Budget Implementation Act, 2016, No. 2 (S.C. 2016, c. 12)
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Assented to 2016-12-15
PART 1Amendments to the Income Tax Act and to Related Legislation (continued)
R.S., c. 1 (5th Supp.)Income Tax Act (continued)
28 (1) Paragraph 88(1)(c.1) of the Act is repealed.
(2) Paragraph 88(1)(d.1) of the Act is replaced by the following:
(d.1) subsection 84(2) and section 21 of the Income Tax Application Rules do not apply to the winding-up of the subsidiary, and subsection 13(21.2) does not apply to the winding-up of the subsidiary with respect to property acquired by the parent on the winding-up;
(3) Subsections (1) and (2) come into force or are deemed to have come into force on January 1, 2017.
29 (1) Subparagraph (c.1)(i) of the definition capital dividend account in subsection 89(1) of the Act is replaced by the following:
(i) 1/2 of the total of all amounts each of which is an amount required by paragraph 14(1)(b) (as it read before 2017) to be included in computing the corporation’s income in respect of a business carried on by the corporation for a taxation year that is included in the period and that ended after February 27, 2000 and before October 18, 2000,
(2) Subparagraph (c.2)(i) of the definition capital dividend account in subsection 89(1) of the Act is replaced by the following:
(i) the total of all amounts each of which is an amount required by paragraph 14(1)(b) (as it read before 2017) or subparagraph 13(38)(d)(iii) to be included in computing the corporation’s income in respect of a business carried on by the corporation for a taxation year that is included in the period and that ends after October 17, 2000,
(3) Subparagraph (d)(iii) of the definition capital dividend account in subsection 89(1) of the Act is replaced by the following:
(iii) the adjusted cost basis (in this paragraph as defined in subsection 148(9)), immediately before the death, of
(A) if the death occurs before March 22, 2016, a policy referred to in subparagraph (i) or (ii) to the corporation, and
(B) if the death occurs after March 21, 2016, a policyholder’s interest in a policy referred to in subparagraph (i) or (ii),
(4) Paragraph (d) of the definition capital dividend account in subsection 89(1) of the Act is amended by adding the following after subparagraph (iv):
(v) if the death occurs after March 21, 2016, an interest in the policy was disposed of by a policyholder (other than a taxable Canadian corporation) after 1999 and before March 22, 2016 and subsection 148(7) applied to the disposition, the total of
(A) the amount, if any, by which the fair market value of consideration given in respect of the disposition exceeds the total of
(I) the greater of the amount determined under subparagraph 148(7)(a)(i) in respect of the disposition and the adjusted cost basis to the policyholder of the interest immediately before the disposition, and
(II) the amount by which the paid-up capital of any class of the capital stock of a corporation resulting from the disposition is reduced at the beginning of March 22, 2016 because of the application of paragraphs 148(7)(c) and (f) in respect of the disposition, and
(B) if the paid-up capital in respect of a class of shares of the capital stock of a corporation was increased before March 22, 2016 as described in subparagraph 148(7)(f)(iii) in respect of the disposition, the amount, if any, by which the total reduction in the paid-up capital in respect of that class — not exceeding the amount of that increase — after that increase and before March 22, 2016 (except to the extent that the amount of the reduction was deemed by subsection 84(4) or (4.1) to be a dividend received by a taxpayer) exceeds the amount determined under subparagraph 148(7)(a)(i) in respect of the disposition, or
(vi) if the death occurs after March 21, 2016, an interest in the policy was disposed of by a policyholder (other than a taxable Canadian corporation) after 1999 and before March 22, 2016 and subsection 148(7) applied to the disposition, the amount, if any, determined by the formula
A − B
where
- A
- is the amount, if any, by which the lesser of the adjusted cost basis to the policyholder of the interest immediately before the disposition and the fair market value of consideration given in respect of the disposition exceeds the amount determined under subparagraph 148(7)(a)(i) in respect of the disposition, and
- B
- is the absolute value of the negative amount, if any, that would be, in the absence of section 257, the adjusted cost basis, immediately before the death, of the interest in the policy,
(5) Subparagraph (b)(iii) of the definition paid-up capital in subsection 89(1) of the Act is replaced by the following:
(iii) if the particular time is after March 31, 1977, an amount equal to the paid-up capital in respect of that class of shares at the particular time, computed without reference to the provisions of this Act except subsections 51(3) and 66.3(2) and (4), sections 84.1 and 84.2, subsections 85(2.1), 85.1(2.1) and (8), 86(2.1), 87(3) and (9), paragraph 128.1(1)(c.3), subsections 128.1(2) and (3), section 135.2, subsections 138(11.7), 139.1(6) and (7), 148(7), 192(4.1) and 194(4.1) and sections 212.1 and 212.3,
(6) Subsections (1) and (2) come into force or are deemed to have come into force on January 1, 2017.
30 (1) Paragraph 94(4)(b) of the Act is replaced by the following:
(b) subsections (8.1) and (8.2), paragraph (14)(a), subsections 70(6) and 73(1), the definition Canadian partnership in subsection 102(1), paragraph 107.4(1)(c), the definition qualified disability trust in subsection 122(3), paragraph (a) of the definition mutual fund trust in subsection 132(6), the definition eligible trust in subsection 135.2(1) and subparagraph (b)(i) of the definition investment fund in subsection 251.2(1);
(2) Subsection (1) is deemed to have come into force on March 21, 2013, except that paragraph 94(4)(b) of the Act, as enacted by subsection (1), is to be read without reference to
(a) before July 1, 2015, “the definition eligible trust in subsection 135.2(1)”; and
(b) for taxation years that end before 2016, “the definition qualified disability trust in subsection 122(3),”.
31 (1) Clause 95(2)(d.1)(ii)(B) of the Act is replaced by the following:
(B) subsections 13(21.2), 18(15) and 40(3.4) in respect of any property that was disposed of, at any time before the merger, by a foreign affiliate predecessor, and
(2) Subclause 95(2)(e)(v)(A)(II) of the Act is replaced by the following:
(II) subsections 13(21.2), 18(15) and 40(3.4) in respect of any property that was disposed of, at any time before the liquidation and dissolution, by the disposing affiliate, and
(3) Clause 95(2)(f.11)(ii)(A) of the Act is replaced by the following:
(A) this Act is to be read without reference to subsections 17(1) and 18(4) and section 91, except that, where the foreign affiliate is a member of a partnership, section 91 is to be applied to determine the income or loss of the partnership and for that purpose subsection 96(1) is to be applied to determine the foreign affiliate’s share of that income or loss of the partnership,
(4) Subsections (1) to (3) come into force or are deemed to have come into force on January 1, 2017.
32 (1) The portion of subsection 96(1.7) of the Act before the formula is replaced by the following:
Marginal note:Gains and losses
(1.7) Notwithstanding subsection (1) or section 38, if in a particular taxation year of a taxpayer, the taxpayer is a member of a partnership with a fiscal period that ends in the particular year, the amount of a taxable capital gain, allowable capital loss or allowable business investment loss of the taxpayer for the particular year determined in respect of the partnership is the amount determined by the formula
(2) The description of A in subsection 96(1.7) of the Act is replaced by the following:
- A
- is the amount of the taxpayer’s taxable capital gain, allowable capital loss or allowable business investment loss, as the case may be, for the particular year otherwise determined under this section in respect of the partnership;
(3) The portion of subsection 96(3) of the Act before paragraph (a) is replaced by the following:
Marginal note:Agreement or election of partnership members
(3) If a taxpayer who was a member of a partnership at any time in a fiscal period has, for any purpose relevant to the computation of the taxpayer’s income from the partnership for the fiscal period, made or executed an agreement, designation or election under or in respect of the application of any of subsections 13(4), (4.2) and (16), section 15.2, subsections 20(9) and 21(1) to (4), section 22, subsection 29(1), section 34, clause 37(8)(a)(ii)(B), subsections 44(1) and (6), 50(1) and 80(5) and (9) to (11), section 80.04, subsections 86.1(2), 88(3.1), (3.3) and (3.5) and 90(3), the definition relevant cost base in subsection 95(4) and subsections 97(2), 139.1(16) and (17) and 249.1(4) and (6) that, if this Act were read without reference to this subsection, would be a valid agreement, designation or election,
(4) Subsection 96(8) of the Act is amended by adding “and” at the end of paragraph (b), by striking out “and” at the end of paragraph (c) and by repealing paragraph (d).
(5) Subsections (1) to (4) come into force or are deemed to have come into force on January 1, 2017.
33 (1) The portion of subsection 97(2) of the Act before paragraph (a) is replaced by the following:
(2) Notwithstanding any other provision of this Act other than subsections (3) and 13(21.2), where a taxpayer at any time disposes of any property that is a capital property, Canadian resource property, foreign resource property or inventory of the taxpayer to a partnership that immediately after that time is a Canadian partnership of which the taxpayer is a member, if the taxpayer and all the other members of the partnership jointly so elect in prescribed form within the time referred to in subsection 96(4),
(2) Subsection (1) comes into force or is deemed to have come into force on January 1, 2017.
34 (1) Paragraph 98(3)(b) of the Act is amended by adding “and” at the end of subparagraph (i) and by repealing subparagraph (i.1).
(2) Subsection 98(3) of the Act is amended by adding “and” at the end of paragraph (e), by striking out “and” at the end of paragraph (f) and by repealing paragraph (g).
(3) Paragraph 98(5)(b) of the Act is amended by adding “and” at the end of subparagraph (i) and by repealing subparagraph (i.1).
(4) Subsection 98(5) of the Act is amended by adding “and” at the end of paragraph (f), by striking out “and” at the end of paragraph (g) and by repealing paragraph (h).
(5) Subsections (1) to (4) come into force or are deemed to have come into force on January 1, 2017.
35 (1) Subparagraph (i) of the description of B in paragraph 104(6)(b) of the Act is replaced by the following:
(i) if the trust is a trust for which a day is to be determined under paragraph (4)(a) or (a.4) by reference to a death or later death, as the case may be, that has not occurred before the beginning of the year, the total of
(A) the part of its income (determined without reference to this subsection and subsection (12)) for the year that became payable in the year to, or that was included under subsection 105(2) in computing the income of, a beneficiary (other than an individual whose death is that death or later death, as the case may be), and
(B) the total of all amounts each of which
(I) is included in its income (determined without reference to this subsection and subsection (12)) for the year — if the year is the year in which that death or later death, as the case may be, occurs and paragraph (13.4)(b) does not apply in respect of the trust for the year — because of the application of subsection (4), (5), (5.1) or (5.2) or 12(10.2), and
(II) is not included in the amount determined for clause (A) for the year, and
(2) The portion of paragraph 104(13.4)(b) of the Act before subparagraph (i) is replaced by the following:
(b) subject to paragraph (b.1), the trust’s income (determined without reference to subsections (6) and (12)) for the particular year is, notwithstanding subsection (24), deemed
(3) Subsection 104(13.4) of the Act is amended by striking out “and” at the end of paragraph (b) and by adding the following after that paragraph:
(b.1) paragraph (b) does not apply in respect of the trust for the particular year, unless
(i) the individual is resident in Canada immediately before the death,
(ii) the trust is, immediately before the death, a testamentary trust that
(A) is a post-1971 spousal or common-law partner trust, and
(B) was created by the will of a taxpayer who died before 2017, and
(iii) an election — made jointly between the trust and the legal representative administering the individual’s graduated rate estate in prescribed form — that paragraph (b) applies is filed with
(A) the individual’s return of income under this Part for the individual’s year, and
(B) the trust’s return of income under this Part for the particular year; and
(4) Subparagraph 104(13.4)(c)(i) of the Act is replaced by the following:
(i) the references in paragraph 150(1)(c) to “year” and in subparagraph (a)(ii) of the definition balance-due day in subsection 248(1) to “taxation year” are to be read as “calendar year in which the taxation year ends”, and
(5) Subsections (1) to (4) apply to the 2016 and subsequent taxation years.
36 (1) Paragraph 107(2)(b.1) of the Act is amended by adding “and” at the end of subparagraph (i) and by repealing subparagraph (ii).
(2) Paragraph 107(2)(f) of the Act is repealed.
(3) Paragraph 107(2.001)(c) of the Act is replaced by the following:
(c) the property is capital property used in, or property described in the inventory of, a business carried on by the trust through a permanent establishment (as defined by regulation) in Canada immediately before the time of the distribution.
(4) Subsections (1) to (3) come into force or are deemed to have come into force on January 1, 2017.
37 (1) Paragraph 107.4(3)(e) of the Act is repealed.
(2) Subsection (1) comes into force or is deemed to have come into force on January 1, 2017.
38 (1) Subsection 108(1.1) of the Act is replaced by the following:
Marginal note:Testamentary trust not disqualified
(1.1) For the purpose of the definition testamentary trust in subsection (1), a contribution to a particular trust does not include
(a) a qualifying expenditure (within the meaning of section 118.04 or 118.041) of a beneficiary under the trust; or
(b) an amount paid to, or on behalf of, the trust by another trust if
(i) the trust is an individual’s graduated rate estate (determined without regard to the payment and this subsection),
(ii) paragraph 104(13.4)(b) applies to the other trust, for a taxation year that ends at a time determined by reference to the individual’s death, because of a joint election made under subparagraph 104(13.4)(b.1)(iii) by the other trust and the legal representative administering the estate,
(iii) the payment is on account of the tax payable by the individual, for the individual’s taxation year that includes the day on which the individual dies, under
(A) this Part, or
(B) the law of the province, in which the individual was resident immediately before the individual’s death, that imposes a tax on the taxable income of individuals resident in that province, and
(iv) the amount of the payment does not exceed the amount by which that tax payable is greater than it would have been if paragraph 104(13.4)(b) did not apply to the other trust in respect of the taxation year referred to in subparagraph (ii).
(2) Subsection (1) applies to the 2016 and subsequent taxation years.
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