Budget Implementation Act, 2006, No. 2

2007, c. 2

Annual Statutes

C-28 1 39 55-56 Elizabeth II 2006-2007

A second Act to implement certain provisions of the budget tabled in Parliament on May 2, 2006

Budget Implementation Act, 2006, No. 2

Budget Implementation, 2006, No. 2 2007 2 21 2 2007 90386

SUMMARY

Part 1 implements the following income tax measures proposed or referenced in Budget 2006:

the new Canada Employment Credit;

the new Textbook Tax Credit;

the new tax credit for public transit passes;

the new deduction for tradespeople’s tool expenses;

a complete exemption for scholarship income received in connection with enrolment at an institution which qualifies the student for the education tax credit;

the new Children’s Fitness Tax Credit;

a doubling, to $2,000 from $1,000, of the amount on which the pension income credit is calculated;

an extension of the $500,000 lifetime capital gains exemption, and various intergenerational rollovers, to fishers;

the new Apprenticeship Job Creation Tax Credit;

a reduction of the current 12 per cent small business tax rate to 11.5 per cent for 2008 and to 11 per cent thereafter;

an increase, to $400,000 from $300,000, of the amount that a small business can earn at the small business tax rate, effective January 1, 2007; and

a reduction of the minimum tax on financial institutions.

Part 2 implements the proposal in Budget 2006 to lower the income tax rate on large corporation dividends received by Canadians.

Part 3 implements the proposal in Budget 2006 to reduce excise duties for Canadian vintners and brewers.

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, 2006, No. 2 .

PART 1

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

AMENDMENTS TO THE INCOME TAX ACT

(1) Clause (

B) of the description of B in subparagraph 8(1)( r )(ii) of the Income Tax Act is replaced by the following:

(

B) the greater of

(

I) the amount that is the total of $500 and the amount determined for the taxation year for B in subsection 118(10), and

(II)

5% of the total of

the total of all amounts each of which is the taxpayer’s income from employment for the taxation year as an eligible apprentice mechanic, computed without reference to this paragraph, and

the amount, if any, by which the amount required by paragraph 56(1)( n.1 ) to be included in computing the taxpayer’s income for the taxation year exceeds the amount required by paragraph 60(

p) to be deducted in computing that income, and

(2) Subsection 8(1) of the Act is amended by striking out the word “and” at the end of paragraph ( q ), by adding the word “and” at the end of paragraph (

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

Deduction — tradesperson’s tools

(

s) if the taxpayer is employed as a tradesperson at any time in the taxation year, the lesser of $500 and the amount determined by the formula

A - $1,000 where A

is the lesser of

(

i) the total of all amounts each of which is the cost of an eligible tool acquired by the taxpayer in the year, and

(ii)

the total of

(

A) the amount that would, if this subsection were read without reference to this paragraph, be the taxpayer’s income for the taxation year from employment as a tradesperson in the taxation year, and

(

B) the amount, if any, by which the amount required by paragraph 56(1)( n.1 ) to be included in computing the taxpayer’s income for the taxation year exceeds the amount required by paragraph 60(

p) to be deducted in computing that income.

(3) Subparagraph 8(6)( a )(

i) of the Act is replaced by the following:

(

i) is registered in a program established in accordance with the laws of Canada or of a province that leads to designation under those laws as a mechanic licensed to repair self-propelled motorized vehicles, and

(4) Paragraph 8(6)(

b) of the Act is amended by striking out the word “and” at the end of subparagraph (ii) and by adding the following after subparagraph (iii):

(iv)

is, unless the device or equipment can be used only for the purpose of measuring, locating or calculating, not an electronic communication device or electronic data processing equipment; and

(5) Subsection 8(7) of the Act is replaced by the following:

Eligible tool of tradesperson

(6.1) For the purposes of paragraph (1)( s ), an eligible tool of a taxpayer is a tool (including ancillary equipment) that

(

a) is acquired by the taxpayer on or after May 2, 2006 for use in connection with the taxpayer’s employment as a tradesperson;

(

b) has not been used for any purpose before it is acquired by the taxpayer;

(

c) is certified in prescribed form by the taxpayer’s employer to be required to be provided by the taxpayer as a condition of, and for use in, the taxpayer’s employment as a tradesperson; and

(

d) is, unless the device or equipment can be used only for the purpose of measuring, locating or calculating, not an electronic communication device or electronic data processing equipment.

Cost of tool

(7) Except for the purposes of the description of A in subparagraph (1)( r )(ii) and the description of A in paragraph (1)( s ), the cost to a taxpayer of an eligible tool the cost of which was included in determining the value of one or both of those descriptions in respect of the taxpayer for a taxation year is the amount determined by the formula

K - (K × L/M) where K

is the cost to the taxpayer of the tool determined without reference to this subsection;

(

a) if the tool is a tool to which only paragraph (1)(

r) applies in the taxation year, the amount that would be determined under subparagraph (1)( r )(ii) in respect of the taxpayer for the taxation year if the value of C in that subparagraph were nil,

(

b) if the tool is a tool to which only paragraph (1)(

s) applies in the taxation year, the amount determined under that paragraph to be deductible by the taxpayer in the taxation year, or

(

c) if the tool is a tool to which both paragraphs (1)(

r) and (

s) apply in the taxation year, the amount that is the total of

(

i) the amount that would be determined under subparagraph (1)( r )(ii) in respect of the taxpayer for the taxation year if the value of C in that subparagraph were nil, and

(ii)

the amount determined under paragraph (1)(

s) to be deductible by the taxpayer in the taxation year; and

is the amount that is

(

a) if the tool is a tool to which only paragraph (1)(

r) applies in the taxation year, the value of A determined under subparagraph (1)( r )(ii) in respect of the taxpayer for the taxation year,

(

b) if the tool is a tool to which only paragraph (1)(

s) applies in the taxation year, the amount determined under subparagraph (

i) of the description of A in paragraph (1)(

s) in respect of the taxpayer for the taxation year, and

(

c) if the tool is a tool to which both paragraphs (1)(

r) and (

s) apply in the taxation year, the amount that is the greater of the value of A determined under subparagraph (1)( r )(ii) in respect of the taxpayer for the taxation year and the amount determined under subparagraph (

i) of the description of A in paragraph (1)(

s) in respect of the taxpayer for the taxation year.

(6) Subsection (1) applies to the 2006 and subsequent taxation years except that, for the 2006 taxation year, subclause (B)(

I) of the description of B in subparagraph 8(1)( r )(ii) of the Act, as enacted by subsection (1), is to be read as follows:

(

I) the amount that is the total of $1,000 and the amount, if any, deducted by the taxpayer for the taxation year under paragraph (1)( s ), and

(7) Subsections (2) and (5) apply to the 2006 and subsequent taxation years.

(8) Subsections (3) and (4) apply to property acquired on or after May 2, 2006.

(1) The portion of subsection 14(1.01) of the Act before paragraph (

c) is replaced by the following:

Election re capital gain

(1.01) A taxpayer may, in the taxpayer’s return of income for a taxation year, or with an election under subsection 83(2) filed on or before the taxpayer’s filing-due date for the taxation year, elect that the following rules apply to a disposition made at any time in the year of an eligible capital property in respect of a business, if the taxpayer’s actual proceeds of the disposition exceed the taxpayer’s eligible capital expenditure in respect of the acquisition of the property, that eligible capital expenditure can be determined and, for taxpayers who are individuals, the taxpayer’s exempt gains balance in respect of the business for the taxation year is nil:

(

a) for the purpose of subsection (5) other than the description of A in the definition cumulative eligible capital , the proceeds of disposition of the property are deemed to be equal to the amount of that eligible capital expenditure;

(

b) the taxpayer is deemed to have disposed at that time of a capital property that had, immediately before that time, an adjusted cost base to the taxpayer equal to the amount of that eligible capital expenditure, for proceeds of disposition equal to the actual proceeds; and

(2) Paragraph 14(1.01)(

c) of the Act is replaced by the following:

(

c) if the eligible capital property is

(

i) a qualified farm property (within the meaning assigned by subsection 110.6(1)) of the taxpayer at that time, the capital property deemed by paragraph (

b) to have been disposed of by the taxpayer is deemed to be a qualified farm property of the taxpayer at that time, and

(ii)

a qualified fishing property (within the meaning assigned by subsection 110.6(1)) of the taxpayer at that time, the capital property deemed by paragraph (

b) to have been disposed of by the taxpayer is deemed to be a qualified fishing property of the taxpayer at that time.

(3) Section 14 of the Act is amended by adding the following after subsection (1.01):

Election re property acquired with pre-1972 outlays or expenditures

(1.02) If at any time in a taxation year a taxpayer has disposed of an eligible capital property in respect of which an outlay or expenditure to acquire the property was made before 1972 (which outlay or expenditure would have been an eligible capital expenditure if it had been made or incurred as a result of a transaction that occurred after 1971), the taxpayer’s actual proceeds of the disposition exceed the total of those outlays or expenditures, that total can be determined, subsection 21(1) of the Income Tax Application Rules applies in respect of the disposition and, for taxpayers who are individuals, the taxpayer’s exempt gains balance in respect of the business for the taxation year is nil, the taxpayer may, in the taxpayer’s return of income for the taxation year, or with an election under subsection 83(2) filed on or before the taxpayer’s filing-due date for the taxation year, elect that the following rules apply:

(

a) for the purpose of subsection (5) other than the description of A in the definition cumulative eligible capital , the proceeds of disposition of the property are deemed to be nil;

(

b) the taxpayer is deemed to have disposed at that time of a capital property that had, immediately before that time, an adjusted cost base to the taxpayer equal to nil, for proceeds of disposition equal to the amount determined, in respect of the disposition, under subsection 21(1) of the Income Tax Application Rules ; and

(

c) if the eligible capital property is at that time a qualified farm property (within the meaning assigned by subsection 110.6(1)) of the taxpayer, the capital property deemed by paragraph (

b) to have been disposed of by the taxpayer is deemed to have been at that time a qualified farm property of the taxpayer.

Non-application of subsections (1.01) and (1.02)

(1.03) Subsections (1.01) and (1.02) do not apply to a disposition by a taxpayer of a property

(

a) that is goodwill; or

(

b) that was acquired by the taxpayer

(

i) in circumstances where an election was made under subsection 85(1) or (2) and the amount agreed on in that election in respect of the property was less than the fair market value of the property at the time it was so acquired, and

(ii)

from a person or partnership with whom the taxpayer did not deal at arm’s length and for whom the eligible capital expenditure in respect of the acquisition of the property cannot be determined.

(4) Paragraph 14(1.02)(

c) of the Act, as enacted by subsection (3), is replaced by the following:

(

c) if the eligible capital property is

(

i) a qualified farm property (within the meaning assigned by subsection 110.6(1)) of the taxpayer at that time, the capital property deemed by paragraph (

b) to have been disposed of by the taxpayer is deemed to be a qualified farm property of the taxpayer at that time, and

(ii)

a qualified fishing property (within the meaning assigned by subsection 110.6(1)) of the taxpayer at that time, the capital property deemed by paragraph (

b) to have been disposed of by the taxpayer is deemed to be a qualified fishing property of the taxpayer at that time.

(5) Section 14 of the Act is amended by adding the following after subsection (1.1):

Deemed capital gain

(1.2) For the purposes of

section 110.6 and paragraph 3(

b) as it applies for the purposes of that section, an amount included under paragraph (1)(

b) in computing a taxpayer’s income for a particular taxation year from a fishing business is deemed to be a taxable capital gain of the taxpayer for the year from the disposition in the year of qualified fishing property to the extent of the lesser of

(

a) the amount included under paragraph (1)(

b) in computing the taxpayer’s income for the particular year from the fishing business, and

(

b) the amount determined by the formula

A - B where A

is the amount by which

(i)

½ of the total of all amounts each of which is the taxpayer’s proceeds from a disposition on or after May 2, 2006 and in the particular taxation year or a preceding taxation year of eligible capital property (referred to in this subsection as a “disposed property”) that was at the time of the disposition a qualified fishing property (within the meaning assigned by subsection 110.6(1)) of the taxpayer exceeds the total of

(ii)

½ of the total of all amounts each of which is

(

A) an eligible capital expenditure of the taxpayer in respect of the fishing business that was made or incurred in respect of a disposed property, or

(

B) an outlay or expense of the taxpayer that was not deductible in computing the taxpayer’s income and that was made or incurred for the purpose of making a disposition of a disposed property, and

is the total of all amounts each of which is an amount deemed by this

section to be a taxable capital gain of the taxpayer for a taxation year preceding the particular year from the disposition of qualified fishing property of the taxpayer.

(6) The description of E in the definition cumulative eligible capital in subsection 14(5) of the Act is replaced by following:

is the total of all amounts each of which is ¾ of the amount, if any, by which

(

a) an amount that the taxpayer has or may become entitled to receive, after the taxpayer’s adjustment time and before that time, on account of capital in respect of the business carried on or formerly carried on by the taxpayer, other than an amount that

(

i) is included in computing the taxpayer’s income, or deducted in computing, for the purposes of this Act, any balance of undeducted outlays, expenses or other amounts for the year or a preceding taxation year,

(ii)

reduces the cost or capital cost of a property or the amount of an outlay or expense, or

(iii)

is included in computing any gain or loss of the taxpayer from a disposition of a capital property

exceeds

(

b) all outlays and expenses that were not otherwise deductible in computing the taxpayer’s income and were made or incurred by the taxpayer for the purpose of obtaining the amount described by paragraph ( a ), and

(7) Subsection (1) applies to dispositions of eligible capital property that occur in taxation years that end after February 27, 2000, except that, in its application to those dispositions of eligible capital property that occur before December 21, 2002, the portion of subsection 14(1.01) of the Act before paragraph ( c ), as enacted by subsection (1), is to be read as follows:

(1.01) A taxpayer may, in the taxpayer’s return of income for a taxation year, elect that the following rules apply to a disposition made at any time in the taxation year of an eligible capital property (other than goodwill) in respect of a business, if the taxpayer’s actual proceeds of the disposition exceed the taxpayer’s cost of the property, that cost can be determined and, for taxpayers who are individuals, the taxpayer’s exempt gains balance in respect of the business for the taxation year is nil:

(

a) for the purposes of subsection (5), the proceeds of disposition of the property are deemed to be equal to that cost;

(

b) the taxpayer is deemed to have disposed at that time of a capital property that had, immediately before that time, an adjusted cost base to the taxpayer equal to that cost, for proceeds of disposition equal to the actual proceeds; and

(8) Subsections (2), (4) and (5) apply to dispositions of property that occur on or after May 2, 2006.

(9) Subsection (3) applies to dispositions of eligible capital property that occur after December 20, 2002, except that, in applying subsection 14(1.03) of the Act, as enacted by subsection (3), to dispositions that occur on or before February 27, 2004, subsection 14(1.03) is to be read without reference to its paragraph ( b ).

(10) Subsection (6) applies to amounts that become receivable on or after May 2, 2006, except that it does not apply to an amount that became receivable by a taxpayer before August 31, 2006 if the taxpayer so elects by filing with the Minister of National Revenue an election in writing on or before the taxpayer’s filing-due date for the taxpayer’s taxation year that includes August 31, 2006.

(1) Subsection 40(1.1) of the Act is replaced by the following:

Reserve — property disposed of to a child

(1.1) In computing the amount that a taxpayer may claim under subparagraph (1)( a )(iii) in computing the taxpayer’s gain from the disposition of a property, that subparagraph shall be read as if the references in that subparagraph to “1/5” and “4” were references to “1/10” and “9” respectively, if,

(

a) the property was disposed of by the taxpayer to the taxpayer’s child,

(

b) that child was resident in Canada immediately before the disposition, and

(

c) the property was immediately before the disposition,

(

i) any land in Canada or depreciable property in Canada of a prescribed class that was used by the taxpayer, the spouse or common-law partner of the taxpayer, a child or a parent of the taxpayer in a farming or fishing business carried on in Canada,

(ii)

a share of the capital stock of a family farm corporation of the taxpayer or an interest in a family farm partnership of the taxpayer (such a share or an interest having the meaning assigned by subsection 70(10)),

(iii)

a qualified small business corporation share of the taxpayer (within the meaning assigned by subsection 110.6(1)), or

(iv)

a share of the capital stock of a family fishing corporation of the taxpayer or an interest in a family fishing partnership (such a share or an interest having the meaning assigned by subsection 70(10)).

(2) Subsection (1) applies to dispositions of property that occur on or after May 2, 2006.

(1) Subsection 44(1.1) of the Act is replaced by the following:

Reserve — property disposed of to a child

(1.1) In computing the amount that a taxpayer may claim under subparagraph (1)( e )(iii) in computing the taxpayer’s gain from the disposition of a former property of the taxpayer, that subparagraph shall be read as if the references in that subparagraph to “1/5” and “4” were references to “1/10” and “9” respectively if that former property is real or immovable property in respect of the disposition of which, because of subsection 73(3), the rules in subsection 73(3.1) applied to the taxpayer and a child of the taxpayer.

(2) Subsection (1) applies to dispositions of property that occur on or after May 2, 2006.

(1) Paragraph 56(1)(

k) of the Act is replaced by the following:

Certain tools of an employee, re proceeds

(

k) all amounts received in the year by a person or partnership (in this paragraph referred to as the “vendor”) as consideration for the disposition by the vendor of a property the cost of which was included in computing an amount under paragraph 8(1)(

r) or (

s) in respect of the vendor or in respect of a person with whom the vendor does not deal at arm’s length, to the extent that the total of those amounts received in respect of the disposition in the year and in preceding taxation years exceeds the total of the cost to the vendor of the property immediately before the disposition and all amounts included in respect of the disposition under this paragraph in computing the vendor’s income for a preceding taxation year, unless the property was acquired by the vendor in circumstances to which subsection 85(5.1) or subsection 97(5) applied;

(2) Subsection 56(1) of the Act is amended by adding the following after paragraph ( n ):

Apprenticeship incentive grant

( n.1 )

amounts received by the taxpayer in the year under the Apprenticeship Incentive Grant program administered by the Department of Human Resources and Social Development;

(3) Subsection 56(3) of the Act is replaced by the following:

Exemption for scholarships, fellowships, bursaries and prizes

(3) For the purpose of subparagraph (1)( n )(ii), a taxpayer’s scholarship exemption for a taxation year is the total of

(

a) the total of all amounts each of which is the amount included under subparagraph (1)( n )(

i) in computing the taxpayer’s income for the taxation year in respect of a scholarship, fellowship or bursary received in connection with the taxpayer’s enrolment in an educational program in respect of which an amount may be deducted under subsection 118.6(2) in computing the taxpayer’s tax payable under this Part for the taxation year,

(

b) the total of all amounts each of which is the lesser of

(

i) the amount included under subparagraph (1)( n )(

i) in computing the taxpayer’s income for the taxation year in respect of a scholarship, fellowship, bursary or prize that is to be used by the taxpayer in the production of a literary, dramatic, musical or artistic work, and

(ii)

the total of all amounts each of which is an expense incurred by the taxpayer in the taxation year for the purpose of fulfilling the conditions under which the amount described in subparagraph (

i) was received, other than

(

A) personal or living expenses of the taxpayer (except expenses in respect of travel, meals and lodging incurred by the taxpayer in the course of fulfilling those conditions and while absent from the taxpayer’s usual place of residence for the period to which the scholarship, fellowship, bursary or prize, as the case may be, relates),

(

B) expenses for which the taxpayer is entitled to be reimbursed, and

(

C) expenses that are otherwise deductible in computing the taxpayer’s income, and

(

c) the lesser of $500 and the amount by which the total described in subparagraph (1)( n )(

i) for the taxation year exceeds the total of the amounts determined under paragraphs (

a) and ( b ).

(4) Subsection 56(8) of the Act is replaced by the following:

CPP/QPP and UCCB amounts for previous years

(8) Notwithstanding subsections (1) and (6), if

(

a) one or more amounts are received by an individual (other than a trust) in a taxation year as, on account of, in lieu of payment of or in satisfaction of, any benefit under the Universal Child Care Benefit Act , the Canada Pension Plan or a provincial pension plan as defined in

section 3 of the Canada Pension Plan , and

(

b) a portion, not less than $300, of the total of those amounts relates to one or more preceding taxation years,

that portion shall, at the option of the individual, not be included in the individual’s income.

(5) Subsections (1), (3) and (4) apply to the 2006 and subsequent taxation years.

(6) Subsection (2) applies to the 2007 and subsequent taxation years.

(1) Section 60 of the Act is amended by adding the following after paragraph ( o.1 ):

Repayment of apprenticeship incentive grant

(

p) the total of all amounts each of which is an amount paid in the taxation year as a repayment under the Apprenticeship Incentive Grant program of an amount that was included because of paragraph 56(1)( n.1 ) in computing the taxpayer’s income for the taxation year or a preceding taxation year;

(2) Subsection (1) applies to the 2007 and subsequent taxation years.

(1) Paragraph (

b) of the definition earned income in subsection 63(3) of the Act is replaced by the following:

(

b) all amounts that are included, or that would, but for paragraph 81(1)(

a) or subsection 81(4), be included, because of

section 6 or 7 or paragraph 56(1) ( n ), ( n.1 ), (

o) or ( r ), in computing the taxpayer’s income,

(2) Subsection (1) applies to the 2007 and subsequent taxation years.

(1) Clause (ii)(

J) of the description of A in paragraph 64(

a) of the Act is replaced by the following:

(

J) where the taxpayer has an impairment in physical or mental functions, for the cost of attendant care services provided in Canada and to a person who is neither the taxpayer’s spouse or common-law partner nor under 18 years of age, if the taxpayer is a taxpayer in respect of whom an amount may be deducted because of

section 118.3, or if the taxpayer has been certified in writing by a medical practitioner to be a person who, because of that impairment is, and is likely to be indefinitely, dependent on others for their personal needs and care and who as a result requires a full-time attendant,

(2) Subsection (1) applies to the 2005 and subsequent taxation years.

(1) Subsections 70(9) to (9.3) of the Act are replaced by the following:

When subsection (9.01) applies

(9) Subsection (9.01) applies to a taxpayer and a child of the taxpayer in respect of land in Canada or depreciable property in Canada of a prescribed class of the taxpayer in respect of which subsection (5) would, if this Act were read without reference to this subsection, apply if

(

a) the property was, before the death of the taxpayer, used principally in a fishing or farming business carried on in Canada in which the taxpayer, the spouse or common-law partner of the taxpayer or a child or a parent of the taxpayer was actively engaged on a regular and continuous basis (or, in the case of property used in the operation of a woodlot, was engaged to the extent required by a prescribed forest management plan in respect of that woodlot);

(

b) the child of the taxpayer was resident in Canada immediately before the day on which the taxpayer died; and

(

c) as a consequence of the death of the taxpayer, the property is transferred to and becomes vested indefeasibly in the child within the period ending 36 months after the death of the taxpayer or, if written application has been made to the Minister by the taxpayer’s legal representative within that period, within any longer period that the Minister considers reasonable in the circumstances.

Transfer of farming and fishing property to child

(9.01) If, because of subsection (9), this subsection applies to the taxpayer and a child of the taxpayer in respect of a property of the taxpayer that has been transferred to the child as a consequence of the death of the taxpayer, the following rules apply:

(

a) where the taxpayer’s legal representative does not elect in the taxpayer’s return of income under this Part for the year in which the taxpayer died, to have paragraph (

b) apply to the taxpayer and the child in respect of the property,

(i)

paragraphs (5)(

a) and (

b) and

section 69 do not apply to the taxpayer and the child in respect of the property,

(ii)

the taxpayer is deemed to have

(

A) disposed of the property immediately before the taxpayer’s death, and

(

B) received, at the time of the disposition of the property, proceeds of disposition in respect of that disposition of the property equal to

(

I) where the property was depreciable property of a prescribed class, the lesser of

the capital cost to the taxpayer of the property, and

the amount, determined immediately before the time of the disposition of the property, that is that proportion of the undepreciated capital cost of property of that class to the taxpayer that the capital cost to the taxpayer of the property is of the capital cost to the taxpayer of all property of that class that had not, at or before that time, been disposed of, and

(II)

where the property is land (other than land to which subclause (

I) applies), the adjusted cost base to the taxpayer of the property immediately before the time of the disposition of the property,

(iii)

the child is, immediately after the time of the disposition of the property, deemed to have acquired the property at a cost equal to the taxpayer’s proceeds of disposition in respect of the disposition of the property determined under subparagraph (ii), and

(iv)

where the property was depreciable property of a prescribed class, paragraphs (5)(

c) and (

d) apply to the taxpayer and the child in respect of the property as if the references in those paragraphs to “paragraph ( a )” and “paragraph ( b )” were read as “subparagraph (9.01)( a )(ii)” and “subparagraph (9.01)( a )(iii)”, respectively; and

(

b) where the taxpayer’s legal representative elects, in the taxpayer’s return of income under this Part for the taxation year in which the taxpayer died, to have this paragraph apply to the taxpayer in respect of the property,

(i)

paragraphs (5)(

a) and (

b) and

section 69 do not apply to the taxpayer and the child in respect of the property,

(ii)

the taxpayer is deemed to have

(

A) disposed of the property immediately before the taxpayer’s death, and

(

B) received, at the time of the disposition of the property, proceeds of disposition in respect of that disposition of the property equal to

(

I) where the property was depreciable property of a prescribed class, the amount that the legal representative designates, which must not be greater than the greater of nor less than the lesser of

the fair market value of the property immediately before the time of the disposition of the property, and

the lesser of the capital cost to the taxpayer of the property and the amount, determined immediately before the time of the disposition of the property, that is that proportion of the undepreciated capital cost of property of that class to the taxpayer that the capital cost to the taxpayer of the property is of the capital cost to the taxpayer of all property of that class that had not, at or before that time, been disposed of, and

(II)

where the property is land (other than land to which subclause (

I) applies), the amount that the legal representative designates, which must not be greater than the greater of nor less than the lesser of

the fair market value of the property immediately before the time of the disposition of the property, and

the adjusted cost base to the taxpayer of the property immediately before the time of the disposition of the property,

(iii)

(iv)

where the property was depreciable property of a prescribed class, paragraphs (5)(

c) and (

d) apply to the taxpayer in respect of the property as if the references in those paragraphs to “paragraph ( a )” and “paragraph ( b )” were read as “subparagraph (9.01)( b )(ii)” and “subparagraph (9.01)( b )(iii)”, respectively,

(

v) except for the purpose of this subparagraph,

(

A) where the amount designated by the taxpayer’s legal representative under subclause (ii)(B)(I), exceeds the greater of the amounts determined under sub-subclauses (ii)(B)(I)1 and 2 in respect of the property, the amount designated is deemed to be equal to the greater of those amounts, and

(

B) where the amount designated by the taxpayer’s legal representative under subclause (ii)(B)(II) exceeds the greater of the amounts determined under sub-subclauses (ii)(B)(II)1 and 2 in respect of the property, the amount designated is deemed to be equal to the greater of those amounts, and

(vi)

except for the purpose of this subparagraph,

(

A) where the amount designated by the taxpayer’s legal representative under subclause (ii)(B)(

I) is less than the lesser of the amounts determined under sub-subclauses (ii)(B)(I)1 and 2 in respect of the property, the amount designated is deemed to be equal to the lesser of those amounts, and

(

B) where the amount designated by the taxpayer’s legal representative under subclause (ii)(B)(II) is less than the lesser of the amounts determined under sub-subclauses (ii)(B)(II)1 and 2 in respect of the property, the amount designated is deemed to be equal to the lesser of those amounts.

When subsection (9.11) applies

(9.1) Subsection (9.11) applies to a trust and a child of the settlor of the trust in respect of a property in respect of which subsection 104(4) or (5) would, if this Act were read without reference to this subsection, apply to the trust as a consequence of the death of the beneficiary under the trust who was a spouse or a common-law partner of the settlor if

(

a) the property (or property for which the property was substituted) was transferred to the trust by the settlor;

( b )

subsection (6), subsection 73(1) (as that subsection applied to transfers before 2000) or subparagraph 73(1.01)( c )(

i) applied to the settlor and the trust in respect of the transfer referred to in paragraph ( a );

(

c) the property is, immediately before the beneficiary’s death, land or a depreciable property of a prescribed class of the trust that was used in a fishing or farming business carried on in Canada;

(

d) the child of the settlor is, immediately before the beneficiary’s death, resident in Canada; and

(

e) as a consequence of the beneficiary’s death, the property is transferred to and becomes vested indefeasibly in the child of the settlor within the period ending 36 months after that beneficiary’s death or, if written application has been made to the Minister by the taxpayer’s legal representative within that period, within any longer period that the Minister considers reasonable in the circumstances.

Transfer of farming and fishing property from trust to settlor’s children

(9.11) If, because of subsection (9.1), this subsection applies to the trust and a child of the settlor of the trust in respect of a property of the trust that has been distributed to the child as a consequence of the death of the beneficiary under the trust who was the spouse or common-law partner of the settlor, the following rules apply:

(

a) where the trust does not elect, in its return of income under this Part for the taxation year in which the beneficiary died, to have paragraph (

b) apply to the trust in respect of the property,

(i)

subsections 104(4) and (5) and

section 69 do not apply to the trust and the child in respect of the property,

(ii)

the trust is deemed to have

(

A) disposed of the property immediately before the beneficiary’s death, and

(

B) received, at the time of the disposition, proceeds of disposition in respect of that disposition equal to

(

I) where the property was depreciable property of a prescribed class, the lesser of

the capital cost to the trust of the property, and

the amount, determined immediately before the time of the disposition of the property, that is that proportion of the undepreciated capital cost of property of that class to the trust that the capital cost to the trust of the property is of the capital cost to the trust of all property of that class that had not, at or before that time, been disposed of, and

(II)

where the property is land (other than land to which subclause (

I) applies), the adjusted cost base to the trust of the property immediately before the time of the disposition of the property, and

(iii)

the child is, immediately after the time of the disposition of the property, deemed to have acquired the property at a cost equal to the trust’s proceeds of disposition in respect of the disposition of the property determined under subparagraph (ii);

(

b) where the trust elects, in the trust’s return of income under this Part for the taxation year in which the beneficiary died, to have this paragraph apply to the trust in respect of the property,

(i)

subsections 104(4) and (5) do not apply to the trust in respect of the property,

(ii)

the trust is deemed to have

(

A) disposed of the property immediately before the beneficiary’s death, and

(

B) received, at the time of the disposition of the property, proceeds of disposition in respect of the disposition of the property equal to

(

I) where the property was depreciable property of a prescribed class, the amount that the trust designates, which must not be greater than the greater of nor less than the lesser of

the fair market value of the property immediately before the time of the disposition of the property, and

the lesser of the capital cost to the trust of the property and the amount, determined immediately before the time of the disposition of the property, that is that proportion of the undepreciated capital cost of property of that class to the trust that the capital cost to the trust of the property is of the capital cost to the trust of all property of that class that had not, at or before that time, been disposed of, and

(II)

where the property is land (other than land to which subclause (

I) applies), the amount that the trust designates, which must not be greater than the greater of nor less than the lesser of

the fair market value of the property immediately before the time of the disposition of the property, and

the adjusted cost base to the trust of the property immediately before the time of the disposition of the property,

(iii)

(iv)

except for the purpose of this subparagraph,

(

A) where the amount designated by the trust under subclause (ii)(B)(

I) exceeds the greater of the amounts determined under sub-subclauses (ii)(B)(I)1 and 2 in respect of the property, the amount designated is deemed to be equal to the greater of those amounts, and

(

B) where the amount designated by the trust under subclause (ii)(B)(II) exceeds the greater of the amounts determined under sub-subclauses (ii)(B)(II)1 and 2 in respect of the property, the amount designated is deemed to be equal to the greater of those amounts, and

(

v) except for the purpose of this subparagraph,

(

A) where the amount designated by the trust under subclause (ii)(B)(

I) is less than the lesser of the amounts determined under sub-subclauses (ii)(B)(I)1 and 2 in respect of the property, the amount designated is deemed to be equal to the lesser of those amounts, and

(

B) where the amount designated by the trust under subclause (ii)(B)(II), is less than the lesser of the amounts determined under sub-subclauses (ii)(B)(II)1 and 2 in respect of the property, the amount designated is deemed to be equal to the lesser of those amounts;

(

c) where paragraph (

a) or ( b ) (each of which is referred to in this subsection as the “relevant provision”) applied to the trust in respect of a property that was depreciable property of a prescribed class (other than where the trust’s proceeds of disposition of the property under the relevant provision are redetermined under subsection 13(21.1)),

(

i) the capital cost to the child of the property, immediately after the time of the disposition, is deemed to be the amount that was the capital cost to the trust of the property, immediately before the time of the disposition, and

(ii)

the amount, if any, by which the capital cost to the trust of the property, immediately before the time of the disposition, exceeds the amount determined under the relevant provision to be the cost of the property to the child, immediately after the time of the disposition, is, for the purposes of sections 13 and 20 and any regulations made for the purpose of paragraph 20(1)( a ), deemed to have been allowed to the child in respect of the property under regulations made for the purpose of paragraph 20(1)(

a) in computing income for taxation years that ended before the child acquired the property; and

(

d) where the relevant provision applied to the trust in respect of a property and the trust’s proceeds of disposition in respect of the disposition of the property determined under the relevant provision are redetermined under subsection 13(21.1), notwithstanding the relevant provision,

(

i) where the capital cost to the trust of the property, immediately before the time of the disposition, exceeds the amount redetermined under subsection 13(21.1), for the purposes of sections 13 and 20 and any regulations made for the purpose of paragraph 20(1)( a ),

(

A) the capital cost to the child of the property, immediately after the time of the disposition, is deemed to be the amount that was the capital cost to the trust of the property, immediately before the time of the disposition, and

(

B) the amount, if any, by which the capital cost to the trust of the property, immediately before the time of the disposition, exceeds the amount redetermined under subsection 13(21.1) is deemed to have been allowed to the child in respect of the property under regulations made for the purpose of paragraph 20(1)(

a) in computing income for taxation years that ended before the child acquired the property, and

(ii)

where the property is land, the cost to the child of the property is deemed to be the amount that was the trust’s proceeds of disposition as redetermined under subsection 13(21.1).

When subsection (9.21) applies

(9.2) Subsection (9.21) applies to a taxpayer and a child of the taxpayer in respect of a property of the taxpayer in respect of which subsection (5) would, if this Act were read without reference to this subsection, apply to the taxpayer and the child if

(

a) the property was, immediately before the death of the taxpayer, a share of the capital stock of a family fishing corporation of the taxpayer, an interest in a family fishing partnership of the taxpayer, a share of the capital stock of a family farm corporation of the taxpayer or an interest in a family farm partnership of the taxpayer;

(

b) the child of the taxpayer was resident in Canada immediately before the day on which taxpayer died; and

(

Transfer of family farm and fishing corporations and partnerships

(9.21) If, because of subsection (9.2), this subsection applies to the taxpayer and a child of the taxpayer in respect of a property of the taxpayer that has been transferred to the child as a consequence of the death of the taxpayer, the following rules apply:

(

a) where the taxpayer’s legal representative does not elect, in the taxpayer’s return of income under this Part for the taxation year in which the taxpayer died, to have paragraph (

b) apply to the taxpayer in respect of the property,

(i)

paragraphs (5)(

a) and (

b) and

section 69 do not apply to the taxpayer and the child in respect of the property,

(ii)

where the property is, immediately before the death of the taxpayer, a share of the capital stock of a family fishing corporation of the taxpayer, or a share of the capital stock of a family farm corporation of the taxpayer,

(

A) the taxpayer is deemed to have

(

I) disposed of the property immediately before the taxpayer’s death, and

(II)

received proceeds of disposition in respect of that disposition equal to the adjusted cost base to the taxpayer, immediately before the time of that disposition, of the property, and

(

B) the child is, immediately after the time of the disposition, deemed to have acquired the property at a cost equal to the taxpayer’s proceeds of disposition in respect of that disposition determined under clause (A), and

(iii)

where the property is, immediately before the death of the taxpayer, a partnership interest described in paragraph (9.2)( a ) (other than a partnership interest to which subsection 100(3) applies),

(

A) the taxpayer is, except for the purpose of paragraph 98(5)( g ), deemed not to have disposed of the property as a consequence of the taxpayer’s death,

(

B) the child is deemed to have acquired the property at the time of the taxpayer’s death at a cost equal to the cost to the taxpayer of the interest immediately before the time that is immediately before the time of the taxpayer’s death, and

(

C) each amount required by subsection 53(1) or (2) to be added or deducted in computing the adjusted cost base to the taxpayer, immediately before the time of the taxpayer’s death, of the property is deemed to be an amount required by subsection 53(1) or (2) to be added or deducted in computing, at any time at or after the time of the taxpayer’s death, the adjusted cost base to the child of the property; and

(

(i)

paragraphs (5)(

a) and (

b) and

section 69 do not apply to the taxpayer and the child in respect of the property,

(ii)

subject to subparagraph (iii), where the property is, immediately before the taxpayer’s death, a share of the capital stock of a family fishing corporation of the taxpayer, a share of the capital stock of a family farm corporation of the taxpayer, an interest in a family fishing partnership of the taxpayer or an interest in a family farm partnership of the taxpayer,

(

A) the taxpayer is deemed to have

(

I) disposed of the property immediately before the taxpayer’s death, and

(II)

received, at the time of the disposition of the property, proceeds of disposition in respect of the disposition of the property equal to the amount that the taxpayer’s legal representative designates, which must not be greater than the greater of nor less than the lesser of

the fair market value of the property immediately before the taxpayer’s death, and

the adjusted cost base to the taxpayer of the property immediately before the time of the disposition,

(

B) the child is, immediately after the time of the disposition, deemed to have acquired the property at a cost equal to the taxpayer’s proceeds of disposition in respect of the disposition of the property determined under clause (A),

(

C) except for the purpose of this clause, where the amount designated by the taxpayer’s legal representative under subclause (A)(II) exceeds the greater of the amounts determined under sub-subclauses (A)(II)1 and 2 in respect of the property, the amount designated is deemed to be equal to the greater of those amounts, and

(

D) except for the purpose of this clause, where the amount designated by the taxpayer’s legal representative under subclause (A)(II) is less than the lesser of the amounts determined under sub-subclauses (A)(II)1 and 2 in respect of the property, the amount designated is deemed to be equal to the lesser of those amounts, and

(iii)

where the property is, immediately before the death of the taxpayer, a partnership interest described in paragraph (9.2)( a ) (other than a partnership interest to which subsection 100(3) applies), and the taxpayer’s legal representative further elects, in the taxpayer’s return of income under this Part for the taxation year in which the taxpayer died, to have this subparagraph apply to the taxpayer in respect of the property,

(

A) the taxpayer is, except for the purpose of paragraph 98(5)( g ), deemed not to have disposed of the property as a consequence of the taxpayer’s death,

(

C) each amount required by subsection 53(1) or (2) to be added or deducted in computing the adjusted cost base to the taxpayer, immediately before the time of the taxpayer’s death, of the property is deemed to be an amount required by subsection 53(1) or (2) to be added or deducted in computing, at any time at or after the taxpayer’s death, the adjusted cost base to the child of the property.

When subsection (9.31) applies

(9.3) Subsection (9.31) applies to a trust and a child of the settlor of the trust in respect of a property in respect of which subsection 104(4) would, if this Act were read without reference to this subsection, apply to the trust as a consequence of the death of the beneficiary under the trust who was a spouse or a common-law partner of the settlor of the trust if

(

a) the property (or property for which the property was substituted) was transferred to the trust by the settlor and was, immediately before that transfer, a share of the capital stock of a family farm corporation of the settlor, a share of the capital stock of a family fishing corporation of the settlor, an interest in a family farm partnership of the settlor or an interest in a family fishing partnership of the settlor;

( b )

subsection (6), subsection 73(1) (as that subsection applied to transfers before 2000) or subparagraph 73(1.01)( c )(

i) applied to the settlor and the trust in respect of the transfer referred to in paragraph ( a );

(

c) the property is, immediately before the beneficiary’s death,

(

i) a share of the capital stock of a Canadian corporation that would, immediately before that beneficiary’s death, be a share of the capital stock of a family farm corporation of the settlor, if the settlor owned the share at that time and paragraph (

a) of the definition share of the capital stock of a family farm corporation , in subsection (10) were read without the words “in which the person or a spouse, common-law partner, child or parent of the person was actively engaged on a regular and continuous basis (or, in the case of property used in the operation of a woodlot, was engaged to the extent required by a prescribed forest management plan in respect of that woodlot)”,

(ii)

a share of the capital stock of a Canadian corporation that would, immediately before the beneficiary’s death, be a share of the capital stock of a family fishing corporation of the settlor, if the settlor owned the share at that time and paragraph (

a) of the definition share of the capital stock of a family fishing corporation in subsection (10) were read without reference to the words “in which the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual was actively engaged on a regular and continuous basis”, or

(iii)

a partnership interest in a partnership that carried on the business of farming or fishing in Canada in which it used all or substantially all of the property;

(

d) the child of the settlor was, immediately before that beneficiary’s death, resident in Canada; and

(

e) as a consequence of that beneficiary’s death, the property is transferred to and becomes vested indefeasibly in the child within the period ending 36 months after that beneficiary’s death or, if written application has been made to the Minister by the taxpayer’s legal representative within that period, within any longer period that the Minister considers reasonable in the circumstances.

Transfer of family farm or fishing corporation or family farm or fishing partnership from trust to children of settlor

(9.31) If, because of subsection (9.3), this subsection applies to the trust and a child of the settlor of the trust in respect of a property of the trust that has been distributed to the child as a consequence of the death of the beneficiary under the trust who was a spouse or common-law partner of the settlor of the trust, the following rules apply:

(

a) where the trust does not elect, in its return of income under this Part for the taxation year in which the beneficiary died, to have paragraph (

b) apply to the trust in respect of the property

(

i) section 69 and subsection 104(4) do not apply to the trust and the child in respect of the property,

(ii)

where the property is, immediately before the beneficiary’s death, a share described in subparagraph (9.3)( c )(

i) or (ii),

(

A) the trust is deemed to have

(

I) disposed of the property immediately before the beneficiary’s death, and

(II)

received proceeds of disposition in respect of that disposition equal to the adjusted cost base to the trust of the property immediately before the time of that disposition, and

(

B) the child is, immediately after the time of the disposition, deemed to have acquired the property at a cost equal to the trust’s proceeds of disposition in respect of that disposition of the property determined under clause (A), and

(iii)

where the property is, immediately before the beneficiary’s death, a partnership interest described in subparagraph (9.3)( c )(iii) (other than a partnership interest to which subsection 100(3) applies),

(

A) the trust is, except for the purpose of paragraph 98(5)( g ), deemed not to have disposed of the property as a consequence of the beneficiary’s death,

(

B) the child is deemed to have acquired the property, at the time of the beneficiary’s death, at a cost equal to the cost to the trust of the interest immediately before the time that is immediately before the time of the beneficiary’s death, and

(

C) each amount required by subsection 53(1) or (2) to be added or deducted in computing the adjusted cost base to the trust, immediately before the beneficiary’s death, of the property is deemed to be an amount required by subsection 53(1) or (2) to be added or deducted in computing, at or after the time of the beneficiary’s death, the adjusted cost base to the child of the property; and

(

b) where the trust elects, in its return of income under this Part for the taxation year in which the beneficiary died, to have this paragraph apply to the trust in respect of the property

(i)

subsection 104(4) does not apply to the trust in respect of the property and

section 69 does not apply to the trust or the child in respect of the transfer of the property,

(ii)

subject to subparagraph (iii), where the property is, immediately before the beneficiary’s death, a share of the capital stock of a corporation described in subparagraph (9.3)( c )(

i) or (ii) or a partnership interest described in subparagraph (9.3)( c )(iii),

(

A) the trust is deemed to have

(

I) disposed of the property immediately before the beneficiary’s death, and

(II)

received, at the time of the disposition of property, proceeds of disposition in respect of the disposition of the property equal to the amount that the trust designates, which must not be greater than the greater of nor less than the lesser of

the fair market value of the property immediately before the beneficiary’s death, and

the adjusted cost base to the trust of the property immediately before the beneficiary’s death, and

(

B) the child is, immediately after the time of the disposition of the property, deemed to have acquired the property at a cost equal to the trust’s proceeds of disposition in respect of that disposition of the property determined under clause (A),

(iii)

where the property is, immediately before that beneficiary’s death, a partnership interest described in subparagraph (9.3)( c )(iii) (other than a partnership interest to which subsection 100(3) applies), and the trust further elects, in its return of income under this Part for the taxation year in which the beneficiary died, to have this subparagraph apply to the trust in respect of the property,

(

A) the trust is, except for the purpose of paragraph 98(5)( g ), deemed not to have disposed of the property as a consequence of the beneficiary’s death,

(

B) the child is deemed to have acquired the property, at the time of the beneficiary’s death, at a cost equal to the cost to the trust of the property immediately before the time that is immediately before the beneficiary’s death, and

(

C) each amount required by subsection 53(1) or (2) to be added or deducted in computing, immediately before the beneficiary’s death, the adjusted cost base to the trust of the property is deemed to be an amount required by subsection 53(1) or (2) to be added or deducted in computing, at or after the time of the beneficiary’s death, the adjusted cost base to the child of the property,

(iv)

except for the purpose of this subparagraph, where the amount designated by the trust under subclause (ii)(A)(II) exceeds the greater of the amounts determined under sub-subclauses (ii)(A)(II)1 and 2 in respect of the property, the amount designated is deemed to be equal to the greater of those amounts, and

(

v) except for the purpose of this subparagraph, where the amount designated by the trust under subclause (ii)(A)(II) is less than the lesser of the amounts determined under sub-subclauses (ii)(A)(II)1 and 2 in respect of the property, the amount designated is deemed to be equal to the lesser of those amounts.

(2) Subsection 70(9.6) of the Act is replaced by the following:

Transfer to a parent

(9.6) Subsection (9.01) or (9.21), as the case may be, applies in respect of a transfer of a property as if the references in those subsections to “child” were read as references to “parent” if

(

a) the property was acquired by a taxpayer in circumstances where any of subsections (9.01), (9.11), (9.21), (9.31) and 73(3.1) and (4.1) applied in respect of the acquisition;

(

b) as a consequence of the death of the taxpayer the property is transferred to a parent of the taxpayer; and

(

c) the taxpayer’s legal representative has elected, in the taxpayer’s return of income under this Part for the taxation year in which the taxpayer died, that this subsection apply in respect of the transfer.

(3) Subsection 70(9.8) of the Act is replaced by the following:

Leased farm and fishing property

(9.8) For the purposes of subsections (9) and 14(1), paragraph 20(1)( b ), subsection 73(3) and paragraph (

d) of the

definitions qualified farm property and qualified fishing property in subsection 110.6(1), a property of an individual is, at a particular time, deemed to be used by the individual in a fishing or farming business, as the case may be, carried on in Canada if, at that particular time, the property is being used, principally in the course of carrying on a fishing or farming business in Canada, by

(

a) a corporation, a share of the capital stock of which is a share of the capital stock of a family fishing corporation, or a share of the capital stock of a family farm corporation, of the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual; or

(

b) a partnership, a partnership interest of which is an interest in a family fishing partnership, or an interest in a family farm partnership, of the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual.

(4) The definition interest in a family farm partnership in subsection 70(10) of the Act is replaced by the following:

interest in a family farm partnership

participation dans une société de personnes agricole familiale

interest in a family farm partnership of an individual at any time means a partnership interest owned by the individual at that time if, at that time, all or substantially all of the fair market value of the property of the partnership was attributable to

(

a) property that has been used principally in the course of carrying on a farming business in Canada in which the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual was actively engaged on a regular and continuous basis (or, in the case of property used in the operation of a woodlot, was engaged to the extent required by a prescribed forest management plan in respect of that woodlot), by

(

i) the partnership,

(ii)

a corporation, a share of the capital stock of which is a share of the capital stock of a family farm corporation of the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual,

(iii)

a partnership, a partnership interest in which is an interest in a family farm partnership of the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual, or

(iv)

the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual,

(

b) shares of the capital stock or indebtedness of one or more corporations all or substantially all of the fair market value of the property of which was attributable to property described in paragraph ( d ),

(

c) partnership interests or indebtedness of one or more partnerships all or substantially all of the fair market value of the property of which was attributable to property described in paragraph ( d ), or

(

d) properties described in any of paragraphs (

a) to ( c );

(5) Subsection 70(10) of the Act is amended by adding the following in alphabetical order:

interest in a family fishing partnership

participation dans une société de personnes de pêche familiale

interest in a family fishing partnership of an individual at any time means a partnership interest owned by the individual at that time if, at that time, all or substantially all of the fair market value of the property of the partnership was attributable to

(

a) property that has been used principally in the course of carrying on a fishing business in Canada in which the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual was actively engaged on a regular and continuous basis, by

(

i) the partnership,

(ii)

a corporation, a share of the capital stock of which is a share of the capital stock of a family fishing corporation of the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual,

(iii)

a partnership, a partnership interest in which is an interest in a family fishing partnership of the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual, or

(iv)

the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual,

(

d) properties described in any of paragraphs (

a) to ( c );

share of the capital stock of a family fishing corporation

action du capital-actions d’une société de pêche familiale

share of the capital stock of a family fishing corporation of an individual at any time means a share of the capital stock of a corporation owned by the individual at that time if, at that time, all or substantially all of the fair market value of the property owned by the corporation was attributable to

(

i) the corporation,

(ii)

(iii)

a corporation controlled by a corporation described in subparagraph (

i) or (ii),

(iv)

(

v) the individual, the individual’s spouse or common-law partner, a child of the individual or a parent of the individual,

(

d) properties described in any of paragraphs (

a) to ( c );

(6) Subsections (1) to (5) apply to a disposition, that occurs on or after May 2, 2006, of a property unless the disposition of the property was before 2007 and the taxpayer elects in writing in the taxpayer’s return of income for the taxation year in which the disposition occurred to have subsection 70(9), (9.1), (9.2) or (9.3) of the Act, as that subsection read on May 1, 2006, apply to the disposition of the property.

(1) Paragraph 73(3)(

c) of the Act is replaced by the following:

( c )

subsection 69(1) does not apply in determining the proceeds of disposition of the depreciable property, the land or the eligible capital property;

(2) Paragraph 73(4)(

b) of the Act is replaced by the following:

( b )

subsection 69(1) does not apply in determining the proceeds of disposition of the property; and

(3) Subsections 73(3) and (4) of the Act, as amended by subsections (1) and (2), respectively, are replaced by the following:

When subsection (3.1) applies

(3) Subsection (3.1) applies to a taxpayer and a child of the taxpayer in respect of property that has been transferred, at any time, by the taxpayer to the child, where

(

a) the property was, immediately before the transfer, land in Canada or depreciable property in Canada of a prescribed class, of the taxpayer, or any eligible capital property in respect of a fishing or farming business carried on in Canada by the taxpayer;

(

b) the child of the taxpayer was resident in Canada immediately before the transfer; and

(

c) the property has been used principally in a fishing or farming business in which the taxpayer, the taxpayer’s spouse or common-law partner, a child of the taxpayer or a parent of the taxpayer was actively engaged on a regular and continuous basis (or in the case of property used in the operation of a woodlot, was engaged to the extent required by a prescribed forest management plan in respect of that woodlot).

Inter vivos transfer of farm or fishing property to child

(3.1) If, because of subsection (3), this subsection applies to the taxpayer and a child of the taxpayer in respect of a property transferred by the taxpayer to the child of the taxpayer, the following rules apply:

(

a) where, immediately before the transfer, the property was depreciable property of a prescribed class, the taxpayer is deemed to have disposed of the property, at the time of the transfer, for proceeds of disposition equal to

(

i) in any case to which neither subparagraph (ii) nor (iii) applies, the taxpayer’s proceeds of disposition otherwise determined,

(ii)

the greater of the amounts referred to in clauses (

A) and (B), if the taxpayer’s proceeds of disposition otherwise determined exceed the greater of

(

A) the fair market value of the property immediately before the time of the transfer, and

(

B) the lesser of

(

I) the capital cost to the taxpayer of the property, and

(II)

(iii)

if the taxpayer’s proceeds of disposition otherwise determined are less than the lesser of the amounts referred to in clauses (ii)(

A) and (B), the lesser of those amounts;

(

b) where the property transferred was land, the taxpayer is deemed to have disposed of the property at the time of the transfer for proceeds of disposition equal to,

(

i) in any case to which neither subparagraph (ii) nor (iii) applies, the taxpayer’s proceeds of disposition otherwise determined,

(ii)

the greater of the amounts referred to in clauses (

A) and (B), if the taxpayer’s proceeds of disposition otherwise determined exceed the greater of

(

A) the fair market value of the land immediately before the time of the transfer, and

(

B) the adjusted cost base to the taxpayer of the land immediately before the time of the transfer, or

(iii)

if the taxpayer’s proceeds of disposition otherwise determined are less than the lesser of the amounts referred to in clauses (ii)(

A) and (B), the lesser of those amounts;

(

c) where, immediately before the transfer, the property was eligible capital property, the taxpayer is deemed to have disposed of the property, at the time of the transfer, for proceeds of disposition equal to,

(

i) in any case to which neither subparagraph (ii) nor (iii) applies, the taxpayer’s proceeds of disposition otherwise determined,

(ii)

the greater of the amounts referred to in clauses (

A) and (B), if the taxpayer’s proceeds of disposition otherwise determined exceed the greater of

(

A) the fair market value of the property immediately before the time of the transfer, and

(

B) the amount determined by the formula

4/3 (A × B/C) where A

is the taxpayer’s cumulative eligible capital in respect of the business,

is the fair market value of the property immediately before the transfer, and

is the fair market value immediately before the transfer of all the taxpayer’s eligible capital property in respect of the business, or

(iii)

if the taxpayer’s proceeds of disposition otherwise determined are less than the lesser of the amounts referred to in clauses (ii)(

A) and (B), the lesser of those amounts;

( d )

subsection 69(1) does not apply to the taxpayer and the child in respect of the property;

(

e) the child is deemed to have acquired the property at a cost equal to the taxpayer’s proceeds of disposition in respect of the disposition of the property determined under

(

i) where the property is depreciable property of the taxpayer, paragraph ( a ), and

(ii)

where the property is land of the taxpayer, paragraph ( b );

(

f) if the property was, immediately before the transfer, an eligible capital property of the taxpayer in respect of a business, the child is deemed to have acquired

(

i) where the child does not continue to carry on the business, a capital property, immediately after the transfer, at a cost equal to the taxpayer’s proceeds of disposition in respect of the disposition of the property determined under paragraph ( c ),

(ii)

where the child continues to carry on the business, an eligible capital property and to have made an eligible capital expenditure at a cost equal to the total of

(

A) the taxpayer’s proceeds of disposition referred to in paragraph ( c ), and

(B)

4/3 of the amount determined by the formula

(A × B/C) - D where A

is the amount, if any, determined for F in the definition cumulative eligible capital in subsection 14(5) in respect of the business immediately before the transfer,

is the fair market value of the property immediately before the transfer,

is the fair market value immediately before the transfer of all the taxpayer’s eligible capital property in respect of the business, and

is the amount, if any, included under paragraph 14(1)(

a) in computing the taxpayer’s income as a result of the disposition, and

(iii)

for the purpose of determining at any subsequent time the child’s cumulative eligible capital in respect of the business, an amount equal to ¾ of the amount determined under subparagraph (ii) is to be added to the amount otherwise determined for P in the definition cumulative eligible capital in subsection 14(5);

(

g) for the purpose of determining, in respect of any disposition of the property, after the time of the transfer, the amount deemed to be the child’s taxable capital gain, and the amount to be included in computing the child’s income, there shall be added to the amount otherwise determined for Q in respect of the business in the definition cumulative eligible capital in subsection 14(5), the amount determined by the formula,

A × B/C where A

is the amount, if any, determined for Q in that definition in respect of the business immediately before the time of the transfer,

is the fair market value, immediately before that time, of the transferred property , and

is the fair market value immediately before that time of all the taxpayer’s eligible capital property in respect of the business; and

(

h) where the property is depreciable property of a prescribed class of the taxpayer and the capital cost to the taxpayer of the property exceeds the cost to the child of the property, for the purposes of sections 13 and 20 and any regulations made under paragraph 20(1)( a ),

(

i) the capital cost to the child of the property is deemed to be the amount that was the capital cost to the taxpayer of the property immediately before the transfer, and

(ii)

the excess is deemed to have been allowed to the child in respect of the property under regulations made under paragraph 20(1)(

a) in computing income for taxation years that ended before the the child acquired the property.

When subsection (4.1) applies

(4) Subsection (4.1) applies to a taxpayer and a child of the taxpayer in respect of property that has been transferred, at any time, to the child if

(

a) the child was resident in Canada immediately before the transfer; and

(

b) the property was, immediately before the transfer, a share of the capital stock of a family fishing corporation of the taxpayer, a share of the capital stock of a family farm corporation of the taxpayer, an interest in a family fishing partnership of the taxpayer or an interest in a family farm partnership of the taxpayer (within the meaning assigned by subsection 70(10)).

Inter vivos transfer of family farm or fishing corporations and partnerships

(4.1) If, because of subsection (4), this subsection applies to the taxpayer and the taxpayer’s child in respect of the transfer of the property by the taxpayer to the child,

(

a) subject to paragraph ( c ), where the property was, immediately before the transfer, a share of the capital stock of a family fishing corporation of the taxpayer, a share of the capital stock of a family farm corporation of the taxpayer, an interest in a family fishing partnership of the taxpayer or an interest in a family farm partnership of the taxpayer, the taxpayer is deemed to have disposed of the property at the time of the transfer for proceeds of disposition equal to,

(

i) in any case to which neither subparagraph (ii) nor (iii) applies, the taxpayer’s proceeds of disposition otherwise determined,

(ii)

the greater of the amounts referred to in clauses (

A) and (B), if the taxpayer’s proceeds of disposition otherwise determined exceed the greater of

(

A) the fair market value of the property immediately before the time of the transfer, and

(

B) the adjusted cost base to the taxpayer of the property immediately before the time of the transfer, or

(iii)

if the taxpayer’s proceeds of disposition otherwise determined are less than the lesser of the amounts referred to in clauses (ii)(

A) and (B), the lesser of those amounts;

(

b) subject to paragraph ( c ), where the property is, immediately before the transfer, a share of the capital stock of a family fishing corporation of the taxpayer, a share of the capital stock of a family farm corporation of the taxpayer, an interest in a family fishing partnership of the taxpayer or an interest in a family farm partnership of the taxpayer, the child is deemed to have acquired the property for an amount equal to the taxpayer’s proceeds of disposition in respect of the disposition of the property determined under paragraph ( a );

(

c) where the property is, immediately before the transfer, an interest in a family fishing partnership of the taxpayer, or an interest in a family farm partnership of the taxpayer (other than a partnership interest to which subsection 100(3) applies), the taxpayer receives no consideration in respect of the transfer of the property and the taxpayer elects, in the taxpayer’s return of income under this Part for the taxation year which includes the time of the transfer, to have this paragraph apply in respect of the transfer of the property,

(

i) the taxpayer is, except for the purpose of paragraph 98(5)( g ), deemed not to have disposed of the property at the time of the transfer,

(ii)

the child is deemed to have acquired the property at the time of the transfer at a cost equal to the cost to the taxpayer of the interest immediately before the transfer, and

(iii)

each amount required by subsection 53(1) or (2) to be added or deducted in computing the adjusted cost base to the taxpayer, immediately before the transfer, of the property is deemed to be an amount required by subsection 53(1) or (2) to be added or deducted in computing at any time at or after the time of the transfer, the adjusted cost base to the child of the property; and

( d )

subsection 69(1) does not apply to the taxpayer and the child in respect of the property.

(4) Subsections (1) and (2) apply to dispositions that occur after December 20, 2002.

(5) Subsection (3) applies to a disposition, that occurs on or after May 2, 2006, of a property unless the disposition of the property was before 2007 and the taxpayer elects in writing in the taxpayer’s return of income for the taxation year in which the disposition occurred to have subsection 73(3) or 73(4) of the Act, as that subsection read on May 1, 2006, apply to the disposition of the property.

(1) Subsection 74.1(2) of the Act is replaced by the following:

Transfers and loans to minors

(2) If an individual has transferred or lent property, either directly or indirectly, by means of a trust or by any other means whatever, to or for the benefit of a person who was under 18 years of age (other than an amount received in respect of that person either as a consequence of the operation of subsection 122.61(1) or under

section 4 of the Universal Child Care Benefit Act ) and who

(

a) does not deal with the individual at arm’s length, or

(

b) is the niece or nephew of the individual,

any income or loss, as the case may be, of that person for a taxation year from the property or from property substituted for that property, that relates to the period in the taxation year throughout which the individual is resident in Canada, is deemed to be income or a loss, as the case may be, of the individual and not of that person unless that person has, before the end of the taxation year, attained the age of 18 years.

(2) Subsection (1) applies in respect of amounts received after June 30, 2006.

(1) The portion of subsection 85(5.1) of the Act before paragraph (

a) is replaced by the following:

Acquisition of certain tools — capital cost and deemed depreciation

(5.1) If subsection (1) has applied in respect of the acquisition at any particular time of any depreciable property by a corporation from an individual, the cost of the property to the individual was included in computing an amount under paragraph 8(1)(

r) or (

s) in respect of the individual, and the amount that would be the cost of the property to the individual immediately before the transfer if this Act were read without reference to subsection 8(7) (which amount is in this subsection referred to as the “individual’s original cost”) exceeds the individual’s proceeds of disposition of the property,

(2) Subsection (1) applies to the 2006 and subsequent taxation years.

(1) The portion of subsection 97(5) of the Act before paragraph (

a) is replaced by the following:

Acquisition of certain tools — capital cost and deemed depreciation

(5) If subsection (2) has applied in respect of the acquisition at any particular time of any depreciable property by a partnership from an individual, the cost of the property to the individual was included in computing an amount under paragraph 8(1)(

r) or (

(2) Subsection (1) applies to the 2006 and subsequent taxation years.

(1) Paragraph 104(21.2)(

b) of the Act is replaced by the following:

(

b) the beneficiary is, for the purposes of sections 3, 74.3 and 111 as they apply for the purposes of

section 110.6,

(

i) deemed to have disposed of the capital property referred to in clause (ii)(A), (

B) or (

C) if a taxable capital gain is determined in respect of the beneficiary for the beneficiary’s taxation year in which the designation year ends under those clauses, and

(ii)

deemed to have a taxable capital gain for the beneficiary’s taxation year in which the designation year ends

(

A) from a disposition of a capital property that is qualified farm property (as defined for the purpose of

section 110.6) of the beneficiary equal to the amount determined by the formula

(A × B × C)/(D × E) (

B) from a disposition of a capital property that is a qualified small business corporation share (as defined for the purpose of

section 110.6) of the beneficiary equal to the amount determined by the formula

(A × B × F)/(D ×

E) and

(

C) from a disposition of a capital property that is a qualified fishing property (as defined for the purpose of

section 110.6) of the beneficiary equal to the amount determined by the formula

(A × B × I)/(D ×

E) where A

is the lesser of

(

I) the amount determined by the formula

G - H where G

is the total of amounts designated under subsection (21) for the designation year by the trust, and

is the total of amounts designated under subsection (13.2) for the designation year by the trust, and

(II)

the trust’s eligible taxable capital gains for the designation year,

is the amount, if any, by which the amount designated under subsection (21) for the designation year by the trust in respect of the beneficiary exceeds the amount designated under subsection (13.2) for the year by the trust in respect of the beneficiary for the taxation year,

is the amount, if any, that would be determined under paragraph 3(

b) for the designation year in respect of the trust’s capital gains and capital losses if the only properties referred to in that paragraph were qualified farm properties of the trust disposed of by it after 1984,

is the total of all amounts each of which is the amount determined for B for the designation year in respect of a beneficiary under the trust,

is the total of the amounts determined for C, F and I for the designation year in respect of the beneficiary,

is the amount, if any, that would be determined under paragraph 3(

b) for the designation year in respect of the trust’s capital gains and capital losses if the only properties referred to in that paragraph were qualified small business corporation shares of the trust, other than qualified farm property, disposed of by it after June 17, 1987, and

is the amount, if any, that would be determined under paragraph 3(

b) for the designation year in respect of the trust’s capital gains and capital losses if the only properties referred to in that paragraph were qualified fishing properties of the trust disposed of by it on or after May 2, 2006,

(2) Subsection (1) applies to taxation years of a trust that end on or after May 2, 2006.

(1) Subsection 108(1) of the Act is amended by adding the following in alphabetical order:

qualified fishing property

bien de pêche admissible

qualified fishing property of an individual has the meaning assigned by subsection 110.6(1);

(2) Subsection (1) applies after May 1, 2006.

(1) The

definitions interest in a family farm partnership , qualified farm property and share of the capital stock of a family farm corporation in subsection 110.6(1) of the Act are replaced by the following:

interest in a family farm partnership

participation dans une société de personnes agricole familiale

interest in a family farm partnership of an individual (other than a trust that is not a personal trust) at any time means a partnership interest owned by the individual at that time if

(

a) throughout any 24-month period ending before that time, more than 50% of the fair market value of the property of the partnership was attributable to

(

i) property that was used principally in the course of carrying on the business of farming in Canada in which the individual, a beneficiary referred to in clause (

C) or a spouse, common-law partner, child or parent of the individual or of a beneficiary referred to in clause (

C) was actively engaged on a regular and continuous basis, by

(

A) the partnership,

(

B) the individual,

(

C) where the individual is a personal trust, a beneficiary of the trust,

(

D) a spouse, common-law partner, child or parent of the individual or of a beneficiary referred to in clause (C),

(

E) a corporation, a share of the capital stock of which was a share of the capital stock of a family farm corporation of the individual, a beneficiary referred to in clause (

C) or a spouse, common-law partner, child or parent of the individual or of a beneficiary referred to in clause (C), or

(

F) a partnership, a partnership interest of which was an interest in a family farm partnership of the individual, a beneficiary referred to in clause (

C) or a spouse, common-law partner, child or parent of the individual or of a beneficiary referred to in clause (C),

(ii)

shares of the capital stock or indebtedness of one or more corporations all or substantially all of the fair market value of the property of which was attributable to properties described in subparagraph (iv),

(iii)

a partnership interest in or indebtedness of one or more partnerships all or substantially all of the fair market value of the property of which was attributable to properties described in subparagraph (iv), or

(iv)

properties described in any of subparagraphs (

i) to (iii), and

(

b) at that time, all or substantially all of the fair market value of the property of the partnership was attributable to property described in subparagraph ( a )(iv);

qualified farm property

bien agricole admissible

qualified farm property of an individual (other than a trust that is not a personal trust) at any time means a property owned at that time by the individual, the spouse or common-law partner of the individual or a partnership, an interest in which is an interest in a family farm partnership of the individual or the individual’s spouse or common-law partner that is

(

a) real or immovable property that was used principally in the course of carrying on the business of farming in Canada by,

(

i) the individual,

(ii)

if the individual is a personal trust, a beneficiary of the trust that is entitled to receive directly from the trust any income or capital of the trust,

(iii)

a spouse, common-law partner, child or parent of a person referred to in subparagraph (

i) or (ii),

(iv)

a corporation, a share of the capital stock of which is a share of the capital stock of a family farm corporation of an individual referred to in any of subparagraphs (

i) to (iii), or

(

v) a partnership, an interest in which is an interest in a family farm partnership of an individual referred to in any of subparagraphs (

i) to (iii),

(

b) a share of the capital stock of a family farm corporation of the individual or the individual’s spouse or common-law partner,

(

c) an interest in a family farm partnership of the individual or the individual’s spouse or common-law partner, or

(

d) an eligible capital property (which is deemed to include capital property to which paragraph 70(5.1)(

b) or 73(3.1)(

f) applies) used by a person or partnership referred to in any of subparagraphs ( a )(

i) to (v), or by a personal trust from which the individual acquired the property, in the course of carrying on the business of farming in Canada;

share of the capital stock of a family farm corporation

action du capital-actions d’une société agricole familiale

share of the capital stock of a family farm corporation of an individual (other than a trust that is not a personal trust) at any time means a share of the capital stock of a corporation owned by the individual at that time if

(

a) throughout any 24-month period ending before that time, more than 50% of the fair market value of the property owned by the corporation was attributable to

(

i) property that was used principally in the course of carrying on the business of farming in Canada in which the individual, a beneficiary referred to in clause (

C) or a spouse or common-law partner, child or parent of the individual or of a beneficiary referred to in clause (

C) was actively engaged on a regular and continuous basis, by

(

A) the corporation,

(

B) the individual,

(

C) where the individual is a personal trust, a beneficiary of the trust,

(

D) a spouse, common-law partner, child or parent of the individual or of a beneficiary referred to in clause (C),

(

E) another corporation that is related to the corporation and of which a share of the capital stock was a share of the capital stock of a family farm corporation of the individual, a beneficiary referred to in clause (

C) or a spouse, common-law partner, child or parent of the individual or of a beneficiary referred to in clause (C), or

(

F) a partnership, an interest in which was an interest in a family farm partnership of the individual, a beneficiary referred to in clause (

C) or a spouse, common-law partner, child or parent of the individual or of such a beneficiary,

(ii)

shares of the capital stock or indebtedness of one or more corporations all or substantially all of the fair market value of the property of which was attributable to property described in subparagraph (iv),

(iii)

(iv)

properties described in any of subparagraphs (

i) to (iii), and

(

b) at that time, all or substantially all of the fair market value of the property owned by the corporation was attributable to property described in subparagraph ( a )(iv);

(2) Paragraph (

b) of the description of A in the definition annual gains limit in subsection 110.6(1) of the Act is replaced by:

(

b) the amount that would be determined in respect of the individual for the year under paragraph 3(

b) in respect of capital gains and losses if the only properties referred to in that paragraph were qualified farm properties disposed of by the individual after 1984, qualified small business corporation shares disposed of by the individual after June 17, 1987 and qualified fishing properties disposed of by the individual on or after May 2, 2006, and

(3) Subparagraph ( a )(

i) of the definition share of the capital stock of a family farm corporation in subsection 110.6(1) of the Act is amended by striking out the word “or” at the end of clause (

D) and by adding the following after that clause:

(D.1)

another corporation that is related to the corporation and of which a share of the capital stock was a share of the capital stock of a family farm corporation of the individual, a beneficiary referred to in clause (

C) or a spouse or common-law partner, child or parent of the individual or of a beneficiary referred to in clause (C), or

(4) Subsection 110.6(1) of the Act is amended by adding the following in alphabetical order:

interest in a family fishing partnership

participation dans une société de personnes de pêche familiale

interest in a family fishing partnership of an individual (other than a trust that is not a personal trust) at any time means a partnership interest owned by the individual at that time if

(

a) throughout any 24-month period ending before that time, more than 50% of the fair market value of the property of the partnership was attributable to

(

i) property that was used principally in the course of carrying on the business of fishing in Canada in which the individual, a beneficiary referred to in clause (

C) or a spouse or common-law partner, child or parent of the individual or of a beneficiary referred to in clause (

C) was actively engaged on a regular and continuous basis, by

(

A) the partnership,

(

B) the individual,

(

C) where the individual is a personal trust, a beneficiary of the trust,

(

D) a spouse, common-law partner, child or parent of the individual or of a beneficiary referred to in clause (C),

(

E) a corporation, a share of the capital stock of which was a share of the capital stock of a family fishing corporation of the individual, a beneficiary referred to in clause (

C) or a spouse, common-law partner, child or parent of the individual or of a beneficiary referred to in clause (C), or

(

F) a partnership, a partnership interest of which was an interest in a family fishing partnership of the individual, a beneficiary referred to in clause (

C) or a spouse, common-law partner, child or parent of the individual or of a beneficiary referred to in clause (C),

(ii)

(iii)

(iv)

properties described in any of subparagraph (

i) to (iii), and

(

b) at that time, all or substantially all of the fair market value of the property of the partnership was attributable to property described in subparagraph ( a )(iv);

qualified fishing property

bien de pêche admissible

qualified fishing property of an individual (other than a trust that is not a personal trust) at any time means a property owned at that time by the individual, the spouse or common-law partner of the individual or a partnership, an interest in which is an interest in a family fishing partnership of the individual or the individual’s spouse or common-law partner that is

(

a) real or immovable property or a fishing vessel that was used principally in the course of carrying on the business of fishing in Canada by,

(

i) the individual,

(ii)

if the individual is a personal trust, a beneficiary of the trust that is entitled to receive directly from the trust any income or capital of the trust,

(iii)

a spouse, common-law partner, child or parent of a person referred to in subparagraph (

i) or (ii),

(iv)

a corporation, a share of the capital stock of which is a share of the capital stock of a family fishing corporation of an individual referred to in any of subparagraphs (

i) to (iii), or

(

v) a partnership, an interest in which is an interest in a family fishing partnership of an individual referred to in any of subparagraphs (

i) to (iii),

(

b) a share of the capital stock of a family fishing corporation of the individual or the individual’s spouse or common-law partner,

(

c) an interest in a family fishing partnership of the individual or the individual’s spouse or common-law partner, or

(

d) an eligible capital property (which is deemed to include capital property to which paragraph 70(5.1)(

b) or 73(3.1)(

f) applies) used by a person or partnership referred to in any of subparagraphs ( a )(

i) to (v), or by a personal trust from which the individual acquired the property, in the course of carrying on the business of fishing in Canada;

share of the capital stock of a family fishing corporation

action du capital-actions d’une société de pêche familiale

share of the capital stock of a family fishing corporation of an individual (other than a trust that is not a personal trust) at any time means a share of the capital stock of a corporation owned by the individual at that time if

(

a) throughout any 24-month period ending before that time, more than 50% of the fair market value of the property owned by the corporation was attributable to

(

i) property that was used principally in the course of carrying on the business of fishing in Canada in which the individual, a beneficiary referred to in clause (

C) or a spouse or common-law partner, child or parent of the individual or of a beneficiary referred to in clause (C), was actively engaged on a regular and continuous basis, by

(

A) the corporation,

(

B) the individual,

(

C) where the individual is a personal trust, a beneficiary of the trust,

(

D) a spouse, common-law partner, child or parent of the individual or of a beneficiary referred to in clause (C),

(

E) another corporation that is related to the corporation and of which a share of the capital stock was a share of the capital stock of a family fishing corporation of the individual, a beneficiary referred to in clause (

C) or a spouse, common-law partner, child or parent of the individual or of a beneficiary referred to in clause (C), or

(

F) a partnership, an interest in which was an interest in a family fishing partnership of the individual, a beneficiary referred to in clause (

C) or a spouse, common-law partner, child or parent of the individual or of such a beneficiary,

(ii)

(iii)

(iv)

properties described in any of subparagraphs (

i) to (iii), and

(

b) at that time, all or substantially all of the fair market value of the property owned by the corporation was attributable to property described in subparagraph ( a )(iv).

(5) Section 110.6 of the Act is amended by adding the following after subsection (1.1):

Property used in a fishing business

(1.2) For the purposes of applying the definition qualified fishing property , in subsection (1), of an individual, at any time, a property owned at that time by the individual, the spouse or common-law partner of the individual, or a partnership, an interest in which is an interest in a family fishing partnership of the individual or of the individual’s spouse or common-law partner, will not be considered to have been used in the course of carrying on the business of fishing in Canada, unless

(

a) throughout the period of at least 24 months immediately preceding that time, the property or property for which the property was substituted (in this paragraph referred to as “the property”) was owned, by any one or more of

(

i) the individual, or a spouse, common-law partner, child or parent of the individual,

(ii)

a partnership, an interest in which is an interest in a family fishing partnership of the individual or of the individual’s spouse or common-law partner,

(iii)

if the individual is a personal trust, the individual from whom the trust acquired the property or a spouse, common-law partner, child or parent of that individual, or

(iv)

a personal trust from which the individual or a child or parent of the individual acquired the property; and

(

b) either

(

i) in at least two years while the property was owned by the one or more persons referred to in paragraph ( a ),

(

A) the gross revenue of a person (in this clause referred to as the “operator”) referred to in paragraph (

a) from the fishing business referred to in clause (

B) for the period during which the property was owned by a person described in paragraph (

a) exceeded the income of the operator from all other sources for that period, and

(

B) the property was used principally in a fishing business carried on in Canada in which an individual referred to in paragraph ( a ), or where the individual is a personal trust, a beneficiary of the trust, was actively engaged on a regular and continuous basis, or

(ii)

throughout a period of at least 24 months while the property was owned by one or more persons or partnerships referred to in paragraph ( a ), the property was used by a corporation referred to in subparagraph ( a )(iv) of the definition qualified fishing property in subsection (1) or by a partnership referred to in paragraph ( a )(

v) of that definition in a fishing business in which an individual referred to in any of subparagraphs ( a )(

i) to (iii) of that definition was actively engaged on a regular and continuous basis.

Property used in a farming business

(1.3) For the purposes of applying the definition qualified farm property , in subsection (1), of an individual, at any time, a property owned at that time by the individual, the spouse or common-law partner of the individual, or a partnership, an interest in which is an interest in a family farm partnership of the individual or of the individual’s spouse or common-law partner, will not be considered to have been used in the course of carrying on the business of farming in Canada, unless

(

i) the individual, or a spouse, common-law partner, child or parent of the individual,

(ii)

a partnership, an interest in which is an interest in a family farm partnership of the individual or of the individual’s spouse or common-law partner,

(iii)

if the individual is a personal trust, the individual from whom the trust acquired the property or a spouse, common-law partner, child or parent of that individual, or

(iv)

a personal trust from which the individual or a child or parent of the individual acquired the property;

(

b) if paragraph (

c) does not apply, either

(

i) in at least two years while the property was owned by the one or more persons referred to in paragraph ( a ),

(

A) the gross revenue of a person (in this clause referred to as the “operator”) referred to in paragraph (

a) from the farming business referred to in clause (

B) for the period during which the property was owned by a person described in paragraph (

a) exceeded the income of the operator from all other sources for that period, and

(

B) the property was used principally in a farming business carried on in Canada in which an individual referred to in paragraph ( a ), or where the individual is a personal trust, a beneficiary of the trust, was actively engaged on a regular and continuous basis, or

(ii)

throughout a period of at least 24 months while the property was owned by one or more persons or partnerships referred to in paragraph ( a ), the property was used by a corporation referred to in subparagraph ( a )(iv) of the definition qualified farm property in subsection (1) or by a partnership referred to in subparagraph ( a )(

v) of that definition in a farming business in which an individual referred to in any of subparagraphs ( a )(

i) to (iii) of that definition was actively engaged on a regular and continuous basis; or

(

c) if the property or property for which the property was substituted was last acquired by the individual or partnership before June 18, 1987 or after June 17, 1987 under an agreement in writing entered into before that date,

(

i) in the year the property was disposed of by the individual, the property was used principally in the course of carrying on the business of farming in Canada by

(

A) the individual, or a spouse, common-law partner, child or parent of the individual,

(

B) a beneficiary referred to in subparagraph ( a )(ii) in the definition qualified farm property in subsection (1) or a spouse, common-law partner, child or parent of that beneficiary,

(

C) a corporation referred to in subparagraph ( a )(iv) in the definition qualified farm property in subsection (1),

(

D) a partnership referred to in subparagraph ( a )(

v) in the definition qualified farm property in subsection (1), or

(

E) a personal trust from which the individual acquired the property, or

(ii)

in at least five years during which the property was owned by a person described in clauses (

A) to (E), the property was used principally in the course of carrying on the business of farming in Canada by

(

A) the individual, or a spouse, common-law partner, child or parent of the individual,

(

B) a beneficiary referred to in subparagraph ( a )(ii) in the definition qualified farm property in subsection (1) or a spouse, common-law partner, child or parent of that beneficiary,

(

C) a corporation referred to in subparagraph ( a )(iv) in the definition qualified farm property in subsection (1),

(

D) a partnership referred to in subparagraph ( a )(

v) in the definition qualified farm property in subsection (1), or

(

E) a personal trust from which the individual acquired the property.

(6) The description of A in paragraph 110.6(2)(

a) of the Act is replaced by the following:

is the total of all amounts each of which is an amount deducted under this

section in computing the individual’s taxable income for a preceding taxation year that ended

(

i) before 1988, or

(ii)

after October 17, 2000,

(7) Paragraph 110.6(2)(

d) of the Act is replaced by the following:

(

d) the amount that would be determined in respect of the individual for the year under paragraph 3(

b) in respect of capital gains and capital losses if the only properties referred to in that paragraph were qualified farm properties of the individual disposed of after June 17, 1987.

(8) Paragraph 110.6(2.1)(

d) of the Act is replaced by the following:

(

d) the amount that would be determined in respect of the individual for the year under paragraph 3( b ) (to the extent that that amount is not included in computing the amount determined under paragraph (2)(

d) or (2.2)(

d) in respect of the individual) in respect of capital gains and capital losses if the only properties referred to in paragraph 3(

b) were qualified small business corporation shares of the individual disposed of after June 17, 1987.

(9) Section 110.6 of the Act is amended by adding the following after subsection (2.1):

Capital gains deduction — qualified fishing property

(2.2) In computing the taxable income for a taxation year of an individual (other than a trust) who was resident in Canada throughout the year and who, in the year or a preceding year, disposed of a property that was, at the time of disposition, a qualified fishing property of the individual, there may be deducted the amount that the individual claims not exceeding the least of

(

a) the amount determined by the formula in paragraph (2)(

a) in respect of the individual for the year;

(

b) the amount, if any, by which the individual’s cumulative gains limit at the end of that year exceeds the total of all amounts each of which is an amount deducted under subsection (2) or (2.1) in computing the individual’s taxable income for the year;

(

c) the amount, if any, by which the individual’s annual gains limit for the year exceeds the total of all amounts each of which is an amount deducted under subsection (2) or (2.1) in computing the individual’s taxable income for the year; and

(

d) the amount that would be determined in respect of the individual for the year under paragraph 3(

b) in respect of capital gains and capital losses if the only properties referred to in that paragraph were qualified fishing properties of the individual disposed of on or after May 2, 2006.

(10) Subsections 110.6(4) to (8) of the Act are replaced by the following:

Maximum capital gains deduction

(4) Notwithstanding subsections (2), (2.1) and (2.2), the total amount that may be deducted under this

section in computing an individual’s income for a taxation year shall not exceed the amount determined by the formula in paragraph (2)(

a) in respect of the individual for the year.

Deemed resident in Canada

(5) For the purposes of subsections (2), (2.1) and (2.2), an individual is deemed to have been resident in Canada throughout a particular taxation year if

(

a) the individual was resident in Canada at any time in the particular taxation year; and

(

b) the individual was resident in Canada throughout the immediately preceding taxation year or throughout the immediately following taxation year.

Failure to report capital gain

(6) Notwithstanding subsections (2), (2.1) and (2.2), no amount may be deducted under this

section in respect of a capital gain of an individual for a particular taxation year in computing the individual’s taxable income for the particular taxation year, if

(

a) the individual knowingly or under circumstances amounting to gross negligence

(

i) fails to file the individual’s return of income for the particular taxation year within one year after the taxpayer’s filing-due date for the particular taxation year, or

(ii)

fails to report the capital gain in the individual’s return of income for the particular taxation year; and

(

b) the Minister establishes the facts justifying the denial of such an amount under this section.

Deduction not permitted

(7) Notwithstanding subsections (2), (2.1) and (2.2), no amount may be deducted under this

section in computing an individual’s taxable income for a taxation year in respect of a capital gain of the individual for the taxation year, if the capital gain is from a disposition of property which disposition is part of a series of transactions or events

(

a) to which subsection 55(2) would apply if this Act were read without reference to paragraph 55(3)( b ); or

(

b) in which any property is acquired by a corporation or partnership for consideration that is significantly less than the fair market value of the property at the time of acquisition (other than an acquisition as the result of an amalgamation or merger of corporations or the winding-up of a corporation or partnership or a distribution of property of a trust in satisfaction of all or part of a corporation’s capital interest in the trust).

Deduction not permitted

(8) Nothwithstanding subsections (2), (2.1) and (2.2), where an individual has a capital gain for a taxation year from the disposition of a property and it can reasonably be concluded, having regard to all the circumstances, that a significant part of the capital gain is attributable to the fact that dividends were not paid on a share (other than a prescribed share) or that dividends paid on such a share in the taxation year or in any preceding taxation year were less than 90% of the average annual rate of return on that share for that year, no amount in respect of that capital gain shall be deducted under this

section in computing the individual’s taxable income for the year.

(11) Paragraph 110.6(12)(

b) of the Act is replaced by the following:

(

b) the amount, if any, that would be determined in respect of the trust for that year under paragraph 3(

b) in respect of capital gains and capital losses if the only properties referred to in that paragraph were qualified farm properties disposed of by it after 1984, qualified small business corporation shares disposed of by it after June 17, 1987 and qualified fishing properties disposed of by it on or after May 2, 2006, and

(12) Subsections (1), (2), (4) and (5) apply to dispositions of property that occur on or after May 2, 2006.

(13) Subsection (3) applies to dispositions of property that occur after 2001 and before May 2, 2006.

(14) Subsection (6) applies to preceding taxation years that end after October 17, 2000.

(15) Subsections (7) to (11) apply to taxation years that end on or after May 2, 2006.

(1) Paragraphs 117(2)(

c) and (

d) of the Act, as enacted by subsection 58(3) of the Budget Implementation Act, 2006 ,

chapter 4 of the Statutes of Canada, 2006, are replaced by the following:

(

c) if the amount taxable is greater than the amount determined for the year in respect of $72,756, but is equal to or less than the amount determined for the year in respect of $118,285, the total of the amounts determined in respect of the taxation year under paragraphs (

a) and (

b) plus 26% of the amount by which the amount taxable exceeds the amount determined in respect of $72,756; and

(

d) if the amount taxable is greater than the amount that would be determined for the year in respect of $118,285, the total of the amounts determined in respect of the taxation year under paragraphs ( a ), (

b) and (

c) plus 29% of the amount by which the amount taxable exceeds the amount determined in respect of $118,285.

(2) Subsection (1) applies to the 2007 and subsequent taxation years.

(1) The portion of subsection 117.1(1) of the Act before paragraph (

a) is replaced by the following:

Annual adjustment (indexing)

117.1

(1) The amount of $1,000 referred to in the formula in paragraph 8(1)(

s) and each of the amounts expressed in dollars in subsection 117(2), the description of B in subsection 118(1), subsection 118(2), paragraph (

a) of the description of B in subsection 118(10), subsection 118.01(2), the descriptions of C and F in subsection 118.2(1), subsections 118.3(1), 122.5(3) and 122.51(1) and (2) and

Part I.2 in relation to tax payable under this Part or

Part I.2 for a taxation year shall be adjusted so that the amount to be used under those provisions for the year is the total of

(2) Subsection (1) applies to the 2008 and subsequent taxation years.

(1) The portion of the description of B before paragraph (

a) in subsection 118(3) of the Act is replaced by the following:

is the lesser of $2,000 and

(2) Section 118 of the Act is amended by adding the following after subsection (9):

Canada Employment Credit

(10) For the purpose of computing the tax payable under this Part by an individual for a taxation year, there may be deducted the amount determined by the formula

A × B where A

is the appropriate percentage for the taxation year; and

is the lesser of

( a )

$1,000, and

(

b) the amount that would be the individual’s income for the taxation year from all offices and employments if this Act were read without reference to

section 8.

(3) Subsections (1) and (2) apply to the 2006 and subsequent taxation years, except that in its application to the 2006 taxation year, the reference to “$1,000” in paragraph (

a) in the description of B in subsection 118(10) of the Act, as enacted by subsection (2), shall be read as a reference to “$250”.

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

section 118.01:

Definitions

118.02

(1) The following

definitions apply in this section.

eligible public transit pass

laissez-passer de transport admissible

eligible public transit pass means a document

(

a) issued by or on behalf of a qualified Canadian transit organization; and

(

b) identifying the right of an individual who is the holder or owner of the document to use public commuter transit services of that qualified Canadian transit organization on an unlimited number of occasions and on any day on which the public commuter transit services are offered during an uninterrupted period of at least 28 days.

public commuter transit services

services de transport en commun

public commuter transit services means services offered to the general public, ordinarily for a period of at least five days per week, of transporting individuals, from a place in Canada to another place in Canada, by means of bus, ferry, subway, train or tram, and in respect of which it can reasonably be expected that those individuals would return daily to the place of their departure.

qualified Canadian transit organization

organisme de transport canadien admissible

qualified Canadian transit organization means a person authorised, under a law of Canada or a province, to carry on in Canada a business that is the provision of public commuter transit services, which is carried on through a permanent establishment in Canada.

qualifying relation

proche admissible

qualifying relation of an individual for a taxation year means a person who is

(

a) the individual’s spouse or common-law partner at any time in the taxation year; or

(

b) a child of the individual who has not, during the taxation year, attained the age of 19 years.

Transit pass tax credit

(2) For the purpose of computing the tax payable under this

Document details

Collection	Annual Statutes
Citation	2007, c. 2
Type	statute
Volume / chapter	2007, c. 2
Language	en
Format	xml
Source	JUSTICE_LAWS
Identifier	bb010da58e4e202b15eba14396d95b18dc806fac

Source file is stored in the law ingest library (xml).