VIII, s. 43]
(f)[Repealed, 2016, c. 12, s. 36]
Marginal note:No rollover on election by a trust
(2.001)Where a trust makes a distribution of a property to a beneficiary of the trust in full or partial satisfaction of the beneficiary’s capital interest in the trust and so elects in prescribed form filed with the Minister with the trust’s return of income for its taxation year in which the distribution occurred, subsection (2) does not apply to the distribution if
(a)the trust is resident in Canada at the time of the distribution;
(b)the property is taxable Canadian property; or
(c)the property is capital property used in, or property described in the inventory of, a business carried on by the trust through apermanent establishment(as defined by regulation) in Canada immediately before the time of the distribution.
Marginal note:No rollover on election by a beneficiary
(2.002)Where a non-resident trust makes a distribution of a property (other than a property described in paragraph (2.001)(b) or (c)) to a beneficiary of the trust in full or partial satisfaction of the beneficiary’s capital interest in the trust and the beneficiary makes an election under this subsection in prescribed form filed with the Minister with the beneficiary’s return of income for the beneficiary’s taxation year in which the distribution occurred,
(a)subsection (2) does not apply to the distribution; and
(b)for the purpose of subparagraph (1)(a)(ii), the cost amount of the interest to the beneficiary is deemed to be nil.
Marginal note:Distribution of principal residence
(2.01)Where property that would, if a personal trust had designated the property under paragraph (c.1) of the definitionprincipal residencein section 54, be a principal residence (within the meaning of that definition) of the trust for a taxation year, is at any time (in this subsection referred to as “that time”) distributed by the trust to a taxpayer in circumstances in which subsection (2) applies and the trust so elects in its return of income for the taxation year that includes that time,
(a)the trust shall be deemed to have disposed of the property immediately before the particular time that is immediately before that time for proceeds of disposition equal to the fair market value of the property at that time; and
(b)the trust shall be deemed to have reacquired the property at the particular time at a cost equal to that fair market value.
Marginal note:Other distributions
(2.1)Where at any time a property of a trust is distributed by the trust to a beneficiary under the trust, there would, if this Act were read without reference to paragraphs (h) and (i) of the definitiondispositionin subsection 248(1), be a resulting disposition of all or any part of the beneficiary’s capital interest in the trust (which interest or part, as the case may be, is in this subsection referred to as the “former interest”) and the rules in subsections (2) and (3.1) and sections 88.1 and 132.2 do not apply in respect of the distribution,
(a)the trust is deemed to have disposed of the property for proceeds equal to its fair market value at that time;
(b)the beneficiary is deemed to have acquired the property at a cost equal to the proceeds determined under paragraph (a);
(c)unless the trust is a mutual fund trust, the beneficiary’s proceeds of disposition of the portion of the former interest disposed of by the beneficiary on the distribution are deemed to be equal to the amount, if any, by which
(i)the proceeds determined under paragraph (a) (other than the portion, if any, of the proceeds that is a payment to which paragraph (h) or (i) of the definitiondispositionin subsection 248(1) applies)
exceed the total of
(ii)where the property is not a Canadian resource property or foreign resource property, the amount, if any, by which
(A)the fair market value of the property at that time
exceeds the total of
(B)the cost amount to the trust of the property immediately before that time, and
(C)the portion, if any, of the excess that would be determined under this subparagraph if this subparagraph were read without reference to this clause that represents a payment to which paragraph (h) or (i) of the definitiondispositionin subsection 248(1) applies, and
(iii)all amounts each of which is an eligible offset at that time of the taxpayer in respect of the former interest;
(d)notwithstanding paragraphs (a) to (c), where the trust is non-resident at that time, the property is not described in paragraph (2.001)(b) or (c) and, if this Act were read without reference to this paragraph, there would be no income, loss, taxable capital gain or allowable capital loss of a taxpayer in respect of the property because of the application of subsection 75(2) to the disposition at that time of the property,
(i)the trust is deemed to have disposed of the property for proceeds equal to the cost amount of the property,
(ii)the beneficiary is deemed to have acquired the property at a cost equal to the fair market value of the property, and
(iii)the beneficiary’s proceeds of disposition of the portion of the former interest disposed of by the beneficiary on the distribution are deemed to be equal to the amount, if any, by which
(A)the fair market value of the property
exceeds the total of
(B)the portion, if any, of the amount of the distribution that is a payment to which paragraph (h) or (i) of the definitiondispositionin subsection 248(1) applies, and
(C)all amounts each of which is an eligible offset at that time of the taxpayer in respect of the former interest; and
(e)where the trust is a mutual fund trust, the distribution occurs in a taxation year of the trust before its 2003 taxation year, the trust has elected under subsection (2.11) in respect of the year and the trust so elects in respect of the distribution in prescribed form filed with the trust’s return of income for the year,
(i)this subsection shall be read without reference to paragraph (c), and
(ii)the beneficiary’s proceeds of disposition of the portion of the former interest disposed of by the beneficiary on the distribution are deemed to be equal to the amount determined under paragraph (a).
Marginal note:Gains not distributed to beneficiaries
(2.11)If a trust that is resident in Canada for a taxation year makes in the taxation year one or more distributions to which subsection (2.1) applies and the trust elects in prescribed form filed with the trust’s return for the year or a preceding taxation year to have one of the following paragraphs apply, the income of the trust for the year (determined without reference to subsection 104(6)) shall, for the purposes of subsections 104(6) and (13), be computed without regard
(a)if the election is to have this paragraph apply, to all of those distributions (other than distributions of cash denominated in Canadian dollars) to non-resident persons (including a partnership other than a Canadian partnership); and
(b)if the election is to have this paragraph apply, to all of those distributions (other than distributions of cash denominated in Canadian dollars).
Marginal note:Election — subsection (2.11)
(2.12)An election made under subsection (2.11) by a mutual fund trust is deemed, for the trust’s 2003 and subsequent taxation years, not to have been made if
(a)the election is made after December 20, 2000 and applies to any taxation year that ends before 2003; and
(b)the proceeds of disposition of a beneficiary’s interest in the trust have been determined under paragraph (2.1)(e).
Marginal note:Flow-through entity
(2.2)Where at any time before 2005 a beneficiary under a trust described in paragraph (h), (i) or (j) of the definitionflow-through entityin subsection 39.1(1) received a distribution of property from the trust in satisfaction of all or a portion of the beneficiary’s interests in the trust and the beneficiary files with the Minister on or before the beneficiary’s filing-due date for the taxation year that includes that time an election in respect of the property in prescribed form, there shall be included in the cost to the beneficiary of a particular property (other than money) received by the beneficiary as part of the distribution of property the least of
(a)the amount, if any, by which the beneficiary’s exempt capital gains balance (as defined in subsection 39.1(1)) in respect of the trust for the beneficiary’s taxation year that includes that time exceeds the total of all amounts each of which is
(i)an amount by which a capital gain is reduced under section 39.1 in the year because of the beneficiary’s exempt capital gains balance in respect of the trust,
(ii)twice an amount by which a taxable capital gain is reduced under section 39.1 in the year because of the beneficiary’s exempt capital gains balance in respect of the trust, or
(iii)an amount included in the cost to the beneficiary of another property received by the beneficiary at or before that time in the year because of this subsection,
(b)the amount by which the fair market value of the particular property at that time exceeds the adjusted cost base to the trust of the particular property immediately before that time, and
(c)the amount designated in respect of the particular property in the election.
Marginal note:Application of subsection (3.1)
(3)Subsection (3.1) applies to a trust’s distribution of property to a taxpayer if
(a)the distribution is a SIFT trust wind-up event to which section 88.1 does not apply;
(b)the property is a share and the only shares distributed on any SIFT trust wind-up event of the trust are of a single class of the capital stock of a taxable Canadian corporation; and
(c)where the trust is a SIFT wind-up entity, the distribution occurs no more than 60 days after the earlier of
(i)the first SIFT trust wind-up event of the trust, and
(ii)the first distribution to the trust that is a SIFT trust wind-up event of another trust.
Marginal note:SIFT trust wind-up event
(3.1)If this subsection applies to a trust’s distribution of property, the following rules apply:
(a)the trust is deemed to have disposed of the property for proceeds of disposition equal to the adjusted cost base to the trust of the property immediately before the distribution;
(b)the taxpayer is deemed to have disposed of the taxpayer’s interest as a beneficiary under the trust for proceeds of disposition equal to the cost amount to the taxpayer of the interest immediately before the distribution;
(c)the taxpayer is deemed to have acquired the property at a cost equal to
(i)if, at all times at which the trust makes a distribution that is a SIFT trust wind-up event, the taxpayer is the only beneficiary under the trust and is a SIFT wind-up entity or a taxable Canadian corporation, the adjusted cost base to the trust of the property immediately before the distribution, and
(ii)in any other case, the cost amount to the taxpayer of the taxpayer’s interest as a beneficiary under the trust immediately before the distribution;
(d)if the taxpayer’s interest as a beneficiary under the trust was immediately before the disposition taxable Canadian property of the taxpayer, the property is deemed to be, at any time that is within 60 months after the distribution, taxable Canadian property of the taxpayer; and
(e)if a liability of the trust becomes as a consequence of the distribution a liability of the corporation described in paragraph (3)(b) in respect of the distribution, and the amount payable by the corporation on the maturity of the liability is the same as the amount that would have been payable by the trust on its maturity,
(i)the transfer of the liability by the trust to the corporation is deemed not to have occurred, and
(ii)the liability is deemed
(A)to have been incurred or issued by the corporation at the time at which, and under the agreement under which, it was incurred or issued by the trust, and
(B)not to have been incurred or issued by the trust.
Marginal note:Trusts in favour of spouse, common-law partner or self
(4)Subsection (2.1) applies (and subsection (2) does not apply) at any time to property distributed to a beneficiary by a trust described in paragraph 104(4)(a) where
(a)the beneficiary is not
(i)in the case of a post-1971 spousal or common-law partner trust, the spouse or common-law partner referred to in paragraph 104(4)(a),
(ii)in the case of an alter ego trust, the taxpayer referred to in paragraph 104(4)(a), and
(iii)in the case of a joint spousal or common-law partner trust, the taxpayer, spouse or common-law partner referred to in paragraph 104(4)(a); and
(b)the distribution of the property occurs on or before the earlier of
(i)a reacquisition, in respect of any property of the trust, that occurs immediately after the day described by paragraph 104(4)(a), and
(ii)the cessation of the trust’s existence.
Marginal note:Where subsection 75(2) applicable to trust
(4.1)Subsection (2.1) applies (and subsection (2) does not apply) in respect of a distribution of any property of a particular personal trust or prescribed trust (other than an excluded property of the particular trust) by the particular trust to a taxpayer who was a beneficiary under the particular trust where
(a)the distribution was in satisfaction of all or any part of the taxpayer’s capital interest in the particular trust;
(b)subsection 75(2) was applicable (determined without its reference to “while the person is resident in Canada” and as if subsection 75(3) as it read before March 21, 2013 were read without reference to its paragraph (c.2)), or subsection 94(8.2) was applicable (determined without reference to paragraph 94(8.1)(a)), at a particular time in respect of any property of
(i)the particular trust, or
(ii)a trust the property of which included a property that, through one or more dispositions to which subsection 107.4(3) applied, became a property of the particular trust, and the property was not, at any time after the particular time and before the distribution, the subject of a disposition for proceeds of disposition equal to the fair market value of the property at the time of the disposition;
(c)the taxpayer was neither
(i)the person (other than a trust described in subparagraph (b)(ii)) from whom the particular trust directly or indirectly received the property, or property for which the property was substituted, nor
(ii)an individual in respect of whom subsection 73(1) would be applicable on the transfer of capital property from the person described in subparagraph (i); and
(d)the person described in subparagraph (c)(i) was in existence at the time the property was distributed.
Marginal note:Distribution of property received on qualifying disposition
(4.2)Subsection (2.1) applies (and subsection (2) does not apply) at any time to property distributed after December 20, 2002 to a beneficiary by a personal trust or a trust prescribed for the purpose of subsection (2), if
(a)at a particular time before December 21, 2002 there was a qualifying disposition (within the meaning assigned by subsection 107.4(1)) of the property, or of other property for which the property is substituted, by a particular partnership or a particular corporation, as the case may be, to a trust; and
(b)the beneficiary is neither the particular partnership nor the particular corporation.
Marginal note:Distribution to non-resident
(5)Subsection (2.1) applies (and subsection (2) does not apply) in respect of a distribution of a property (other than a share of the capital stock of a non-resident-owned investment corporation or property described in any of subparagraphs 128.1(4)(b)(i) to (iii)) by a trust to a non-resident taxpayer (including a partnership other than a Canadian partnership) in satisfaction of all or part of the taxpayer’s capital interest in the trust.
Marginal note:Instalment interest
(5.1)If, solely because of the application of subsection (5), paragraphs (2)(a) to (c) do not apply to a distribution in a taxation year of taxable Canadian property by a trust, in applying sections 155 and 156 and subsections 156.1(1) to (3) and 161(2), (4) and (4.01) and any regulations made for the purposes of those provisions, the trust’s tax payable under this Part for the year is deemed to be the lesser of
(a)the trust’s tax payable under this Part for the year, determined before taking into consideration the specified future tax consequences for the year, and
(b)the amount that would be determined under paragraph (a) if subsection (5) did not apply to each distribution in the year of taxable Canadian property to which the rules in subsection (2) do not apply solely because of the application of subsection (5).
Marginal note:Loss reduction
(6)Notwithstanding any other provision of this Act, where a person or partnership (in this subsection referred to as the “vendor”) has disposed of property and would, but for this subsection, have had a loss from the disposition, the vendor’s loss otherwise determined in respect of the disposition shall be reduced by such portion of that loss as may reasonably be considered to have accrued during a period in which
(a)the property or property for which it was substituted was held by a trust; and
(b)either
(i)the trust was non-resident and the property (or property for which it was substituted) was not taxable Canadian property of the trust, or
(ii)neither the vendor — nor a person that would, if section 251.1 were read without reference to the definitioncontrolledin subsection 251.1(3), be affiliated with the vendor — had a capital interest in the trust.
Marginal note:Distribution by certain employment-related trusts
107.1If at any time any property of an employee life and health trust, an employee trust, a trust governed by an employee benefit plan or a trust described in paragraph (a.1) of the definitiontrustin subsection 108(1) has been distributed by the trust to a taxpayer who was a beneficiary under the trust in satisfaction of all or any part of the taxpayer’s interest in the trust, the following rules apply:
(a)in the case of an employee life and health trust, an employee trust or a trust described in paragraph (a.1) of the definitiontrustin subsection 108(1),
(i)the trust shall be deemed to have disposed of the property immediately before that time for proceeds of disposition equal to its fair market value at that time, and
(ii)the taxpayer shall be deemed to have acquired the property at a cost equal to its fair market value at that time;
(b)in the case of a trust governed by an employee benefit plan,
(i)the trust shall be deemed to have disposed of the property for proceeds of disposition equal to its cost amount to the trust immediately before that time, and
(ii)the taxpayer shall be deemed to have acquired the property at a cost equal to the greater of
(A)its fair market value at that time, and
(B)the adjusted cost base to the taxpayer of the taxpayer’s interest or part thereof, as the case may be, immediately before that time;
(c)the taxpayer shall be deemed to have disposed of the taxpayer’s interest or part thereof, as the case may be, for proceeds of disposition equal to the adjusted cost base to the taxpayer of that interest or part thereof immediately before that time; and
(d)where the property was depreciable property of a prescribed class of the trust and the amount that was the capital cost to the trust of that property exceeds the cost at which the taxpayer is deemed by this section to have acquired 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 taxpayer of the property shall be deemed to be the amount that was the capital cost of the property to the trust, and
(ii)the excess shall be deemed to have been allowed to the taxpayer in respect of the property under regulations made under paragraph 20(1)(a) in computing income for taxation years before the acquisition by the taxpayer of the property.
Marginal note:Distribution by a retirement compensation arrangement
107.2Where, at any time, any property of a trust governed by a retirement compensation arrangement has been distributed by the trust to a taxpayer who was a beneficiary under the trust in satisfaction of all or any part of the taxpayer’s interest in the trust, for the purposes of this Part and Part XI.3, the following rules apply:
(a)the trust shall be deemed to have disposed of the property for proceeds of disposition equal to its fair market value at that time;
(b)the trust shall be deemed to have paid to the taxpayer as a distribution an amount equal to that fair market value;
(c)the taxpayer shall be deemed to have acquired the property at a cost equal to that fair market value;
(d)the taxpayer shall be deemed to have disposed of the taxpayer’s interest or part thereof, as the case may be, for proceeds of disposition equal to the adjusted cost base to the taxpayer of that interest or part thereof immediately before that time; and
(e)where the property was depreciable property of a prescribed class of the trust and the amount that was the capital cost to the trust of that property exceeds the cost at which the taxpayer is deemed by this section to have acquired 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 taxpayer of the property shall be deemed to be the amount that was the capital cost of the property to the trust, and
(ii)the excess shall be deemed to have been allowed to the taxpayer in respect of the property under regulations made under paragraph 20(1)(a) in computing the taxpayer’s income for taxation years before the acquisition by the taxpayer of the property.
Marginal note:Treatment of beneficiaries under qualifying environmental trusts
107.3(1)Where a taxpayer is a beneficiary under a qualifying environmental trust in a taxation year of the trust (in this subsection referred to as the “trust’s year”) that ends in a particular taxation year of the taxpayer,
(a)subject to paragraph 107.3(1)(b), the taxpayer’s income, non-capital loss and net capital loss for the particular year shall be computed as if the amount of the income or loss of the trust for the trust’s year from any source or from sources in a particular place were the income or loss of the taxpayer from that source or from sources in that particular place for the particular year, to the extent of the portion thereof that can reasonably be considered to be the taxpayer’s share of such income or loss; and
(b)if the taxpayer is non-resident at any time in the particular year and an income or loss described in paragraph 107.3(1)(a) or an amount to which paragraph 12(1)(z.1) or (z.2) applies would not otherwise be included in computing the taxpayer’s taxable income or taxable income earned in Canada, as the case may be, notwithstanding any other provision of this Act, the income, the loss or the amount shall be attributed to the carrying on of business in Canada by the taxpayer through a fixed place of business located in the province in which the site to which the trust relates is situated.
Marginal note:Transfers to beneficiaries
(2)Where property of a qualifying environmental trust is transferred at any time to a beneficiary under the trust in satisfaction of all or any part of the beneficiary’s interest as a beneficiary under the trust,
(a)the trust shall be deemed to have disposed of the property at that time for proceeds of disposition equal to its fair market value at that time; and
(b)the beneficiary shall be deemed to have acquired the property at that time at a cost equal to its fair market value at that time.
Marginal note:Ceasing to be qualifying environmental trust
(3)If at any time a trust ceases to be a qualifying environmental trust,
(a)for the purposes of subsections 111(5.5) and 149(10), the trust is deemed to cease at that time to be exempt from tax under this Part on its taxable income;
(b)each beneficiary under the trust immediately before that time is deemed to receive at that time from the trust an amount equal to the percentage of the fair market value of the properties of the trust immediately after that time that can reasonably be considered to be the beneficiary’s interest in the trust; and
(c)each beneficiary under the trust is deemed to acquire immediately after that time an interest in the trust at a cost equal to the amount deemed by paragraph (b) to be received by the beneficiary from the trust.
Marginal note:Application
(4)Subsection 104(13) and sections 105 to 107 do not apply to a trust with respect to a taxation year during which it is a qualifying environmental trust.
Marginal note:Qualifying disposition
107.4(1)In this section, aqualifying dispositionof a property means a disposition of the property before December 21, 2002 by a person or partnership, and a disposition of property after December 20, 2002 by an individual, (which person, partnership or individual is referred to in this subsection as the “contributor”) as a result of a transfer of the property to a particular trust where
(a)the disposition does not result in a change in the beneficial ownership of the property;
(b)the proceeds of disposition would, if this Act were read without reference to this section and sections 69 and 73, not be determined under any provision of this Act;
(c)the particular trust is resident in Canada at the time of the transfer;
(d)[Repealed, 2013, c. 34, s. 235]
(e)unless the contributor is a trust, there is immediately after the disposition no absolute or contingent right of a person or partnership (other than the contributor or, where the property was co-owned, each of the joint contributors) as a beneficiary (determined with reference to subsection 104(1.1)) under the particular trust;
(f)the contributor is not an individual (other than a trust described in any of paragraphs (a) to (e.1) of the definitiontrustin subsection 108(1)), if the particular trust is described in any of paragraphs (a) to (e.1) of the definitiontrustin subsection 108(1);
(g)the disposition is not part of a series of transactions or events
(i)that begins after December 17, 1999 and that includes the subsequent acquisition, for consideration given to a personal trust, of a capital interest or an income interest in the trust,
(ii)that begins after December 17, 1999 and that includes the disposition of all or part of a capital interest or an income interest in a personal trust, other than a disposition solely as a consequence of a distribution from a trust to a person or partnership in satisfaction of all or part of that interest, or
(iii)that begins after June 5, 2000 and that includes the transfer to the particular trust of particular property as consideration for the acquisition of a capital interest in the particular trust, if the particular property can reasonably be considered to have been received by the particular trust in order to fund a distribution (other than a distribution that is proceeds of disposition of a capital interest in the particular trust);
(h)the disposition is not, and is not part of, a transaction
(i)that occurs after December 17, 1999, and
(ii)that includes the giving to the contributor, for the disposition, of any consideration (other than consideration that is an interest of the contributor as a beneficiary under the particular trust or that is the assumption by the particular trust of debt for which the property can, at the time of the disposition, reasonably be considered to be security);
(i)subsection 73(1) does not apply to the disposition and would not apply to the disposition if
(i)no election had been made under that subsection, and
(ii)section 73 were read without reference to subsection 73(1.02); and
(j)if the contributor is an amateur athlete trust, a cemetery care trust, an employee life and health trust, an employee trust, a trust deemed by subsection 143(1) to exist in respect of a congregation that is a constituent part of a religious organization, a related segregated fund trust (within the meaning assigned by paragraph 138.1(1)(a)), a trust described in paragraph 149(1)(o.4) or a trust governed by an eligible funeral arrangement, an employees profit sharing plan, a registered disability savings plan, a registered education savings plan, a registered supplementary unemployment benefit plan or a TFSA, the particular trust is the same type of trust.
Marginal note:Application of paragraph (1)(a)
(2)For the purpose of paragraph (1)(a),
(a)except where paragraph (b) applies, where a trust (in this paragraph and subsection (2.1) referred to as the “transferor trust”), in a period that does not exceed one day, disposes of one or more properties in the period to one or more other trusts, there is deemed to be no resulting change in the beneficial ownership of those properties if
(i)the transferor trust receives no consideration for the disposition, and
(ii)as a consequence of the disposition, the value of each beneficiary’s beneficial ownership at the beginning of the period under the transferor trust in each particular property of the transferor trust (or group of two or more properties of the transferor trust that are identical to each other) is the same as the value of the beneficiary’s beneficial ownership at the end of the period under the transferor trust and the other trust or trusts in each particular property (or in property that was immediately before the disposition included in the group of identical properties referred to above); and
(b)where a trust (in this paragraph referred to as the “transferor”) governed by a registered retirement savings plan or by a registered retirement income fund transfers a property to a trust (in this paragraph referred to as the “transferee”) governed by a registered retirement savings plan or by a registered retirement income fund, the transfer is deemed not to result in a change in the beneficial ownership of the property if the annuitant of the plan or fund that governs the transferor is also the annuitant of the plan or fund that governs the transferee.
Marginal note:Fractional interests
(2.1)For the purpose of applying paragraph (2)(a) in respect of a transfer by a transferor trust of property that includes a share and money, the other trust or trusts referred to in that paragraph may receive, in lieu of a transfer of a fractional interest in a share that would otherwise be required, a disproportionate amount of money or interest in the share (the value of which does not exceed the lesser of $200 and the fair market value of the fractional interest).
Marginal note:Tax consequences of qualifying dispositions
(3)Where at a particular time there is a qualifying disposition of a property by a person or partnership (in this subsection referred to as the “transferor”) to a trust (in this subsection referred to as the “transferee trust”),
(a)the transferor’s proceeds of disposition of the property are deemed to be
(i)where the transferor so elects in writing and files the election with the Minister on or before the transferor’s filing-due date for its taxation year that includes the particular time, or at any later time that is acceptable to the Minister, the amount specified in the election that is not less than the cost amount to the transferor of the property immediately before the particular time and not more than the fair market value of the property at the particular time, and
(ii)in any other case, the cost amount to the transferor of the property immediately before the particular time;
(b)the transferee trust’s cost of the property is deemed to be the amount, if any, by which
(i)the proceeds determined under paragraph (a) in respect of the qualifying disposition
exceed
(ii)the amount by which the transferor’s loss otherwise determined from the qualifying disposition would be reduced because of subsection 100(4), paragraph 107(1)(c) or (d) or any of subsections 112(3) to (4.2), if the proceeds determined under paragraph (a) were equal to the fair market value of the property at the particular time;
(c)[Repealed, 2005, c. 30, s. 4]
(d)if the property was depreciable property of a prescribed class of the transferor and its capital cost to the transferor exceeds the cost at which the transferee trust is deemed by this subsection to have acquired the property, for the purposes of sections 13 and 20 and any regulations made for the purpose of paragraph 20(1)(a),
(i)the capital cost of the property to the transferee trust is deemed to be the amount that was the capital cost of the property to the transferor, and
(ii)the excess is deemed to have been allowed to the transferee trust 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 particular time;
(e)[Repealed, 2016, c. 12, s. 37]
(f)if, as a result of a transaction or event, the property was deemed to be taxable Canadian property of the transferor by this paragraph or any of paragraphs 44.1(2)(c), 51(1)(f), 85(1)(i) and 85.1(1)(a), subsection 85.1(5), paragraph 85.1(8)(b), subsections 87(4) and (5) and paragraphs 97(2)(c) and 107(3.1)(d), the property is also deemed to be, at any time that is within 60 months after the transaction or event, taxable Canadian property of the transferee trust;
(g)where the transferor is a related segregated fund trust (in this paragraph having the meaning assigned by section 138.1),
(i)paragraph 138.1(1)(i) does not apply in respect of a disposition of an interest in the transferor that occurs in connection with the qualifying disposition, and
(ii)in computing the amount determined under paragraph 138.1(1)(i) in respect of a subsequent disposition of an interest in the transferee trust where the interest is deemed to exist in connection with a particular life insurance policy, the acquisition fee (as defined by subsection 138.1(6)) in respect of the particular policy shall be determined as if each amount determined under any of paragraphs 138.1(6)(a) to (d) in respect of the policyholder’s interest in the transferor had been determined in respect of the policyholder’s interest in the transferee trust;
(h)if the transferor is a trust to which property had been transferred by an individual (other than a trust),
(i)where subsection 73(1) applied in respect of the property so transferred and it is reasonable to consider that the property was so transferred in anticipation of the individual ceasing to be resident in Canada, for the purposes of paragraph 104(4)(a.3) and the application of this paragraph to a disposition by the transferee trust after the particular time, the transferee trust is deemed after the particular time to be a trust to which the individual had transferred property in anticipation of the individual ceasing to reside in Canada and in circumstances to which subsection 73(1) applied, and
(ii)for the purposes of paragraph (j) of the definitionexcluded right or interestin subsection 128.1(10) and the application of this paragraph to a disposition by the transferee trust after the particular time, where the property so transferred was transferred in circumstances to which this subsection would apply if subsection (1) were read without reference to paragraphs (1)(h) and (i), the transferee trust is deemed after the particular time to be a trust an interest in which was acquired by the individual as a consequence of a qualifying disposition;
(i)if the transferor is a trust (other than a personal trust or a trust prescribed for the purposes of subsection 107(2)), the transferee trust is deemed to be neither a personal trust nor a trust prescribed for the purposes of subsection 107(2);
(j)if the transferor is a trust and a taxpayer disposes of all or part of a capital interest in the transferor because of the qualifying disposition and, as a consequence, acquires a capital interest or part of it in the transferee trust
(i)the taxpayer is deemed to dispose of the capital interest or part of it in the transferor for proceeds equal to the cost amount to the taxpayer of that interest or part of it immediately before the particular time, and
(ii)the taxpayer is deemed to acquire the capital interest or part of it in the transferee trust at a cost equal to the amount, if any, by which
(A)that cost amount
exceeds
(B)the amount by which the taxpayer’s loss otherwise determined from the disposition referred to in subparagraph (i) would be reduced because of paragraph 107(1)(c) or (d) if the proceeds under that subparagraph were equal to the fair market value of the capital interest or part of it in the transferor immediately before the particular time;
(k)where the transferor is a trust, a taxpayer’s beneficial ownership in the property ceases to be derived from the taxpayer’s capital interest in the transferor because of the qualifying disposition and no part of the taxpayer’s capital interest in the transferor was disposed of because of the qualifying disposition, there shall, immediately after the particular time, be added to the cost otherwise determined of the taxpayer’s capital interest in the transferee trust, the amount determined by the formula
A × [(B - C)/B] - D
where
(i)the amount, if any, by which the cost amount to the taxpayer of the taxpayer’s capital interest in the transferor immediately before the particular time exceeds the fair market value of the taxpayer’s capital interest in the transferor immediately before the particular time, and
(ii)the maximum amount by which the taxpayer’s loss from a disposition of a capital interest otherwise determined could have been reduced because of paragraph 107(1)(c) or (d) if the taxpayer’s capital interest in the transferor had been disposed of immediately before the particular time;
(l)where paragraph (k) applies to the qualifying disposition in respect of a taxpayer, the amount that would be determined under that paragraph in respect of the qualifying disposition if the amount determined for D in that paragraph were nil shall, immediately after the particular time, be deducted in computing the cost otherwise determined of the taxpayer’s capital interest in the transferor;
(m)where paragraphs (j) and (k) do not apply in respect of the qualifying disposition, the transferor is deemed to acquire the capital interest or part of it in the transferee trust that is acquired as a consequence of the qualifying disposition
(i)where the transferee trust is a personal trust, at a cost equal to nil, and
(ii)in any other case, at a cost equal to the excess determined under paragraph (b) in respect of the qualifying disposition; and
(n)if the transferor is a trust and a taxpayer disposes of all or part of an income interest in the transferor because of the qualifying disposition and, as a consequence, acquires an income interest or a part of an income interest in the transferee trust, for the purpose of subsection 106(2), the taxpayer is deemed not to dispose of any part of the income interest in the transferor at the particular time.
Marginal note:Fair market value of vested interest in trust
(4)Where
(a)a particular capital interest in a trust is held by a beneficiary at any time,
(b)the particular interest is vested indefeasibly at that time,
(c)the trust is not described in any of paragraphs (a) to (e.1) of the definitiontrustin subsection 108(1), and
(d)interests under the trust are not ordinarily disposed of for consideration that reflects the fair market value of the net assets of the trust,
the fair market value of the particular interest at that time is deemed to be not less than the amount determined by the formula
(A - B) × (C/D)
where
Marginal note:Definitions
108(1)In this Subdivision,
accumulating incomeof a trust for a taxation year means the amount that would be the income of the trust for the year if that amount were computed
(a)without reference to paragraphs 104(4)(a) and (a.1) and subsections 104(5.1), (5.2) and (12) and 107(4),
(b)as if the greatest amount that the trust was entitled to claim under subsection 104(6) in computing its income for the year were so claimed, and
(c)without reference to subsection 12(10.2), except to the extent that that subsection applies to amounts paid to a trust to which paragraph 70(6.1)(b) applies and before the death of the spouse or common-law partner referred to in that paragraph; (revenu accumulé)
beneficiaryunder a trust includes a person beneficially interested therein; (bénéficiaire)
capital interestof a taxpayer in a trust means all rights of the taxpayer as a beneficiary under the trust, and after 1999 includes a right (other than a right acquired before 2000 and disposed of before March 2000) to enforce payment of an amount by the trust that arises as a consequence of any such right, but does not include an income interest in the trust; (participation au capital)
cost amountto a taxpayer at any time of a capital interest or part of it, as the case may be, in a trust, means (notwithstanding subsection 248(1) and except for the purposes of subsection 107(3.1) and section 107.4 and except in respect of a capital interest in a trust that is at that time a foreign affiliate of the taxpayer),
(a)where any money or other property of the trust has been distributed by the trust to the taxpayer in satisfaction of all or part of the taxpayer’s capital interest (whether on the winding-up of the trust or otherwise), the total of
(i)the money so distributed, and
(ii)all amounts each of which is the cost amount to the trust, immediately before the distribution, of each such other property,
(a.1)where that time (in this paragraph referred to as the “particular time”) is immediately before the time that is immediately before the time of the death of the taxpayer and subsection 104(4) or (5) deems the trust to dispose of property at the end of the day that includes the particular time, the amount that would be determined under paragraph (b) if the taxpayer had died on a day that ended immediately before the time that is immediately before the particular time, and
(b)in any other case, the amount determined by the formula
(A - B) × C/D
where
(i)all money of the trust on hand immediately before that time, and
(ii)all amounts each of which is the cost amount to the trust, immediately before that time, of each other property of the trust,
eligible offsetat any time of a taxpayer in respect of all or part of the taxpayer’s capital interest in a trust is the portion of any debt or obligation that is assumed by the taxpayer and that can reasonably be considered to be applicable to property distributed at that time in satisfaction of the interest or part of the interest, as the case may be, if the distribution is conditional upon the assumption by the taxpayer of the portion of the debt or obligation; (montant de réduction admissible)
eligible real property gain[Repealed, 1995, c. 3, s. 31]
eligible real property loss[Repealed, 1995, c. 3, s. 31]
eligible taxable capital gains,of a trust for a taxation year, means the lesser of
(a)its annual gains limit (within the meaning assigned by subsection 110.6(1)) for the year, and
(b)the amount determined by the formula
A - B
where
excluded property, of a trust, means property owned by the trust at, and distributed by the trust after, the end of 2016, if
(a)the trust is not in its first taxation year that begins after 2016 a trust described in subparagraph (c.1)(iii.1) of the definitionprincipal residencein section 54, and
(b)the property is a property that would be the trust’sprincipal residence(as defined in section 54) for the taxation year in which the distribution occurs if
(i)that definition were read without reference to its subparagraph (c.1)(iii.1), and
(ii)the trust designated the property under that definition as its principal residence for the taxation year; (bien exclu)
exempt propertyof a taxpayer at any time means property any income or gain from the disposition of which by the taxpayer at that time would, because the taxpayer is non-resident or because of a provision contained in a tax treaty, not cause an increase in the taxpayer’s tax payable under this Part; (bien exonéré)
income interestof a taxpayer in a trust means a right (whether immediate or future and whether absolute or contingent) of the taxpayer as a beneficiary under a personal trust to, or to receive, all or any part of the income of the trust and, after 1999, includes a right (other than a right acquired before 2000 and disposed of before March 2000) to enforce payment of an amount by the trust that arises as a consequence of any such right; (participation au revenu)
inter vivostrustmeans a trust other than a testamentary trust; (fiducie non testamentaire)
non-qualifying real property[Repealed, 1995, c. 3, s. 31]
pre-1972 spousal trustat a particular time means a trust that was
(a)created by the will of a taxpayer who died before 1972, or
(b)created before June 18, 1971 by a taxpayer during the taxpayer’s lifetime
that throughout the period beginning at the time it was created and ending at the earliest of January 1, 1993, the day on which the taxpayer’s spouse or common-law partner died and the particular time, was a trust under which the taxpayer’s spouse or common-law partner was entitled to receive all of the income of the trust that arose before the spouse’s or common-law partner’s death, unless a person other than the spouse or common-law partner received or otherwise obtained the use of any of the income or capital of the trust before the end of that period; (fiducie au profit du conjoint antérieure à 1972)
preferred beneficiaryunder a trust for a particular taxation year of the trust means a beneficiary under the trust at the end of the particular year who is resident in Canada at that time if
(a)the beneficiary is
(i)an individual in respect of whom paragraphs 118.3(1)(a) to (b) apply for the individual’s taxation year (in this definition referred to as the “beneficiary’s year”) that ends in the particular year, or
(ii)an individual
(A)who attained the age of 18 years before the end of the beneficiary’s year, was a dependant (within the meaning assigned by subsection 118(6)) of another individual for the beneficiary’s year and was dependent on the other individual because of mental or physical infirmity, and
(B)whose income (computed without reference to subsection 104(14)) for the beneficiary’s year does not exceed the amount determined for F in subsection 118(1.1) for the year, and
(b)the beneficiary is
(i)the settlor of the trust,
(ii)the spouse or common-law partner or former spouse or common-law partner of the settlor of the trust, or
(iii)a child, grandchild or great grandchild of the settlor of the trust or the spouse or common-law partner of any such person; (bénéficiaire privilégié)
qualified farm property[Repealed, 2014, c. 39, s. 28]
qualified fishing property[Repealed, 2014, c. 39, s. 28]
qualified small business corporation share[Repealed, 2014, c. 39, s. 28]
settlor,
(a)in relation to a testamentary trust, means the individual referred to in the definitiontestamentary trustin this subsection, and
(b)in relation to aninter vivostrust,
(i)if the trust was created by the transfer, assignment or other disposition of property thereto (in this definition referred to as property “contributed”) by not more than one individual and the fair market value of such of the property of the trust as was contributed by the individual at the time of the creation of the trust or at any subsequent time exceeds the fair market value of such of the property of the trust as was contributed by any other person or persons at any subsequent time (such fair market values being determined at the time of the making of any such contribution), means that individual, and
(ii)if the trust was created by the contribution of property thereto jointly by an individual and the individual’s spouse or common-law partner and by no other person and the fair market value of such of the property of the trust as was contributed by them at the time of the creation of the trust or at any subsequent time exceeds the fair market value of such of the property of the trust as was contributed by any other person or persons at any subsequent time (such fair market values being determined at the time of the making of any such contribution), means that individual and the spouse or common-law partner; (auteur ou disposant)
testamentary trust, in a taxation year, means a trust that arose on and as a consequence of the death of an individual (including a trust referred to in subsection 248(9.1)), other than
(a)a trust created by a person other than the individual,
(b)a trust created after November 12, 1981 if, before the end of the taxation year, property has been contributed to the trust otherwise than by an individual on or after the individual’s death and as a consequence thereof,
(c)a trust created before November 13, 1981 if
(i)after June 28, 1982 property has been contributed to the trust otherwise than by an individual on or after the individual’s death and as a consequence thereof, or
(ii)before the end of the taxation year, the total fair market value of the property owned by the trust that was contributed to the trust otherwise than by an individual on or after the individual’s death and as a consequence thereof and the property owned by the trust that was substituted for such property exceeds the total fair market value of the property owned by the trust that was contributed by an individual on or after the individual’s death and as a consequence thereof and the property owned by the trust that was substituted for such property, and for the purposes of this subparagraph the fair market value of any property shall be determined as at the time it was acquired by the trust, and
(d)a trust that, at any time after December 20, 2002 and before the end of the taxation year, incurs a debt or any other obligation owed to, or guaranteed by, a beneficiary or any other person or partnership (which beneficiary, person or partnership is referred to in this paragraph as the “specified party”) with whom any beneficiary of the trust does not deal at arm’s length, other than a debt or other obligation
(i)incurred by the trust in satisfaction of the specified party’s right as a beneficiary under the trust
(A)to enforce payment of an amount of the trust’s income or capital gains payable at or before that time by the trust to the specified party, or
(B)to otherwise receive any part of the capital of the trust,
(ii)owed to the specified party, if the debt or other obligation arose because of a service (for greater certainty, not including any transfer or loan of property) rendered by the specified party to, for or on behalf of the trust,
(iii)owed to the specified party, if
(A)the debt or other obligation arose because of a payment made by the specified party for or on behalf of the trust,
(B)in exchange for the payment (and in full settlement of the debt or other obligation), the trust transfers property, the fair market value of which is not less than the principal amount of the debt or other obligation, to the specified party within 12 months after the payment was made (or, if written application has been made to the Minister by the trust within that 12-month period, within any longer period that the Minister considers reasonable in the circumstances), and
(C)it is reasonable to conclude that the specified party would have been willing to make the payment if the specified party dealt at arm’s length with the trust, except where the trust is the individual’s estate and that payment was made within the first 12 months after the individual’s death (or, if written application has been made to the Minister by the estate within that 12-month period, within any longer period that the Minister considers reasonable in the circumstances), or
(iv)incurred by the trust before October 24, 2012 if, in full settlement of the debt or other obligation the trust transfers property, the fair market value of which is not less than the principal amount of the debt or other obligation, to the person or partnership to whom the debt or other obligation is owed within 12 months after the day on which theTechnical Tax Amendments Act, 2012receives royal assent (or if written application has been made to the Minister by the trust within that 12-month period, within any longer period that the Minister considers reasonable in the circumstances); (fiducie testamentaire)
trustincludes aninter vivostrust and a testamentary trust but in subsections 104(4), (5), (5.2), (12), (13.1), (13.2), (14) and (15) and sections 105 to 107 does not include
(a)an amateur athlete trust, an employee life and health trust, an employee trust, a trust described in paragraph 149(1)(o.4) or a trust governed by a deferred profit sharing plan, an employee benefit plan, an employees profit sharing plan, a FHSA, a foreign retirement arrangement, a pooled registered pension plan, a registered disability savings plan, a registered education savings plan, a registered pension plan, a registered retirement income fund, a registered retirement savings plan, a registered supplementary unemployment benefit plan or a TFSA,
(a.1)a trust (other than a trust described in paragraph (a) or (d), a trust to which subsection 7(2) or (6) applies or a trust prescribed for the purpose of subsection 107(2)) all or substantially all of the property of which is held for the purpose of providing benefits to individuals each of whom is provided with benefits in respect of, or because of, an office or employment or former office or employment of any individual,
(b)a related segregated fund trust (within the meaning assigned by section 138.1),
(c)a trust deemed by subsection 143(1) to exist in respect of a congregation that is a constituent part of a religious organization,
(d)an RCA trust (within the meaning assigned by subsection 207.5(1)),
(e)a trust each of the beneficiaries under which was at all times after it was created a trust referred to in paragraph (a), (b) or (d) or a person who is a beneficiary of the trust only because of being a beneficiary under a trust referred to in any of those paragraphs, or
(e.1)a cemetery care trust or a trust governed by an eligible funeral arrangement,
and, in applying subsections 104(4), (5), (5.2), (12), (14) and (15) at any time, does not include
(f)a trust that, at that time, is a unit trust, or
(g)a trust all interests in which, at that time, have vested indefeasibly, other than
(i)an alter ego trust, a joint spousal or common-law partner trust, a post-1971 spousal or common-law partner trust or a trust to which paragraph 104(4)(a.4) applies,
(ii)[Repealed, 2013, c. 34, s. 236]
(iii)a trust that has, in its return of income under this Part for its first taxation year that ends after 1992, elected that this paragraph not apply,
(iv)a trust that is at that time resident in Canada where the total fair market value at that time of all interests in the trust held at that time by beneficiaries under the trust who at that time are non-resident is more than 20% of the total fair market value at that time of all interests in the trust held at that time by beneficiaries under the trust,
(v)a trust under the terms of which, at that time, all or part of a person’s interest in the trust is to be terminated with reference to a period of time (including a period of time determined with reference to the person’s death), otherwise than as a consequence of terms of the trust under which an interest in the trust is to be terminated as a consequence of a distribution to the person (or the person’s estate) of property of the trust if the fair market value of the property to be distributed is required to be commensurate with the fair market value of that interest immediately before the distribution, or
(vi)a trust that, before that time and after December 17, 1999, has made a distribution to a beneficiary in respect of the beneficiary’s capital interest in the trust, if the distribution can reasonably be considered to have been financed by a liability of the trust and one of the purposes of incurring the liability was to avoid taxes otherwise payable under this Part as a consequence of the death of any individual. (fiducie)
Marginal note:Testamentary trust not disqualified
(1.1)For the purpose of the definitiontestamentary trustin subsection (1), a contribution to a particular trust does not include
(a)aqualifying expenditure(within the meaning of section 118.04, 118.041 or 122.92) 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).
Marginal note:When trust is a unit trust
(2)For the purposes of this Act, a trust is a unit trust at any particular time if, at that time, it was aninter vivostrust the interest of each beneficiary under which was described by reference to units of the trust, and
(a)the issued units of the trust included
(i)units having conditions attached thereto that included conditions requiring the trust to accept, at the demand of the holder thereof and at prices determined and payable in accordance with the conditions, the surrender of the units, or fractions or parts thereof, that are fully paid, or
(ii)units qualified in accordance with prescribed conditions relating to the redemption of the units by the trust,
and the fair market value of such of the units as had conditions attached thereto that included such conditions or as were so qualified, as the case may be, was not less than 95% of the fair market value of all of the issued units of the trust (such fair market values being determined without regard to any voting rights attaching to units of the trust);
(b)each of the following conditions was satisfied:
(i)throughout the taxation year that includes the particular time (in this paragraph referred to as the “current year”), the trust was resident in Canada,
(ii)throughout the period or periods (in this paragraph referred to as the “relevant periods”) that are in the current year and throughout which the conditions in paragraph (a) are not satisfied in respect of the trust, its only undertaking was
(A)the investing of its funds in property (other than real property or an interest in real property or an immovable or a real right in an immovable),
(B)the acquiring, holding, maintaining, improving, leasing or managing of any real property or an interest in real property, or of any immovable or a real right in immovables, that is capital property of the trust, or
(C)any combination of the activities described in clauses (A) and (B),
(iii)throughout the relevant periods at least 80% of its property consisted of any combination of
(A)shares,
(B)any property that, under the terms or conditions of which or under an agreement, is convertible into, is exchangeable for or confers a right to acquire, shares,
(C)cash,
(D)bonds, debentures, mortgages, hypothecary claims, notes and other similar obligations,
(E)marketable securities,
(F)real property situated in Canada, and interests in such real property, or immovables situated in Canada and real rights in such immovables, and
(G)rights to and interests in — or, for civil law, rights in or to — any rental or royalty computed by reference to the amount or value of production from a natural accumulation of petroleum or natural gas in Canada, from an oil or gas well in Canada or from a mineral resource in Canada,
(iv)either
(A)not less than 95% of its income for the current year (computed without regard to subsections 39(2), 49(2.1) and 104(6)) was derived from, or from the disposition of, investments described in subparagraph (iii), or
(B)not less than 95% of its income for each of the relevant periods (computed without regard to subsections 39(2), 49(2.1) and 104(6) and as though each of those periods were a taxation year) was derived from, or from the disposition of, investments described in subparagraph (iii),
(v)throughout the relevant periods, not more than 10% of its property consisted of bonds, securities or shares in the capital stock of any one corporation or debtor other than Her Majesty in right of Canada or a province or a Canadian municipality, and
(vi)where the trust would not be a unit trust at the particular time if this paragraph were read without reference to this subparagraph and subparagraph (iii) were read without reference to clause (F), the units of the trust are listed at any time in the current year or in the following taxation year on a designated stock exchange in Canada, or
(c)the fair market value of the property of the trust at the end of 1993 was primarily attributable to real property or an interest in real property — or to immovables or a real right in immovables — and the trust was a unit trust throughout any calendar year that ended before 1994 and the fair market value of the property of the trust at the particular time is primarily attributable to property described in paragraph (a) or (b) of the definitionqualified investmentin section 204, real property or an interest in real property — or immovables or a real right in immovables — or any combination of those properties.
Marginal note:Income of a trust in certain provisions
(3)For the purposes of the definitionsincome interestin subsection (1),lifetime benefit trustin subsection 60.011(1) andexempt foreign trustin subsection 94(1), the income of a trust is its income computed without reference to the provisions of this Act and, for the purposes of the definitionpre-1972 spousal trustin subsection (1) and paragraphs 70(6)(b) and (6.1)(b), 73(1.01)(c) and 104(4)(a), the income of a trust is its income computed without reference to the provisions of this Act, minus any dividends included in that income
(a)that are amounts not included by reason of section 83 in computing the income of the trust for the purposes of the other provisions of this Act;
(b)that are described in subsection 131(1); or
(c)to which subsection 131(1) applies by reason of subsection 130(2).
Marginal note:Trust not disqualified
(4)For the purposes of the definitionpre-1972 spousal trustin subsection (1), subparagraphs 70(6)(b)(ii) and (6.1)(b)(ii) and paragraphs 73(1.01)(c) and 104(4)(a), if a trust was created by a taxpayer whether by the taxpayer’s will or otherwise, no person is deemed to have received or otherwise obtained or to be entitled to receive or otherwise obtain the use of any income or capital of the trust solely because of
(a)the payment, or provision for payment, as the case may be, by the trust of
(i)any estate, legacy, succession or inheritance duty payable, in consequence of the death of the taxpayer, or a spouse or common-law partner of the taxpayer who is a beneficiary under the trust, in respect of any property of, or interest in, the trust, or
(ii)any income or profits tax payable by the trust in respect of any income of the trust; or
(b)the inhabiting at any time by an individual of a housing unit that is, or is in respect of, property that is owned at that time by the trust, if
(i)the property is described in the definitionprincipal residencein section 54 in respect of the trust for the trust’s taxation year that includes that time, and
(ii)the individual is
(A)the taxpayer, or
(B)the taxpayer’s
(I)spouse or common-law partner,
(II)former spouse or common-law partner, or
(III)child.
Marginal note:Interpretation
(5)Except as otherwise provided in this Part,
(a)an amount included in computing the income for a taxation year of a beneficiary of a trust under subsection 104(13) or (14) or section 105 shall be deemed to be income of the beneficiary for the year from a property that is an interest in the trust and not from any other source, and
(b)an amount deductible in computing the amount that would, but for subsections 104(6) and (12), be the income of a trust for a taxation year shall not be deducted by a beneficiary of the trust in computing the beneficiary’s income for a taxation year,
but, for greater certainty, nothing in this subsection shall affect the application of subsection 56(4.1), sections 74.1 to 75 and 120.4 and subsection 160(1.2) of this Act and section 74 of theIncome Tax Act, chapter 148 of the Revised Statutes of Canada, 1952.
Marginal note:Variation of trusts
(6)Where at any time the terms of a trust are varied
(a)for the purposes of subsections 104(4), (5) and (5.2) and subject to paragraph (b), the trust is, at and after that time, deemed to be the same trust as, and a continuation of, the trust immediately before that time;
(b)for greater certainty, paragraph (a) does not affect the application of paragraph 104(4)(a.1); and
(c)for the purposes of paragraph 53(2)(h), subsection 107(1), paragraph (j) of the definitionexcluded right or interestin subsection 128.1(10) and the definitionpersonal trustin subsection 248(1), no interest of a beneficiary under the trust before it was varied is considered to be consideration for the interest of the beneficiary in the trust as varied.
Marginal note:Interests acquired for consideration
(7)For the purposes of paragraph 53(2)(h), subparagraph (c)(i) of the definitionexempt amountin subsection 94(1), subsection 107(1), paragraph (j) of the definitionexcluded right or interestin subsection 128.1(10) and paragraph (b) of the definitionpersonal trustin subsection 248(1),
(a)an interest in a trust is deemed not to be acquired for consideration solely because it was acquired in satisfaction of any right as a beneficiary under the trust to enforce payment of an amount by the trust; and
(b)if all the beneficial interests in a particular trust acquired by way of the transfer, assignment or other disposition of property to the particular trust were acquired by
(i)one person, or
(ii)two or more persons who would be related to each other if
(A)a trust and another person were related to each other, where the other person is a beneficiary under the trust or is related to a beneficiary under the trust, and
(B)a trust and another trust were related to each other, where a beneficiary under the trust is a beneficiary under the other trust or is related to a beneficiary under the other trust,
any beneficial interest in the particular trust acquired by such a person is deemed to have been acquired for no consideration.
Marginal note:Definitions
110(0.1)The following definitions apply in this section.
consolidated financial statementshas the same meaning as in subsection 233.8(1). (états financiers consolidés)
specified person, at any time, means a qualifying person that meets the following conditions:
(a)it is not a Canadian-controlled private corporation;
(b)if the qualifying person is a member of a group that annually prepares consolidated financial statements, the total consolidated group revenue reflected in the last consolidated financial statements of the group presented to shareholders or unitholders — of the member of the group that would be theultimate parent entity, as defined in subsection 233.8(1), of the group if the group were amultinational enterprise group, as defined in subsection 233.8(1) — before that time exceeds $500 million; and
(c)if paragraph (b) does not apply, it has gross revenue in excess of $500 million based on
(i)the amounts reflected in the financial statements of the qualifying person presented to the shareholders or unitholders of the qualifying person for the last fiscal period of the qualifying person that ended before that time,
(ii)if subparagraph (i) does not apply, the amounts reflected in the financial statements of the qualifying person presented to the shareholders or unitholders of the qualifying person for the last fiscal period of the qualifying person that ended before the end of the last fiscal period referred to in subparagraph (i), and
(iii)if subparagraph (i) does not apply and financial statements were not presented as described in subparagraph (ii), the amounts that would have been reflected in the annual financial statements of the qualifying person for the last fiscal period of the qualifying person that ended before that time, if such statements had been prepared in accordance with generally accepted accounting principles. (personne déterminée)
vesting year, of a security to be acquired under an agreement, means
(a)if the agreement specifies the calendar year in which the taxpayer’s right to acquire the security first becomes exercisable (otherwise than as a consequence of an event that is not reasonably foreseeable at the time the agreement is entered into), that calendar year; and
(b)in any other case, the calendar year in which the right to acquire the security would become exercisable if the agreement had specified that all identical rights to acquire securities become exercisable on a pro rata basis over the period that
(i)begins on the day that the agreement was entered into, and
(ii)ends on the day that is the earlier of
(A)the day that is 60 months after the day the agreement is entered into, and
(B)the last day that the right to acquire the security could become exercisable under the agreement. (année de dévolution)
Marginal note:Deductions permitted
(1)For the purpose of computing the taxable income of a taxpayer for a taxation year, there may be deducted such of the following amounts as are applicable
Marginal note:Employee options
(d)an amount equal to 1/2 of the amount of the benefit deemed by subsection 7(1) to have been received by the taxpayer in the year in respect of a security (other than a security that is a non-qualified security) that a particular qualifying person has agreed after February 15, 1984 to sell or issue under an agreement, in respect of the transfer or other disposition of rights under the agreement or as a result of the death of the taxpayer because the taxpayer immediately before death owned a right to acquire the security under the agreement, if
(i)the security was acquired under the agreement
(A)by the taxpayer or a person not dealing at arm’s length with the taxpayer in circumstances described in paragraph 7(1)(c), or
(B)in the case of a benefit deemed by paragraph 7(1)(e) to have been received by the taxpayer, within the first taxation year of the graduated rate estate of the taxpayer, by
(I)the graduated rate estate of the taxpayer,
(II)a person who is abeneficiary(as defined in subsection 108(1)) under the graduated rate estate of the taxpayer, or
(III)a person in whom the rights of the taxpayer under the agreement have vested as a result of the death,
(i.1)the security
(A)is a prescribed share at the time of its sale or issue, as the case may be,
(B)would have been a prescribed share if it were issued or sold to the taxpayer at the time the taxpayer disposed of rights under the agreement,
(B.1)in the case of a benefit deemed by paragraph 7(1)(e) to have been received by the taxpayer, would have been a prescribed share if it were issued or sold to the taxpayer immediately before the death of the taxpayer,
(C)would have been a unit of a mutual fund trust at the time of its sale or issue if those units issued by the trust that were not identical to the security had not been issued,
(D)would have been a unit of a mutual fund trust if
(I)it were issued or sold to the taxpayer at the time the taxpayer disposed of rights under the agreement, and
(II)those units issued by the trust that were not identical to the security had not been issued, or
(E)in the case of a benefit deemed by paragraph 7(1)(e) to have been received by the taxpayer, would have been a unit of a mutual fund trust if
(I)it were issued or sold to the taxpayer immediately before the death of the taxpayer, and
(II)those units issued by the trust that were not identical to the security had not been issued,
(ii)where rights under the agreement were not acquired by the taxpayer as a result of a disposition of rights to which subsection 7(1.4) applied,
(A)the amount payable by the taxpayer to acquire the security under the agreement is not less than the amount by which
(I)the fair market value of the security at the time the agreement was made
exceeds
(II)the amount, if any, paid by the taxpayer to acquire the right to acquire the security, and
(B)at the time immediately after the agreement was made, the taxpayer was dealing at arm’s length with
(I)the particular qualifying person,
(II)each other qualifying person that, at the time, was an employer of the taxpayer and was not dealing at arm’s length with the particular qualifying person, and
(III)the qualifying person of which the taxpayer had, under the agreement, a right to acquire a security, and
(iii)where rights under the agreement were acquired by the taxpayer as a result of one or more dispositions to which subsection 7(1.4) applied,
(A)the amount payable by the taxpayer to acquire the security under the agreement is not less than the amount that was included, in respect of the security, in the amount determined under subparagraph 7(1.4)(c)(ii) with respect to the most recent of those dispositions,
(B)at the time immediately after the agreement the rights under which were the subject of the first of those dispositions (in this subparagraph referred to as the “original agreement”) was made, the taxpayer was dealing at arm’s length with
(I)the qualifying person that made the original agreement,
(II)each other qualifying person that, at the time, was an employer of the taxpayer and was not dealing at arm’s length with the qualifying person that made the original agreement, and
(III)the qualifying person of which the taxpayer had, under the original agreement, a right to acquire a security,
(C)the amount that was included, in respect of each particular security that the taxpayer had a right to acquire under the original agreement, in the amount determined under subparagraph 7(1.4)(c)(iv) with respect to the first of those dispositions was not less than the amount by which
(I)the fair market value of the particular security at the time the original agreement was made
exceeded
(II)the amount, if any, paid by the taxpayer to acquire the right to acquire the security, and
(D)for the purpose of determining if the condition in paragraph 7(1.4)(c) was satisfied with respect to each of the particular dispositions following the first of those dispositions,
(I)the amount that was included, in respect of each particular security that could be acquired under the agreement the rights under which were the subject of the particular disposition, in the amount determined under subparagraph 7(1.4)(c)(iv) with respect to the particular disposition
was not less than
(II)the amount that was included, in respect of the particular security, in the amount determined under subparagraph 7(1.4)(c)(ii) with respect to the last of those dispositions preceding the particular disposition;
Marginal note:Charitable donation of employee option securities
(d.01)subject to subsection (2.1), if the taxpayer disposes of a security acquired in the year by the taxpayer under an agreement referred to in subsection 7(1) by making a gift of the security to a qualified donee, an amount in respect of the disposition of the security equal to 1/2 of the lesser of the benefit deemed by paragraph 7(1)(a) to have been received by the taxpayer in the year in respect of the acquisition of the security and the amount that would have been that benefit had the value of the security at the time of its acquisition by the taxpayer been equal to the value of the security at the time of the disposition, if
(i)the security is a security described in subparagraph 38(a.1)(i),
(ii)[Repealed, 2002, c. 9, s. 33(1)]
(iii)the gift is made in the year and on or before the day that is 30 days after the day on which the taxpayer acquired the security, and
(iv)the taxpayer is entitled to a deduction under paragraph (d) in respect of the acquisition of the security;
Marginal note:Idem
(d.1)where the taxpayer
(i)is deemed, under paragraph 7(1)(a) by virtue of subsection 7(1.1), to have received a benefit in the year in respect of a share acquired by the taxpayer after May 22, 1985,
(ii)has not disposed of the share (otherwise than as a consequence of the taxpayer’s death) or exchanged the share within two years after the date the taxpayer acquired it, and
(iii)has not deducted an amount under paragraph 110(1)(d) in respect of the benefit in computing the taxpayer’s taxable income for the year,
an amount equal to 1/2 of the amount of the benefit;
Marginal note:Prospector’s and grubstaker’s shares
(d.2)where the taxpayer has, under paragraph 35(1)(d), included an amount in the taxpayer’s income for the year in respect of a share received after May 22, 1985, an amount equal to 1/2 of that amount unless that amount is exempt from income tax in Canada by reason of a provision contained in a tax convention or agreement with another country that has the force of law in Canada;
Marginal note:Employer’s shares
(d.3)where the taxpayer has, under subsection 147 (10.4), included an amount in computing the taxpayer’s income for the year, an amount equal to 1/2 of that amount;
Marginal note:Employer deduction — non-qualified securities
(e)an amount equal to the amount of the benefit in respect of employment with the taxpayer deemed by subsection 7(1) to have been received by an individual in the year in respect of a non-qualified security that the taxpayer (or a qualifying person that does not deal at arm’s length with the taxpayer) has agreed to sell or issue under an agreement with the individual, if
(i)the taxpayer is a qualifying person,
(ii)at the time the agreement was entered into, the individual was an employee of the taxpayer,
(iii)the amount is not claimed as a deduction in computing the taxable income of another qualifying person,
(iv)an amount would have been deductible in computing the taxable income of the individual under paragraph (d) if the security were not a non-qualified security,
(v)in the case of an individual who is not resident in Canada throughout the year, the benefit deemed by subsection 7(1) to have been received by the individual was included in computing the taxable income earned in Canada of the individual for the year, and
(vi)the notification requirements in subsection (1.9) are met in respect of the security;
Marginal note:Deductions for payments
(f)any social assistance payment made on the basis of a means, needs or income test and included because of clause 56(1)(a)(i)(A) or paragraph 56(1)(u) in computing the taxpayer’s income for the year or any amount that is
(i)an amount exempt from income tax in Canada because of a provision contained in a tax convention or agreement with another country that has the force of law in Canada,
(ii)compensation received under an employees’ or workers’ compensation law of Canada or a province in respect of an injury, disability or death, except any such compensation received by a person as the employer or former employer of the person in respect of whose injury, disability or death the compensation was paid,
(iii)income from employment with a prescribed international organization,
(iv)the taxpayer’s income from employment with a prescribed international non-governmental organization, where the taxpayer
(A)was not, at any time in the year, a Canadian citizen,
(B)was a non-resident person immediately before beginning that employment in Canada, and
(C)if the taxpayer is resident in Canada, became resident in Canada solely for the purpose of that employment, or
(v)the lesser of
(A)the employment income earned by the taxpayer as a member of the Canadian Forces, or as a police officer, while serving on a deployed international operational mission (as determined by the Minister of National Defence, the Minister of Public Safety and Emergency Preparedness or by a person designated by either Minister), and
(B)the employment income that would have been so earned by the taxpayer if the taxpayer had been paid at the maximum rate of pay that applied, from time to time during the mission, to a Lieutenant-Colonel (General Service Officers) of the Canadian Forces,
to the extent that it is included in computing the taxpayer’s income for the year;
Marginal note:Financial assistance
(g)any amount that
(i)is received by the taxpayer in the year under a program referred to in subparagraph 56(1)(r)(ii) or (iii), a program established under the authority of theDepartment of Employment and Social Development Actor a prescribed program,
(ii)is financial assistance for the payment of tuition fees of the taxpayer that are not included in computing an amount deductible under subsection 118.5(1) in computing the taxpayer’s tax payable under this Part for any taxation year,
(iii)is included in computing the taxpayer’s income for the year, and
(iv)is not otherwise deductible in computing the taxpayer’s taxable income for the year;
(h)35 per cent of the total of all benefits (in this paragraph referred to as “U.S. social security benefits”) that are received by the taxpayer in the taxation year and to which paragraph 5 of Article XVIII of theConvention between Canada and the United States of America with respect to Taxes on Income and on Capitalas set out in Schedule I to theCanada-United States Tax Convention Act, 1984, S.C. 1984, c. 20, applies, if
(i)the taxpayer has continuously during a period that begins before 1996 and ends in the taxation year, been resident in Canada, and has received U.S. social security benefits in each taxation year that ends in that period, or
(ii)in the case where the benefits are payable to the taxpayer in respect of a deceased individual,
(A)the taxpayer was, immediately before the deceased individual’s death, the deceased individual’s spouse or common-law partner,
(B)the taxpayer has continuously during a period that begins at the time of the deceased individual’s death and ends in the taxation year, been resident in Canada,
(C)the deceased individual was, in respect of the taxation year in which the deceased individual died, a taxpayer described in subparagraph (i), and
(D)in each taxation year that ends in a period that begins before 1996 and that ends in the taxation year, the taxpayer, the deceased individual, or both of them, received U.S. social security benefits.
(i)[Repealed, 1994, c. 7, Sch