:

(e.2)

paragraphs 87(2)(c), (d.1), (e.1), (e.3), (

g) to (l), (l.21) to (u), (x), (z.1), (z.2), (aa), (cc), (ll), (nn), (pp), (rr) and (tt) to (ww), subsection 87(6) and, subject to

section 78, subsection 87(7) apply to the winding-up as if the references in those provisions to

(2) The portion of paragraph 88(1)(e.2) of the Act before subparagraph (i), as enacted by subsection (1), is replaced by the following:

(e.2)

paragraphs 87(2)(c), (d.1), (e.1), (e.3), (e.42), (

g) to (l), (l.21) to (u), (x), (z.1), (z.2), (aa), (cc), (ll), (nn), (pp), (rr) and (tt) to (ww), subsection 87(6) and, subject to

section 78, subsection 87(7) apply to the winding-up as if the references in those provisions to

(3) Subsection 88(1) of the Act is amended by striking out “and” at the end of paragraph (h), by adding “and” at the end of paragraph (

i) and by adding the following after paragraph (i):

(

j) for the purposes of subsection 10.1(6), the subsidiary’s taxation year in which an eligible derivative (as defined in subsection 10.1(5)) was distributed to, or assumed by, the parent on the winding-up is deemed to have ended immediately before the time when the eligible derivative was distributed or assumed.

(4) Subsection (1) applies to taxation years that end after 2001.

(5) Subsections (2) and (3) apply to taxation years that begin after March 21, 2017.

(1) The portion of paragraph (

a) of the definition capital dividend account in subsection 89(1) of the Act before subparagraph (

i) is replaced by the following:

(

a) the amount, if any, by which the total of

(2) Paragraph (

a) of the definition capital dividend account in subsection 89(1) of the Act is amended by adding “and” at the end of subparagraph (

i) and by adding the following after that subparagraph:

(i.1)

all amounts each of which is an amount in respect of a distribution made, in the period and after September 15, 2016, by a trust to the corporation in respect of capital gains of the trust equal to the lesser of

(

A) the amount, if any, by which

(

I) the amount of the distribution

exceeds

(II)

the amount designated under subsection 104(21) by the trust in respect of the net taxable capital gains of the trust attributable to those capital gains, and

(

B) 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

is the amount referred to in subclause (A)(II),

(3) The portion of paragraph (

f) of the definition capital dividend account in subsection 89(1) of the Act before subparagraph (

i) is replaced by the following:

(

f) all amounts each of which is an amount in respect of a distribution made, in the period and before September 16, 2016, by a trust to the corporation in respect of capital gains of the trust equal to the lesser of

(1) Section 90 of the Act is amended by adding the following after subsection (6):

Upstream loan continuity — reorganizations

(6.1) Subsection (6.11) applies at any time if

(

a) immediately before that time, a person or partnership (referred to in this subsection and subsection (6.11) as the “original debtor”) owes an amount in respect of a loan or indebtedness (referred to in this subsection and subsection (6.11) as the “pre-transaction loan”) to another person or partnership (referred to in this subsection and subsection (6.11) as the “original creditor”);

(

b) the pre-transaction loan was, at the time it was made or entered into, a loan or indebtedness that is described in subsection (6); and

(

c) in the course of an amalgamation, a merger, a winding-up or a liquidation and dissolution,

(

i) the amount owing in respect of the pre-transaction loan becomes owing at that time by another person or partnership (the amount owing after that time and the other person or partnership are referred to in subsection (6.11) as the “post-transaction loan payable” and the “new debtor”, respectively),

(ii)

the amount owing in respect of the pre-transaction loan becomes owing at that time to another person or partnership (the amount owing after that time and the other person or partnership are referred to in subsection (6.11) as the “post-transaction loan receivable” and the “new creditor”, respectively), or

(iii)

the taxpayer in respect of which the original debtor was a specified debtor at the time referred to in paragraph (b)

(

A) ceases to exist, or

(

B) merges with one or more corporations to form one corporate entity (referred to in subsection (6.11) as the “new corporation”).

Upstream loan continuity — reorganizations

(6.11) If this subsection applies at any time, for the purposes of subsections (6) and (7) to (15) and 39(2.1) and (2.2) and paragraph 95(2)(g.04),

(

a) if the condition in subparagraph (6.1)(c)(

i) is met,

(

i) the post-transaction loan payable is deemed to be the same loan or indebtedness as the pre-transaction loan, and

(ii)

the new debtor is deemed to be same debtor as, and a continuation of, the original debtor;

(

b) if the condition in subparagraph (6.1)(c)(ii) is met,

(

i) the post-transaction loan receivable is deemed to be the same loan or indebtedness as the pre-transaction loan, and

(ii)

the new creditor is deemed to be same creditor as, and a continuation of, the original creditor;

(

c) if the condition in clause (6.1)(c)(iii)(

A) is met,

(

i) subject to subparagraph (ii), each entity that held an equity interest in the taxpayer immediately before the winding-up (referred to in this paragraph as a “successor entity”) is deemed to be the same entity as, and a continuation of, the taxpayer, and

(ii)

for the purposes of applying subsection (13) and the description of A in subsection (14), an amount is deemed, in respect of a loan or indebtedness, to have been included under subsection (6) in computing the income of each successor entity equal to

(

A) if the taxpayer is a partnership, the amount that may reasonably be considered to be the successor entity’s share (determined in a manner consistent with the determination of the successor entity’s share of the income of the partnership under subsection 96(1) for the taxpayer’s final fiscal period) of the specified amount that was required to be included in computing the income of the taxpayer under subsection (6) in respect of the loan or indebtedness, and

(

B) in any other case, the proportion of the specified amount included in computing the taxpayer’s income under subsection (6), in respect of the loan or indebtedness, that the fair market value of the successor entity’s equity interest in the taxpayer, immediately before the distribution of the taxpayer’s assets on the winding-up, is of the total fair market value of all equity interests in the taxpayer at that time; and

(

d) if the condition in clause (6.1)(c)(iii)(

B) is met, the new corporation is deemed to be the same corporation as, and a continuation of, the taxpayer.

(2) The portion of subsection 90(7) of the Act before paragraph (

a) is replaced by the following:

Back-to-back loans

(7) For the purposes of this subsection and subsections (6), (8) to (15) and 39(2.1) and (2.2) and paragraph 95(2)(g.04), if at any time a person or partnership (referred to in this subsection as the “intermediate lender”) makes a loan to another person or partnership (in this subsection referred to as the “intended borrower”) because the intermediate lender received a loan from another person or partnership (in this subsection referred to as the “initial lender”)

(3) Subparagraph 90(9)(a)(ii) of the Act is replaced with the following:

(ii)

the income of the corporation under subsection 91(5), in respect of the taxable surplus of a foreign affiliate of the corporation, unless the specified debtor is a person or partnership described in subclause (i)(D)(

I) or (II);

(4) Paragraph (

b) of the definition specified debtor in subsection 90(15) of the Act is replaced by the following:

(

b) a person with which the taxpayer does not, at that time, deal at arm’s length, other than

(

i) a non-resident corporation that is at that time a controlled foreign affiliate , within the meaning assigned by

section 17, of the taxpayer, or

(ii)

a non-resident corporation (other than a corporation that is described in subparagraph (i)) that is, at that time, a foreign affiliate of the taxpayer, if each share of the capital stock of the affiliate is owned at that time by any of

(

A) the taxpayer,

(

B) persons resident in Canada,

(

C) non-resident persons that deal at arm’s length with the taxpayer,

(

D) persons described in subparagraph (i),

(

E) partnerships, each member of which is described in any of clauses (

A) to (F), and

(

F) a corporation each shareholder of which is described in any of clauses (

A) to (F);

(5) Subsection (1) applies to transactions and events that occur after September 15, 2016. However, if a taxpayer files an election with the Minister before 2017, subsection (1) applies in respect of the taxpayer as of August 20, 2011.

(6) Subsection (2) applies in respect of loans received and indebtedness incurred after August 19, 2011. However, subsection 90(7) of the Act, as amended by subsection (2), also applies in respect of any portion of a particular loan received or a particular indebtedness incurred before August 20, 2011 that remains outstanding on August 19, 2014 as if that portion were a separate loan or indebtedness that was received or incurred, as the case may be, on August 20, 2014 in the same manner and on the same terms as the particular loan or indebtedness.

(7) Subsection (3) applies in respect of loans received and indebtedness incurred after August 19, 2011; however, subparagraph 90(9)(a)(ii) of the Act, as enacted by subsection (3), also applies in respect of any portion of a particular loan received or a particular indebtedness incurred before August 20, 2011 that remains outstanding on August 19, 2014 as if that portion were a separate loan or indebtedness that was received or incurred, as the case may be, on August 20, 2014 in the same manner and on the same terms as the particular loan or indebtedness.

In respect of loans received and indebtedness incurred prior to September 16, 2016, subparagraph 90(9)(a)(ii) of the Act, as enacted by subsection (3), is to be read without reference to “unless the specified debtor is a person or partnership described in subclause (i)(D)(

I) or (II)”.

(8) Subsection (4) applies in respect of loans received and indebtedness incurred after August 19, 2011 and in respect of any portion of a particular loan received or indebtedness incurred before August 20, 2011 that remained outstanding on August 19, 2014.

(1) Section 91 of the Act is amended by adding the following after subsection (1):

Conditions for application of subsection (1.2)

(1.1) Subsection (1.2) applies at a particular time in respect of a particular foreign affiliate of a taxpayer resident in Canada if

(

a) an amount would be included under subsection (1) in computing the income of the taxpayer, in respect of a share of the particular affiliate or another foreign affiliate of the taxpayer that has an equity percentage (as defined in subsection 95(4)) in the particular affiliate, for the taxation year of the particular affiliate (determined without reference to subsection (1.2)) that includes the particular time (referred to in this subsection and subsection (1.3) as the “ordinary taxation year” of the particular affiliate), if the ordinary taxation year of the particular affiliate ended at the particular time;

(

b) immediately after the particular time, there is

(

i) an acquisition of control of the taxpayer, or

(ii)

a triggering event that can reasonably be considered to result in a change in the aggregate participating percentage of the taxpayer in respect of the particular affiliate for the ordinary taxation year of the particular affiliate;

(

c) if subparagraph (b)(

i) applies, all or a portion of an amount described in paragraph 95(2)(

f) that accrued to the particular affiliate during the portion of the ordinary taxation year of the particular affiliate before the particular time is excluded in computing the income of another taxpayer because paragraph 95(2)(f.1) applies as a result of the taxpayer being, at a time before the acquisition of control, a designated acquired corporation of the other taxpayer; and

(

d) if subparagraph (b)(ii) applies, none of the following is the case:

(

i) the change referred to in that subparagraph

(

A) is a decrease, and

(

B) is equal to the total of all amounts each of which is the increase — that can reasonably be considered to result from the triggering event — in the aggregate participating percentage of another taxpayer, in respect of the particular affiliate for the ordinary taxation year of the particular affiliate, if the other taxpayer

(

I) is a person resident in Canada, other than a person that is — or a trust, any of the beneficiaries under which is — by reason of a statutory provision, exempt from tax under this Part, and

(II)

is related to the taxpayer,

if the triggering event results from a winding-up of the taxpayer to which subsection 88(1) applies, at the particular time, and

in any other case, immediately after the particular time,

(ii)

the triggering event is on an amalgamation as defined in subsection 87(1),

(iii)

the triggering event is an excluded acquisition or disposition, in respect of the ordinary taxation year of the particular affiliate, and

(iv)

if one or more triggering events — all of which are described in subparagraph (b)(ii) and in respect of which none of the conditions in subparagraphs (

i) to (iii) are satisfied — occur in the ordinary taxation year of the particular affiliate, the percentage determined by the following formula is not greater than 5%:

A — B where A

is the total of all amounts each of which is the decrease — which can reasonably be considered to result from a triggering event described in subparagraph (b)(ii) (other than a triggering event that satisfies the conditions in subparagraph (

i) or (ii)) — in the aggregate participating percentage of the taxpayer in respect of the particular affiliate for the ordinary taxation year of the particular affiliate, and

is the total of all amounts each of which is the increase — which can reasonably be considered to result from a triggering event described in subparagraph (b)(ii) (other than a triggering event that satisfies the conditions in subparagraph (

i) or (ii)) — in the aggregate participating percentage of the taxpayer in respect of the particular affiliate for the ordinary taxation year of the particular affiliate.

Deemed year-end

(1.2) If this subsection applies at a particular time in respect of a foreign affiliate of a particular taxpayer resident in Canada, then for the purposes of this

section and

section 92,

(

a) in respect of the particular taxpayer and each connected person, or connected partnership, in respect of the particular taxpayer, the affiliate’s taxation year that would, in the absence of this subsection, have included the particular time is deemed to have ended at the time (referred to in this

section as the “stub-period end time”) that is immediately before the particular time;

(

b) if the affiliate is, immediately after the particular time, a foreign affiliate of the particular taxpayer or a connected person, or connected partnership, in respect of the particular taxpayer, the affiliate’s next taxation year after the stub-period end time is deemed, in respect of the particular taxpayer or the connected person or connected partnership, as the case may be, to begin immediately after the particular time; and

(

c) in determining the foreign accrual property income of the affiliate for the taxation year referred to in paragraph (

a) in respect of the particular taxpayer or a connected person or connected partnership, in respect of the particular taxpayer, all transactions or events that occur at the particular time are deemed to occur at the stub-period end time.

Definitions

(1.3) The following

definitions apply in this subsection and subsections (1.1) and (1.2).

aggregate participating percentage , of a taxpayer in respect of a foreign affiliate of the taxpayer for a taxation year of the affiliate, means the total of all amounts, each of which is the participating percentage, in respect of the affiliate, of a share of the capital stock of a corporation that is owned by the taxpayer at the end of the taxation year. ( pourcentage de participation total )

connected person , in respect of a particular taxpayer, means a person that — at or immediately after the particular time at which subsection (1.2) applies in respect of a foreign affiliate of the particular taxpayer — is resident in Canada and

(

a) does not deal at arm’s length with the particular taxpayer; or

(

b) deals at arm’s length with the particular taxpayer, if

(

i) the foreign affiliate is a foreign affiliate of the person at the particular time, and

(ii)

the aggregate participating percentage of the person in respect of the foreign affiliate for the affiliate’s ordinary taxation year may reasonably be considered to have increased as a result of the triggering event that gave rise to the application of subsection (1.2). ( personne rattaché

e) connected partnership , in respect of a particular taxpayer, means a partnership if, at or immediately after the particular time at which subsection (1.2) applies in respect of a foreign affiliate of the particular taxpayer,

(

a) the particular taxpayer or a connected person in respect of the particular taxpayer is, directly or indirectly through one or more partnerships, a member of the partnership; or

(

b) if paragraph (

a) does not apply,

(

i) the foreign affiliate is a foreign affiliate of the partnership at the particular time, and

(ii)

the aggregate participating percentage of the partnership in respect of the foreign affiliate for the affiliate’s ordinary taxation year may reasonably be considered to have increased as a result of the triggering event that gave rise to the application of subsection (1.2). ( société de personnes rattaché

e) excluded acquisition or disposition , in respect of a taxation year of a foreign affiliate of a taxpayer, means an acquisition or disposition of an equity interest in a corporation, partnership or trust that can reasonably be considered to result in a change in the aggregate participating percentage of the taxpayer in respect of the affiliate for the taxation year of the affiliate, if

(

a) the change is less than 1%; and

(

b) it cannot reasonably be considered that one of the main reasons the acquisition or disposition occurs as a separate acquisition or disposition from one or more other acquisitions or dispositions is to avoid the application of subsection (1.2). ( acquisition ou disposition exclue )

triggering event means

(

a) an acquisition or disposition of an equity interest in a corporation, partnership or trust;

(

b) a change in the terms or conditions of a share of the capital stock of a corporation or the rights as a member of a partnership or as a beneficiary under a trust; and

(

c) a disposition or change of a right referred to in paragraph 95(6)(a). ( événement déclencheur )

Election for application of subsection (1.2)

(1.4) If the conditions in subsection (1.1) are not met at a particular time in respect of a particular foreign affiliate of a taxpayer resident in Canada, subsection (1.2) applies in respect of the particular affiliate at that time if

(

a) the conditions in paragraph (1.1)(

a) are met in respect of the particular affiliate at the particular time;

(

b) immediately after the particular time there is a disposition of shares of the capital stock of the particular affiliate or another foreign affiliate of the taxpayer that had an equity percentage (as defined in subsection 95(4)) in the particular affiliate by

(

i) the taxpayer, or

(ii)

a controlled foreign affiliate of the taxpayer; and

(

c) the taxpayer and all specified corporations jointly elect in writing to apply subsection (1.2) in respect of the disposition and file the election with the Minister on or before the day that is the earliest filing-due date for all taxpayers making the election in respect of the taxation year in which the transaction to which the election relates occurred, and for this purpose, a specified corporation means a corporation that at or immediately after the particular time meets the following conditions:

(

i) the corporation is resident in Canada,

(ii)

the corporation does not deal at arm’s length with the taxpayer, and

(iii)

the particular affiliate is a foreign affiliate of the corporation, or of a partnership of which the corporation is, directly or indirectly through one or more partnerships, a member.

Election for application of subsection (1.2)

(1.5) A particular taxpayer resident in Canada may elect, by filing with the Minister in prescribed manner a form containing prescribed information on or before the particular taxpayer’s filing-due date for its taxation year that includes a particular time, to have subsection (1.2) apply at the particular time in respect of a particular foreign affiliate of the particular taxpayer if

(

a) immediately after the particular time, there is an acquisition or disposition of shares of the capital stock of a foreign affiliate of another taxpayer that results in a decrease to the surplus entitlement percentage of the other taxpayer in respect of the particular affiliate;

(

b) as a result of the acquisition or disposition described in paragraph (a), subsection (1.2) applies to the other taxpayer resident in Canada in respect of the particular affiliate;

(

c) the surplus entitlement percentage of the particular taxpayer in respect of the particular affiliate increases as a result of the acquisition or disposition described in paragraph (a);

(d)

subsection (1.2) does not apply, in the absence of this subsection, to the particular taxpayer in respect of the acquisition or disposition; and

(

e) the particular affiliate is a foreign affiliate of the particular taxpayer at the particular time.

(2) Subsection 91(1.5) of the Act, as enacted by subsection (1), is repealed.

(3) Subsection 91(4.5) of the Act is replaced by the following:

Exception — hybrid entities

(4.5) For the purposes of subparagraph (4.1)(a)(i), a specified owner in respect of the taxpayer is not to be considered, under the relevant foreign tax law, to own less than all of the shares of the capital stock of a corporation that are considered to be owned for the purposes of this Act solely because the specified owner or the corporation is not treated as a corporation under the relevant foreign tax law.

(4) Subsection (1) is deemed to have come into force on July 12, 2013, except that

(

a) an election referred to in subsection 91(1.4) of the Act, as enacted by subsection (1), is deemed to have been filed by the particular taxpayer and all specified corporations (within the meaning assigned by subsection 91(1.4) of the Act) referred to in that subsection on a timely basis if the election is filed on or before the earliest filing-due date, for all taxpayers making the election, for the respective taxation year that includes the day on which this Act receives royal assent;

(

b) an election referred to in subsection 91(1.5) of the Act, as enacted by subsection (1), is deemed to have been filed by the particular taxpayer referred to in that subsection on a timely basis if the election is filed on or before the filing-due date for the particular taxpayer for its taxation year that includes the day on which this Act receives royal assent;

(

c) subject to paragraph (d), for the purpose of applying subsections 91(1.1) to (1.4) of the Act, as enacted by subsection (1), if the particular time referred to in subsection 91(1.1) of the Act, as enacted by subsection (1), is before September 8, 2017, those subsections are to be read as follows:

Conditions for application of subsection (1.2)

(1.1) Subsection (1.2) applies at a particular time in respect of a particular foreign affiliate of a taxpayer resident in Canada if

(

a) an amount would be included under subsection (1) in computing the income of the taxpayer, in respect of a share of the particular affiliate or another foreign affiliate of the taxpayer that has an equity percentage (as defined in subsection 95(4)) in the particular affiliate, for the taxation year of the particular affiliate (determined without reference to subsection (1.2)) that includes the particular time, if that taxation year ended at the particular time; and

(

b) immediately after the particular time, there is an acquisition or disposition of shares of the capital stock of a foreign affiliate of the taxpayer that results in a change to the surplus entitlement percentage of the taxpayer in respect of the particular affiliate (determined as if the taxpayer were a corporation resident in Canada), unless

(

i) the change is a decrease in the surplus entitlement percentage of the taxpayer (determined as if the taxpayer were a corporation resident in Canada) in respect of the particular affiliate and, as a result of the acquisition or disposition, one or more taxpayers, each of which is a taxable Canadian corporation that does not deal at arm’s length with the taxpayer immediately after the particular time, have increases to their surplus entitlement percentages in respect of the particular affiliate that are, in total, equal to the reduction in the taxpayer’s surplus entitlement percentage in respect of the particular affiliate immediately after the particular time,

(ii)

the acquisition or disposition is on an amalgamation as defined in subsection 87(1), or

(iii)

if one or more such acquisitions or dispositions in respect of which the conditions in subparagraphs (

i) and (ii) are not satisfied occur in a particular taxation year of the particular affiliate (determined without reference to this subsection and subsection (1.2)), the percentage determined by the following formula is not greater than 5%:

A – B where A

is the total of all amounts each of which is the decrease in the surplus entitlement percentage of the taxpayer in respect of the particular affiliate resulting from such acquisition or disposition in the particular year (other than an acquisition or disposition described in subparagraph (

i) or (ii)), and

is the total of all amounts each of which is the increase in the surplus entitlement percentage of the taxpayer in respect of the particular affiliate resulting from such acquisition or disposition in the particular year (other than an acquisition from a person that does not deal at arm’s length with the taxpayer).

Deemed year-end

(1.2) If this subsection applies at a particular time in respect of a foreign affiliate of a particular taxpayer resident in Canada, then for the purposes of this

section and

section 92,

(

a) in respect of the particular taxpayer and each corporation or partnership that is connected to the particular taxpayer, the affiliate’s taxation year that would, in the absence of this subsection, have included the particular time is deemed to have ended at the time (referred to in this

section as the “stub-period end time”) that is immediately before the particular time;

(

b) if the affiliate is, immediately after the particular time, a foreign affiliate of the particular taxpayer or a corporation or partnership that is connected to the particular taxpayer, the affiliate’s next taxation year after the stub-period end time is deemed, in respect of the taxpayer or the connected corporation or partnership, as the case may be, to begin immediately after the particular time; and

(

c) in determining the foreign accrual property income of the affiliate for that taxation year in respect of the particular taxpayer or a corporation or partnership that is connected to the particular taxpayer, all transactions or events that occur at the particular time are deemed to occur at the stub-period end time.

Connected — meaning

(1.3) For the purposes of subsection (1.2),

(

a) a corporation is connected to the particular taxpayer if, at or immediately after the particular time, it is resident in Canada and does not deal at arm’s length with the taxpayer; and

(

b) a partnership is connected to the particular taxpayer if, at or immediately after the particular time, the particular taxpayer or a corporation described in paragraph (

a) is, directly or indirectly through one or more partnerships, a member of the partnership.

Election for application of subsection (1.2)

(1.4) If the conditions in subsection (1.1) are not met at a particular time in respect of a particular foreign affiliate of a taxpayer resident in Canada, subsection (1.2) applies in respect of the particular affiliate at that time if

(

a) the conditions in paragraph (1.1)(

a) are met in respect of the particular affiliate at the particular time;

(

b) immediately after the particular time there is a disposition of shares of the capital stock of the particular affiliate or another foreign affiliate of the taxpayer that had an equity percentage (as defined in subsection 95(4)) in the particular affiliate by

(

i) the taxpayer, or

(ii)

a controlled foreign affiliate of the taxpayer, if the shares are not excluded property of the controlled foreign affiliate immediately after the particular time; and

(

c) the taxpayer and all specified corporations jointly elect, by filing with the Minister in prescribed manner a form containing prescribed information on or before the day that is the earliest filing-due date for all taxpayers making the election in respect of the taxation year in which the transaction to which the election relates occurred, and for this purpose, a specified corporation means a corporation that at or immediately after the particular time meets the following conditions:

(

i) the corporation is resident in Canada,

(ii)

the corporation does not deal at arm’s length with the taxpayer, and

(iii)

the particular affiliate is a foreign affiliate of the corporation, or of a partnership of which the corporation is, directly or indirectly through one or more partnerships, a member.

(

d) paragraph (

c) does not apply in respect of a taxpayer if

(

i) the taxpayer and all connected persons and connected partnerships (within the meanings assigned by subsection 91(1.3) of the Act, as enacted by this subsection) in respect of the taxpayer jointly elect in writing, and

(ii)

the election is filed with the Minister by the later of the taxpayer’s filing-due date for its taxation year that includes September 8, 2017 and six months after the day on which this Act receives royal assent; and

(

e) if paragraph (

c) does not apply in respect of a taxpayer because of paragraph (d),

(

i) section 91 of the Act, as amended by subsection (1), shall be read without reference to its subsection (1.5), and

(ii)

subsection 91(1.1) of the Act, as enacted by subsection (1), shall be read without reference to its subparagraph (b)(

i) and paragraph (

c) in respect of any acquisition of control of the taxpayer that occurs before September 8, 2017.

(5) Subsection (2) applies to taxation years that begin after September 7, 2017.

(6) Subsection (3) applies in respect of the computation of foreign accrual tax applicable to an amount included in computing a taxpayer’s income under subsection 91(1), for a taxation year of the taxpayer that ends after October 24, 2012, in respect of a foreign affiliate of the taxpayer.

(1) Clause 94(3)(b)(ii)(

A) of the Act is replaced by the following:

(

A) the trust’s income for the particular taxation year (other than income — not including dividends or interest — from sources in Canada) is deemed to be from sources in that country and not to be from any other source, and

(2) Subsection (1) applies to taxation years that end after September 15, 2016.

(1) The definition trust company in subsection 95(1) of the Act is replaced by the following:

trust company includes a corporation that is resident in Canada and that is a loan company as defined in subsection 2(1) of the Canadian Payments Act . ( société de fiducie )

(2) The portion of paragraph 95(2)(a.1) of the Act after subparagraph (ii) and before subparagraph (iii) is replaced by the following:

unless more than 90% of the gross revenue of the affiliate for the year from the sale of property (other than a property the income from the sale of which is not included in computing the income from a business other than an active business of the affiliate under this paragraph because of subsection (2.31)) is derived from the sale of such property (other than a property described in subparagraph (ii) the cost of which to any person is a cost referred to in subparagraph (i)) to persons with whom the affiliate deals at arm’s length (which, for this purpose, includes a sale of property to a non-resident corporation with which the affiliate does not deal at arm’s length for sale to persons with whom the affiliate deals at arm’s length) and, where this paragraph applies to include income of the affiliate from the sale of property in the income of the affiliate from a business other than an active business,

(3) The portion of paragraph 95(2)(a.23) of the Act before subparagraph (

i) is replaced by the following:

(a.23)

for the purposes of paragraphs (a.2), (a.21) and (a.24), specified Canadian risk means a risk in respect of

(4) Subsection 95(2) of the Act is amended by adding the following after paragraph (a.23):

(a.24)

for the purposes of paragraph (a.2),

(

i) a risk is deemed to be a specified Canadian risk of a particular foreign affiliate of a taxpayer if

(

A) as part of a transaction or series of transactions, the particular affiliate insured or reinsured the risk,

(

B) the risk would not be a specified Canadian risk if this Act were read without reference to this paragraph, and

(

C) it can reasonably be concluded that one of the purposes of the transaction or series of transactions was to avoid the application of any of paragraphs (a.2) to (a.22), and

(ii)

if the particular affiliate — or a foreign affiliate of another taxpayer, if that other taxpayer or affiliate, or a partnership of which that other taxpayer or affiliate is a member, does not deal at arm’s length with the particular affiliate — enters into one or more agreements or arrangements in respect of the risk,

(

A) activities performed in connection with those agreements or arrangements are deemed to be a separate business, other than an active business, carried on by the particular affiliate or other affiliate, as the case may be, and

(

B) any income of the particular affiliate or other affiliate, as the case may be, from the business (including income that pertains to or is incident to the business) is deemed to be income from a business other than an active business;

(5) Paragraph 95(2)(f.13) of the Act is replaced by the following:

(f.13)

where the calculating currency of a foreign affiliate of a taxpayer is a currency other than Canadian currency, the foreign affiliate shall determine the amount included in computing its foreign accrual property income, in respect of the taxpayer for a taxation year of the foreign affiliate, attributable to its capital gain or taxable capital gain, from the disposition of an excluded property in the taxation year, in Canadian currency by converting the amount of the capital gain, or taxable capital gain, otherwise determined under subparagraph (f.12)(

i) using its calculating currency for the taxation year into Canadian currency using the rate of exchange quoted by the Bank of Canada on the day on which the disposition was made, or another rate of exchange that is acceptable to the Minister;

(6) Paragraph 95(2)(f.15) of the Act is replaced by the following:

(f.15)

for the purposes of applying subparagraph (f)(i), the references in subsection 39(2) to “Canadian currency” are to be read as “the taxpayer’s calculating currency”

(

i) in respect of a debt obligation owing by a foreign affiliate of a taxpayer, or a partnership of which the foreign affiliate is a member, that is a debt referred to in subparagraph (i)(

i) or (ii), and

(ii)

in respect of an agreement described in subparagraph (i)(iii) entered into by a foreign affiliate of a taxpayer, or a partnership of which the foreign affiliate is a member;

(7) Paragraph 95(2)(g.04) of the Act is replaced by the following:

(g.04)

if at any time a corporation resident in Canada or a partnership of which such a corporation is a member (such corporation or partnership referred to in this paragraph as the “borrowing party”) has received a loan from, or become indebted to, a creditor that is a foreign affiliate (referred to in this paragraph as a “creditor affiliate”) of a qualifying entity (in this paragraph within the meaning assigned by subsection 39(2.2)), or that is a partnership (referred to in this paragraph as a “creditor partnership”) of which such an affiliate is a member, and the loan or indebtedness is at a later time repaid, in whole or in part, then the amount of the creditor affiliate’s or creditor partnership’s capital gain or capital loss, as the case may be, determined in the absence of this paragraph, in respect of the repayment, is to be reduced

(

i) in the case of a capital loss

(

A) if the creditor is a creditor affiliate, by an amount, not exceeding the amount of that capital loss so determined, that is determined by the formula

A/B where A

is the amount by which the borrowing party’s capital gain is reduced under paragraph 39(2.1)(

a) in respect of that repayment, and

is the total of all participating percentages, determined at the end of the taxation year of the creditor affiliate that includes the later time, of shares of the capital stock of a foreign affiliate that are owned by qualifying entities and on which an amount would be included under subsection 91(1), on the assumptions that

(

I) the capital loss of the creditor affiliate, determined in the absence of this paragraph, in respect of the repayment of the loan or indebtedness were a capital gain of the creditor affiliate, and

(II)

neither the creditor affiliate nor any other foreign affiliate of a qualifying entity had any other income, gain or loss for any taxation year, and

(

B) if the creditor is a creditor partnership, by an amount, not exceeding the capital loss so determined, that is equal to the amount determined by the formula

A/(B ×

C) where A

is the amount by which the borrowing party’s capital gain is reduced under paragraph 39(2.1)(

a) in respect of that repayment,

is the proportion that the amount of the capital loss of the creditor partnership in respect of the repayment of the loan or indebtedness, determined in the absence of this paragraph, that would be included in the determination of the income, gain or loss of the members of the creditor partnership that are foreign affiliates of qualifying entities is of the amount of the capital loss so determined, and

is the total of all participating percentages, each of which is the participating percentage in respect of a share of the capital stock of a foreign affiliate of a qualifying entity, and that is owned by a qualifying entity, that is relevant in determining the amount that would be included in computing a qualifying entity’s income under subsection 91(1), on the assumptions that

(

I) the capital loss of the creditor partnership, determined in the absence of this paragraph, in respect of the repayment of the loan or indebtedness were a capital gain of the creditor partnership, and

(II)

neither the creditor partnership nor any foreign affiliate of a qualifying entity had any other income, gain or loss for any taxation year, and

(ii)

in the case of a capital gain,

(

A) if the creditor is a creditor affiliate, by an amount, not exceeding that capital gain so determined, that is equal to the amount determined by the formula

A/B where A

is the amount by which the borrowing party is required to reduce its capital loss under paragraph 39(2.1)(

b) in respect of that repayment, and

is the total of all participating percentages, determined at the end of the taxation year of the creditor affiliate that includes the later time, of shares of the capital stock of a foreign affiliate that are owned by qualifying entities and on which an amount would be included under subsection 91(1), on the assumption that neither the creditor affiliate nor any foreign affiliate of a qualifying entity had any other income, gain or loss for any taxation year other than its capital gain, determined in the absence of this paragraph, in respect of the repayment of the loan or indebtedness, and

(

B) if the creditor is a creditor partnership, by an amount, not exceeding the capital loss so determined, that is equal to the amount determined by the following formula

A/(B ×

C) where A

is the amount by which the borrowing party is required to reduce its capital loss under paragraph 39(2.1)(

b) in respect of that repayment,

is the proportion that the amount of the capital gain of the creditor partnership in respect of the repayment of the loan or indebtedness, determined in the absence of this paragraph, that would be included in the determination of the income, gain or loss of the members of the creditor partnership that are foreign affiliates of qualifying entities is of the amount of the capital gain so determined, and

is the total of all participating percentages, each of which is the participating percentage in respect of a share of the capital stock of a foreign affiliate of a qualifying entity, and that is owned by a qualifying entity, that is relevant in determining the amount that would be included in computing a qualifying entity’s income under subsection 91(1), on the assumption that neither the creditor partnership nor any foreign affiliate of a qualifying entity had any other income, gain or loss for any taxation year;

(8) Subsection (1) is deemed to have come into force on October 24, 2001.

(9) Subsection (2) applies in respect of taxation years of a foreign affiliate of a taxpayer that end after October 2012.

(10) Subsections (3) and (4) apply to transactions that occur after March 21, 2017.

(11) Subsection (5) is deemed to have come into force on March 1, 2017.

(12) Subsection (6) applies in respect of taxation years of a foreign affiliate that begin after October 2, 2007.

(13) Subsection (7) applies in respect of portions of loans received and indebtedness incurred before August 20, 2011 that remain outstanding on August 19, 2011 and that are repaid, in whole or in part, before August 20, 2016.

(1) The portion of subsection 96(3) of the Act before paragraph (

a) is replaced by the following:

Agreement or election of partnership members

(3) If 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 10.1(1), 13(4), (4.2) and (16),

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) and (9) to (11),

section 80.04, subsections 86.1(2), 88(3.1), (3.3) and (3.5) and 90(3), the definition relevant cost base in subsection 95(4) and subsections 97(2), 139.1(16) and (17) and 249.1(4) and (6) that, if this Act were read without reference to this subsection, would be a valid agreement, designation or election,

(2) Subsection (1) applies to taxation years that begin after March 21, 2017.

(1) The portion of subsection 97(2) of the Act before paragraph (

a) is replaced by the following:

(2) Notwithstanding any other provision of this Act other than subsections (3) and 13(21.2), where a taxpayer at any time disposes of any property (other than an eligible derivative , as defined in subsection 10.1(5), of the taxpayer if subsection 10.1(6) applies to the taxpayer) that is a capital property, Canadian resource property, foreign resource property or inventory of the taxpayer to a partnership that immediately after that time is a Canadian partnership of which the taxpayer is a member, if the taxpayer and all the other members of the partnership jointly so elect in prescribed form within the time referred to in subsection 96(4),

(2) Subsection (1) applies to taxation years that begin after March 21, 2017.

(1) Section 98 of the Act is amended by adding the following after subsection (6):

Depreciable property — leasehold interests and options

(7) For the purposes of paragraphs (3)(

c) and (5)(c), a leasehold interest in a depreciable property and an option to acquire a depreciable property are depreciable properties.

(2) Subsection (1) applies in respect of partnerships that cease to exist after September 15, 2016.

(1) Paragraph 100(1)(

a) of the Act is replaced by the following:

(a)

1/2 of such portion of the taxpayer’s capital gain for the year from the disposition as may reasonably be regarded as attributable to increases in the value of any partnership property of the partnership that is capital property (other than depreciable property) held directly by the partnership or held indirectly by the partnership through one or more other partnerships, and

(2) Subsection (1) applies in respect of dispositions made after August 13, 2012.

(1) The portion of subsection 104(4) of the Act before paragraph (

a) is replaced by the following:

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 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

(2) The portion of subsection 104(5.8) of the Act before paragraph (

a) is replaced by the following:

Trust transfers

(5.8) Where capital 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,

(3) Subsections (1) and (2) apply to taxation years that begin after 2016.

(1) The portion of subsection 107(4.1) of the Act before paragraph (

a) is replaced by the following:

Where subsection 75(2) applicable to trust

(4.1) Subsection (2.1) applies (and subsection (2) does not apply) in respect of a distribution of any property of a particular personal trust or prescribed trust (other than an excluded property of the particular trust) by the particular trust to a taxpayer who was a beneficiary under the particular trust where

(2) Subsection (1) applies to taxation years that begin after 2016.

(1) The definition excluded property in subsection 108(1) of the Act is replaced by the following:

excluded property , of a trust, means property owned by the trust at, and distributed by the trust after, the end of 2016, if

(

a) the trust is not in its first taxation year that begins after 2016 a trust described in subparagraph (c.1)(iii.1) of the definition principal residence in

section 54, and

(

b) the property is a property that would be the trust’s principal residence (as defined in

section 54) for the taxation year in which the distribution occurs if

(

i) that definition were read without reference to its subparagraph (c.1)(iii.1), and

(ii)

the trust designated the property under that definition as its principal residence for the taxation year; ( bien exclu )

(2) The portion of the definition eligible taxable capital gains in subsection 108(1) of the Act before paragraph (

a) is replaced by the following:

eligible taxable capital gains, of a trust for a taxation year, means the lesser of

(3) Subsection 108(4) of the Act is replaced by the following:

Trust not disqualified

(4) For the purposes of the definition pre-1972 spousal trust in subsection (1), subparagraphs 70(6)(b)(ii) and (6.1)(b)(ii) and paragraphs 73(1.01)(

c) and 104(4)(a), if a trust was created by a taxpayer whether by the taxpayer’s will or otherwise, no person is deemed to have received or otherwise obtained or to be entitled to receive or otherwise obtain the use of any income or capital of the trust solely because of

(

a) the payment, or provision for payment, as the case may be, by the trust of

(

i) any estate, legacy, succession or inheritance duty payable, in consequence of the death of the taxpayer, or a spouse or common-law partner of the taxpayer who is a beneficiary under the trust, in respect of any property of, or interest in, the trust, or

(ii)

any income or profits tax payable by the trust in respect of any income of the trust; or

(

b) the inhabiting at any time by an individual of a housing unit that is, or is in respect of, property that is owned at that time by the trust, i