© Éditeur officiel du Québec
Updated to 1 April 2016
This document has official status.



CHAPTER V.1 
SHARES HELD BY A PARTNERSHIP
2004, c. 8, s. 123.

592.1. For the purpose of determining whether a corporation not resident in Canada is a foreign affiliate of a corporation resident in Canada for the purposes of sections 146.1, 262.0.1, 576.2, 577, 577.2 to 577.11, 589 to 592, 592.2 and 746 to 749, paragraph d of section 785.1, any regulations made under those provisions, sections 571 to 576.1, 578 and 579, where those sections apply for the purposes of those provisions, and sections 772.2 to 772.13, the shares of a class of the capital stock of a corporation that, based on the assumptions contained in paragraph c of section 600, are owned at a particular time by a partnership or are deemed under this section to be owned at a particular time by the partnership, are deemed to be owned at that time by each member of the partnership in proportion to the number of all of those shares that the fair market value of the member's interest in the partnership at that time is of the fair market value of all members' interests in the partnership at that time.

2004, c. 8, s. 123; 2015, c. 21, s. 205.

592.2. Where shares of a class of the capital stock of a foreign affiliate of a particular corporation resident in Canada are owned, based on the assumptions contained in paragraph c of section 600, by a partnership at the time when the foreign affiliate pays a dividend on those shares to the partnership, the following rules apply:

 (a) for the purposes of sections 589 to 592 and 746 to 749 and any regulations made under those sections,

(i)  each member of the partnership is deemed to have received a portion of the dividend equal to the proportion of the dividend that the fair market value of the member’s interest in the partnership at that time is of the fair market value of the aggregate of all members’ interests in the partnership at that time, and

(ii)  the portion of the dividend that is deemed to have been received by a member of the partnership at that time, under subparagraph i, is deemed to have been received by the member in equal proportions on each share of the foreign affiliate that is property of the partnership at that time; and

 (b) for the purpose of applying sections 746 to 749, in relation to the dividend referred to in subparagraph i of subparagraph a, each share of the foreign affiliate referred to in subparagraph ii of subparagraph a is deemed to be owned by each member of the partnership.

In addition, notwithstanding subparagraphs a and b of the first paragraph, the following rules apply:

 (a) where the particular corporation is a member of the partnership, the amount deductible under sections 746 to 749, in relation to the dividend referred to in subparagraph i of subparagraph a of the first paragraph shall not exceed the portion of the amount of the dividend included in computing its income pursuant to section 600; and

 (b) where another foreign affiliate of the particular corporation is a member of the partnership, the amount included in computing the income of that other foreign affiliate, in relation to the dividend referred to in subparagraph i of subparagraph a of the first paragraph shall not exceed the amount that would be included in computing its income pursuant to section 600, in relation to that dividend, but for this section and if the foreign accrual property income of that other foreign affiliate were determined without reference to the value of H of the formula provided for in the definition of foreign accrual property income in subsection 1 of section 95 of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement).

2004, c. 8, s. 123.

592.3. A person or partnership that is (or is deemed by this section to be) a member of a particular partnership that is a member of another partnership is deemed to be a member of the other partnership and to have, directly, rights to the income or capital of the other partnership to the extent of the person or partnership's direct and indirect rights to that income or capital, for the purpose of applying

 (a) except to the extent that the context requires otherwise, a provision of this Title; and

 (b) section 262.0.1.

2015, c. 21, s. 206.

CHAPTER VI 
FOREIGN TRUSTS
1975, c. 22, s. 164.

593. In this chapter and Chapter VI.2,

arm's length transfer at any time by a person or partnership (in this definition referred to as the “transferor”) means a transfer or loan (which transfer or loan is referred to in this definition as the “transfer”) of property (other than restricted property) that is made at that time (in this definition referred to as the “transfer time”) by the transferor to another person or partnership (in this definition referred to as the “recipient”) where

 (a) it is reasonable to conclude that none of the reasons (with reference to all the circumstances including the terms of a trust, an intention, the laws of a country or the existence of an agreement, a memorandum, a letter of wishes or any other arrangement) for the transfer is the acquisition at any time by any person or partnership of an interest as a beneficiary under a trust that is not resident in Canada; and

 (b) the transfer is

(i)  a payment of interest, of dividends, of rent, of royalties or of any other return on investment, or any substitute for such a return on investment, in respect of a particular property held by the recipient, if the amount of the payment is not more than the amount that the transferor would have paid if the transferor dealt at arm's length with the recipient,

(ii)  a payment made by a corporation on a reduction of the paid-up capital in respect of shares of a class of its capital stock held by the recipient, if the amount of the payment is not more than the lesser of the amount of the reduction in the paid-up capital and the consideration for which the shares were issued,

(iii)  a transfer in exchange for which the recipient transfers or loans property to the transferor, or becomes obligated to transfer or loan property to the transferor, and for which it is reasonable to conclude

(1)  having regard only to the transfer and the exchange, that the transferor would have been willing to make the transfer if the transferor dealt at arm's length with the recipient, and

(2)  that the terms and conditions, and circumstances, under which the transfer was made would have been acceptable to the transferor if the transferor dealt at arm's length with the recipient,

(iv)  a transfer made in satisfaction of an obligation referred to in subparagraph iii and for which it is reasonable to conclude

(1)  having regard only to the transfer and the obligation, that the transferor would have been willing to make the transfer if the transferor dealt at arm's length with the recipient, and

(2)  that the terms and conditions, and circumstances, under which the transfer was made would have been acceptable to the transferor if the transferor dealt at arm's length with the recipient,

(v)  a payment of an amount owing by the transferor under a written agreement the terms and conditions of which, when entered into, were terms and conditions that, having regard only to the amount owing and the agreement, would have been acceptable to the transferor if the transferor dealt at arm's length with the recipient,

(vi)  a payment made before 1 January 2002 to a trust, to a corporation controlled by a trust or to a partnership of which a trust is a majority-interest partner in repayment of or otherwise in respect of a loan made by a trust, corporation or partnership to the transferor, or

(vii)  a payment made after 31 December 2001 to a trust, to a corporation controlled by the trust or to a partnership of which the trust is a majority-interest partner, in repayment of or otherwise in respect of a particular loan made by the trust, corporation or partnership to the transferor and either

(1)  the payment is made before 1 January 2011 and they would have been willing to enter into the particular loan if they dealt at arm's length with each other, or

(2)  the payment is made before 1 January 2005 in accordance with fixed repayment terms agreed to before 23 June 2000;

beneficiary under a trust includes

 (a) a person or partnership that is beneficially interested in the trust; and

 (b) a person or partnership that would be beneficially interested in the trust if subparagraph ii of subparagraph b of the first paragraph of section 7.11.1 were read as follows:

“ii. because of the terms or conditions of the particular trust or any agreement in respect of the particular trust at the particular time (including the terms or conditions of a share, or any agreement in respect of a share, of the capital stock of a corporation that is beneficially interested in the particular trust), the particular person or partnership becomes (or could become on the exercise of any discretion by any person or partnership), directly or indirectly, entitled to any amount derived, directly or indirectly, from the income or capital of the particular trust or might, because of the exercise of any discretion by any person or partnership, become beneficially interested in the particular trust at the particular time or at a later time, and”;

closely held corporation at any time means any corporation, other than a corporation in respect of which

 (a) there is at least one class of shares of its capital stock that consists of shares prescribed for the purposes of paragraph d of subsection 1 of section 110 of the Income Tax Act (R.S.C. 1985, c. 1, (5th Suppl.));

 (b) it is reasonable to conclude that at that time, in respect of each class of shares described in paragraph a, shares of the class are held by at least 150 shareholders each of whom holds shares of the class that have a total fair market value of at least $500; and

 (c) it is reasonable to conclude that at that time in no case does a particular shareholder (or a particular shareholder together with one or more other shareholders with whom the particular shareholder does not deal at arm's length) hold shares of the corporation

(i)  that would give the particular shareholder (or the group of other shareholders not dealing with each other at arm's length and of which the particular shareholder is a member) 10% or more of the votes that could be cast under any circumstance at an annual meeting of shareholders of the corporation if the meeting were held at that time, or

(ii)  that have a fair market value of 10% or more of the fair market value of all of the issued and outstanding shares of the corporation;

connected contributor to a trust at any time means a contributor to the trust at that time, other than a person all of whose contributions to the trust made at or before that time were made at a non-resident time of the person;

contribution to a trust by a particular person or partnership means

 (a) a transfer or loan (other than an arm's length transfer) of property to the trust by the particular person or partnership;

 (b) where a particular transfer or loan (other than an arm's length transfer) of property is made by the particular person or partnership as part of a series of transactions that includes another transfer or loan (other than an arm's length transfer) of property to the trust by another person or partnership, that other transfer or loan to the extent that it can reasonably be considered to have been made in respect of the particular transfer or loan; or

 (c) where the particular person or partnership undertakes to make a transfer or loan (other than a transfer or loan that would, if it were made, be an arm's length transfer) of property as part of a series of transactions that includes another transfer or loan (other than an arm's length transfer) of property to the trust by another person or partnership, that other transfer or loan to the extent that it can reasonably be considered to have been made in respect of the undertaking;

contributor to a trust at any time means a person, including a person that has ceased to exist, that is not an exempt person and that, at or before that time, has made a contribution to the trust;

electing contributor to a trust at any time means a resident contributor, to the trust, who has made a valid election under the definition of “electing contributor” in subsection 1 of section 94 of the Income Tax Act to have subsection 16 of that section 94 apply in respect of the contributor and the trust for a taxation year of the contributor that includes that time or that ends before that time and for any subsequent taxation year;

electing trust in respect of a particular taxation year means a trust that

 (a) holds at any time in the particular taxation year, or in a prior taxation year throughout which it was deemed, for the purpose of computing its income, to be resident in Canada under paragraph a of section 595, property that is at that time included in its non-resident portion; and

 (b) has made a valid election under paragraph b of the definition of “electing trust” in subsection 1 of section 94 of the Income Tax Act;

exempt foreign trust at a particular time means either a prescribed trust at the particular time or a trust that is not resident in Canada and that

 (a) is a trust in respect of which the following conditions are met:

(i)  each beneficiary under the trust at the particular time is

(1)  an individual (in this paragraph referred to as an “infirm beneficiary”) who, because of mental or physical infirmity, was, at the time that the trust was created, dependent on an individual who is a contributor to the trust or on an individual related to such a contributor, or

(2)  a person who is entitled, only after the particular time, to receive or otherwise obtain the enjoyment of all or part of the trust's income or capital,

(ii)  at the particular time there is at least one infirm beneficiary under the trust who suffers from a mental or physical infirmity that causes the beneficiary to be dependent on a person,

(iii)  each infirm beneficiary is, at all times that the infirm beneficiary is a beneficiary under the trust during the trust's taxation year that includes the particular time, not resident in Canada, and

(iv)  each contribution to the trust made at or before the particular time can reasonably be considered to have been, at the time that the contribution was made, made to provide for the maintenance of an infirm beneficiary during the expected period of the beneficiary's infirmity;

 (b) is a trust in respect of which the following conditions are met:

(i)  the trust was created because of the breakdown of a marriage of two particular individuals to provide for the maintenance of a beneficiary under the trust who was, during that marriage,

(1)  a child of both of those particular individuals (in this paragraph referred to as a “child beneficiary”), or

(2)  one of those particular individuals (in this paragraph referred to as the “adult beneficiary”),

(ii)  each beneficiary under the trust at the particular time is

(1)  a child beneficiary under 21 years of age,

(2)  a child beneficiary under 31 years of age who is enrolled at any time in the trust's taxation year that includes the particular time at an educational institution that is described in the third paragraph,

(3)  the adult beneficiary, or

(4)  a person who is entitled, only after the particular time, to receive or otherwise obtain the enjoyment of all or part of the trust's income or capital,

(iii)  each beneficiary described in any of subparagraphs 1 to 3 of subparagraph ii is, at all times that the beneficiary is a beneficiary under the trust during the trust's taxation year that includes the particular time, not resident in Canada, and

(iv)  each contribution to the trust, at the time that the contribution was made, was

(1)  an amount paid by the particular individual other than the adult beneficiary that would be a support amount as defined in section 312.3 if it had been paid by that particular individual directly to the adult beneficiary, or

(2)  a contribution made by one of those particular individuals or a person related to one of those particular individuals to provide for the maintenance of a child beneficiary while the child was either under 21 years of age or under 31 years of age and enrolled at an educational institution located outside Canada that is described in the third paragraph;

 (c) is a trust in respect of which one of the following conditions is met:

(i)  at the particular time the trust is an agency of the United Nations,

(ii)  at the particular time the trust owns and administers a university described in subparagraph iv of paragraph a of the definition of “qualified donee” in subsection 1 of section 149.1 of the Income Tax Act,

(iii)  at any time in the trust's taxation year that includes the particular time or at any time in the preceding calendar year Her Majesty in right of Canada has made a gift to the trust, or

(iv)  the trust is created under the International Convention on the Establishment of an International Fund for Compensation for Oil Pollution Damage, 1992, or any protocol to it that has been ratified by the Government of Canada;

 (d) is a trust in respect of which the following conditions are met:

(i)  throughout the particular period that began at the time the trust was created and ended at the particular time, the trust would not be resident in Canada for the purposes of the Income Tax Act if that Act were read without reference to subsection 1 of section 94 of that Act as that subsection read in its application to a taxation year that includes 31 December 2000,

(ii)  the trust was created exclusively for charitable purposes and has been operated throughout the particular period described in subparagraph i exclusively for charitable purposes,

(iii)  if the particular time is more than 24 months after the day on which the trust was created, the trust numbers at the particular time at least 20 persons (other than trusts) each of whom at that time

(1)  is a contributor to the trust,

(2)  exists, and

(3)  deals at arm's length with at least 19 other contributors to the trust,

(iv)  the income of the trust (determined in accordance with the laws described in subparagraph v) for each of its taxation years that ends at or before the particular time would, if the income were not distributed and the laws described in subparagraph v did not apply, be subject to an income or profits tax in the country in which it was resident in the taxation year under consideration, and

(v)  the trust was, for each of its taxation years that ends at or before the particular time, exempt under the laws of the country in which it was resident from the payment of income or profits tax to the government of that country in recognition of the charitable purposes for which the trust is operated;

 (e) is governed throughout the trust's taxation year that includes the particular time by a profit sharing plan, a retirement compensation arrangement or a foreign retirement arrangement;

 (f) is a trust that

(i)  throughout the particular period that began when it was created and ended at the particular time has been operated exclusively for the purpose of administering or providing employee benefits in respect of employees or former employees, and

(ii)  meets the following conditions throughout the trust's taxation year that includes the particular time:

(1)  the trust is a trust governed by an employee benefit plan or is a trust described in subparagraph a.1 of the third paragraph of section 647,

(2)  the trust is maintained for the benefit of natural persons the majority of whom are not resident in Canada, and

(3)  no benefits are provided under the trust other than benefits in respect of qualifying services;

 (g) is a trust (other than a trust described in subparagraph a.1 of the third paragraph of section 647 or a prescribed trust) that throughout the particular period that began when it was created and ended at the particular time

(i)  has been resident in a foreign country the laws of which have, throughout the particular period,

(1)  imposed an income or profits tax, and

(2)  exempted the trust from the payment of all income tax, and all profits tax, to the government of that country in recognition of the purposes for which the trust is operated, and

(ii)  has been operated exclusively for the purpose of administering or providing pension benefits that are primarily in respect of services rendered in the foreign country by natural persons who were not resident in Canada at the time those services were rendered; or

 (h) is a trust (other than a trust that has made a valid election, described in paragraph h of the definition of “exempt foreign trust” in subsection 1 of section 94 of the Income Tax Act, not to be an exempt foreign trust under that paragraph h for the taxation year for which the election is made and for any subsequent taxation year) in respect of which the following conditions are met at the particular time:

(i)  the only beneficiaries under the trust who for any reason are entitled to receive, at or after the particular time and directly from the trust, an amount from the income or capital of the trust are beneficiaries that hold fixed interests in the trust, and

(ii)  any of the following requirements are complied with:

(1)  there are at least 150 beneficiaries among those described in subparagraph i under the trust each of whose fixed interests in the trust have at the particular time a total fair market value of at least $500,

(2)  all fixed interests in the trust are listed on a designated stock exchange and in the 30 days immediately preceding the particular time fixed interests in the trust were traded on a designated stock exchange on at least 10 days,

(3)  each outstanding fixed interest in the trust was issued by the trust for consideration that was not less than 90% of the interest's proportionate share of the net asset value of the trust's property at the time of its issuance, or was acquired for consideration equal to the fair market value of the interest at the time of its acquisition, or

(4)  the trust is governed by a Roth IRA, within the meaning of section 408A of the United States Internal Revenue Code of 1986, as amended from time to time, or by a plan or arrangement created after 21 September 2007 that is subject to that Code and that is described in subclause II of clause D of subparagraph ii of paragraph h of the definition of “exempt foreign trust” in subsection 1 of section 94 of the Income Tax Act, unless the Minister decides otherwise;

exempt person at any time means

 (a) the State, Her Majesty in right of Canada or Her Majesty in right of a province, other than Québec;

 (b) a person whose taxable income for the taxation year that includes that time is exempt from tax under this Part in accordance with Book VIII;

 (c) a trust resident in Canada or a Canadian corporation

(i)  that was established by or arises under a law of Canada or of a province, and

(ii)  the principal activities of which at that time are to administer, manage or invest the monies of one or more superannuation or pension funds or plans established under a law of Canada or of a province;

 (d) a trust or corporation established by or arising under a law of Canada or of a province in connection with a scheme or program for the compensation of workers injured in an accident arising out of or in the course of their employment;

 (e) a trust resident in Canada all the beneficiaries under which are at that time exempt persons;

 (f) a Canadian corporation all the shares, or rights to shares, of which are held at that time by exempt persons;

 (g) a Canadian corporation without share capital all the property of which is held at that time exclusively for the benefit of exempt persons;

 (h) a partnership all the members of which are at that time exempt persons; and

 (i) a trust or corporation that is at that time a mutual fund;

exempt service means a service rendered at any time by a person or partnership (in this definition referred to as the “service provider”) to, for or on behalf of, another person or partnership (in this definition referred to as the “recipient”) where

 (a) the recipient is a trust and the service relates to the administration of the trust; or

 (b) the following conditions are met in respect of the service:

(i)  the service is rendered in the service provider's capacity at that time as an employee or agent of the recipient,

(ii)  in exchange for the service, the recipient transfers or loans property or undertakes to transfer or loan property, and

(iii)  it is reasonable to conclude

(1)  having regard only to the service and the exchange, that the service provider would be willing to provide the service if the service provider were dealing at arm's length with the recipient, and

(2)  that the terms, conditions and circumstances under which the service is provided would be acceptable to the service provider if the service provider were dealing at arm's length with the recipient;

fixed interest at any time of a person or partnership in a trust means an interest of the person or partnership as a beneficiary (in this definition, determined without reference to section 7.11.1) under the trust provided that no amount of the income or capital of the trust to be distributed at any time in respect of any interest in the trust depends on the exercise by any person or partnership of, or the failure by any person or partnership to exercise, any discretionary power, other than a discretionary power in respect of which it is reasonable to conclude that

 (a) the power is consistent with normal commercial practice;

 (b) the power is consistent with terms that would be acceptable to the beneficiaries under the trust if the beneficiaries were dealing with each other at arm's length; and

 (c) the exercise of, or failure to exercise, the power will not materially affect the value of an interest as a beneficiary under the trust relative to the value of other such interests under the trust;

joint contributor at any time in respect of a contribution to a trust means, if more than one contributor has made the contribution, each of those contributors that is at that time a resident contributor to the trust;

mutual fund at any time means a mutual fund corporation or mutual fund trust (in this definition referred to as the “fund”), but does not include a fund in respect of which statements or representations have been made at or before that time–by the fund, or by a promoter or other representative of the fund, in respect of the acquisition or offering of an interest in the fund–that the taxes under this Act on the income, profit or gains for any taxation year–in respect of property that is held by the fund and that is, or derives its value from, an interest in a trust– are less than, or are expected to be less than, the tax that would have been applicable under this Act if the income, profits or gains from the property had been earned directly by a person who acquires an interest in the fund;

non-resident portion of a trust at any time means all property held by the trust to the extent that it is not at that time part of the resident portion of the trust;

non-resident time of a person in respect of a contribution to a trust and a particular time means a time (in this definition referred to as the “contribution time”) at which the person made a contribution to a trust that is before the particular time and at which the person was not resident in Canada (or, if the person was not in existence at the contribution time, the person was not resident in Canada at any time in the 18 months before ceasing to exist), if the person was not resident in Canada or not in existence at any time in the period that began 60 months before the contribution time (or, if the person is an individual and the trust arose on and as a consequence of the death of the individual, 18 months before the contribution time) and ends at the earlier of

 (a) the time that is 60 months after the contribution time; and

 (b) the particular time;

promoter in respect of a trust or corporation at any time means

 (a) a person or partnership that at or before that time establishes, organizes or substantially reorganizes the undertakings of the trust or corporation, as the case may be; and

 (b) for the purposes of the definition of “mutual fund”, a person or partnership described in paragraph a and a person or partnership who in the course of carrying on a business

(i)  issues or sells, or promotes the issuance, sale or acquisition of, an interest in a mutual fund corporation or mutual fund trust,

(ii)  acts as an agent or advisor in respect of the issuance or sale, or the promotion of the issuance, sale or acquisition of, an interest in a mutual fund corporation or mutual fund trust, or

(iii)  accepts, whether as a principal or agent, consideration in respect of an interest in a mutual fund corporation or mutual fund trust;

qualifying services means

 (a) services that are rendered to an employer by an employee of the employer, provided that the employee was not resident in Canada at any time in the period during which the services were rendered;

 (b) services that are rendered to an employer by an employee of the employer, other than

(i)  services that were rendered primarily in Canada,

(ii)  services that were rendered primarily in connection with a business carried on by the employer in Canada, or

(iii)  any combination of services described in subparagraphs i and ii;

 (c) services that are rendered in a particular month to an employer by an employee of the employer, provided that the employee

(i)  was resident in Canada throughout no more than 60 months during the 72-month period that ended at the end of the particular month, and

(ii)  became a member of, or a beneficiary under, the plan or trust under which benefits in respect of the services may be provided (or a similar plan or trust for which the plan or the trust was substituted) before the end of the month following the month in which the employee became resident in Canada; or

 (d) any combination of services that are qualifying services because of any of paragraphs a to c;

resident beneficiary under a trust at any time means a person that is, at that time, a beneficiary under the trust other than a successor beneficiary under the trust or an exempt person, if, at that time,

 (a) the person is resident in Canada; and

 (b) there is a connected contributor to the trust;

resident contributor to a trust at any time means a person that is, at that time, resident in Canada and a contributor to the trust, but–if the trust was created before 1 January 1960 by a person who was not resident in Canada when the trust was created–does not include an individual (other than a trust) who has not, after 31 December 1959, made a contribution to the trust;

resident portion of a trust at a particular time means all of the trust's property that is

 (a) property in respect of which a contribution has been made at or before the particular time to the trust by a contributor that is at the particular time a resident contributor, or if there is at the particular time a resident beneficiary under the trust a connected contributor, to the trust and, for the purposes of this paragraph, the following rules apply:

(i)  if property is held by a contributor in common or in partnership immediately before the property is contributed to the trust, it is contributed by the contributor only to the extent that the contributor so held the property, and

(ii)  if the contribution to the trust is a transfer described in any of paragraphs a, c, e and g of section 594, the property in respect of which the contribution has been made is deemed to be

(1)  in respect of a transfer under paragraph a of section 594 to which subparagraph 1 of subparagraph ii of that paragraph a applies, property the fair market value of which has increased because of a transfer or loan described in subparagraph i of that paragraph a, or, in respect of such a transfer to which subparagraph 2 of subparagraph ii of that paragraph a applies, property in respect of which a valid election under subclause II of clause A of subparagraph ii of paragraph a of the definition of “resident portion” in subsection 1 of section 94 of the Income Tax Act has been made,

(2)  in respect of a transfer under paragraph c of section 594, property described in subparagraph ii of that paragraph c,

(3)  in respect of a transfer under paragraph e of section 594, property acquired as a result of any undertaking including a guarantee, covenant or agreement given by a person or partnership other than the trust to ensure the repayment, in whole or in part, of a loan or other indebtedness incurred by the trust in accordance with that paragraph e, and

(4)  in respect of a transfer under paragraph g of section 594, property in respect of which a valid election under clause D of subparagraph ii of paragraph a of the definition of “resident portion” in subsection 1 of section 94 of the Income Tax Act has been made;

 (b) property that is acquired, at or before the particular time, by way of indebtedness incurred by the trust (in this paragraph referred to as the “subject property”), if

(i)  all or part of the indebtedness is secured on property (other than the subject property) that is held in the trust's resident portion,

(ii)  it was reasonable to conclude, at the time that the indebtedness was incurred, that the indebtedness would be repaid with recourse to any property (other than the subject property) held at any time in the trust's resident portion, or

(iii)  a person resident in Canada or partnership of which a person resident in Canada is a member is obligated, either absolutely or contingently, to effect any undertaking including any guarantee, covenant or agreement given to ensure the repayment, in whole or in part, of the indebtedness, or provided any other financial assistance in respect of the indebtedness;

 (c) property to the extent that it is derived, directly or indirectly, in any manner whatever, from property described in any of paragraphs a, b and d, and, without limiting the generality of the foregoing, including property derived from the income (computed without reference to subparagraph f of the first paragraph of section 597.0.14, paragraphs a and b of section 657 and section 657.1) of the trust for a taxation year of the trust that ends at or before the particular time and property in respect of which an amount would be described at the particular time in respect of the trust in the definition of “capital dividend account” in subsection 1 of section 89 of the Income Tax Act if the trust were at that time a corporation; and

 (d) property that is at the particular time substituted for property described in any of paragraphs a to c;

restricted property of a person or partnership means property that the person or partnership holds and that

 (a) is a share (or a right to acquire a share) of the capital stock of a closely held corporation if the share or right, or property for which the share or right was substituted, was at any time acquired by the person or partnership as part of a transaction or series of transactions under which

(i)  a specified share of the capital stock of a closely held corporation was acquired by any person or partnership in exchange for or as consideration for the disposition of any property or upon the conversion of any property and the cost of the specified share to the person who acquired it was less than the fair market value of the specified share at the time of the acquisition, or

(ii)  a share (other than a specified share) of the capital stock of a closely held corporation becomes a specified share of the capital stock of the corporation;

 (b) is an indebtedness or other obligation, or a right to acquire an indebtedness or other obligation, of a closely held corporation if

(i)  the indebtedness, obligation or right, or property for which the indebtedness, obligation or right was substituted, became property of the person or partnership as part of a transaction or series of transactions under which

(1)  a specified share of the capital stock of a closely held corporation was acquired by any person or partnership in exchange for or as consideration for the disposition of any property or upon the conversion of any property and the cost of the specified share to the person who acquired it was less than the fair market value of the specified share at the time of the acquisition, or

(2)  a share (other than a specified share) of the capital stock of a closely held corporation becomes a specified share of the capital stock of the corporation, and

(ii)  the amount of any payment under the indebtedness, obligation or right (whether the right to the amount is immediate or future, absolute or contingent or conditional on or subject to the exercise of a discretionary power by any person or partnership) is, directly or indirectly, determined primarily by one or more of the following criteria:

(1)  the fair market value of, production from or use of any of the property of the closely held corporation,

(2)  gains and profits from the disposition of any of the property of the closely held corporation,

(3)  income, profits, revenue and cash flow of the closely held corporation, or

(4)  any other criterion similar to a criterion referred to in any of subparagraphs 1 to 3; or

 (c) is property

(i)  that the person or partnership acquired as part of a series of transactions described in paragraph a or b in respect of another property, and

(ii)  the fair market value of which is derived in whole or in part, directly or indirectly, from the other property referred to in subparagraph i;

specified party in respect of a particular person at any time means

 (a) the particular person's spouse at that time;

 (b) a corporation that at that time

(i)  is a controlled foreign affiliate of the particular person or the particular person's spouse, or

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

 (c) a person, or a partnership of which the particular person is a majority-interest partner, for which it is reasonable to conclude that the benefit referred to in subparagraph iv of subparagraph a of the first paragraph of section 597.0.5 was conferred

(i)  in anticipation of the person becoming after that time a corporation described in paragraph b, or

(ii)  to avoid or minimize a liability that arose, or that would otherwise have arisen, under this Act with respect to the particular person; or

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

(i)  the corporation is at or before that time a beneficiary under a trust, and

(ii)  the particular person or the partnership is a beneficiary under the trust solely because of the application of paragraph b of the definition of “beneficiary” in respect of the particular person or the partnership and in relation to the corporation;

specified share means a share of the capital stock of a corporation other than a share that is a prescribed share for the purposes of paragraph d of subsection 1 of section 110 of the Income Tax Act;

specified time in respect of a trust for a taxation year of the trust means

 (a) if the trust exists at the end of the taxation year, the time that is the end of that taxation year; and

 (b) in any other case, the time in that taxation year that is immediately before the time at which the trust ceases to exist;

successor beneficiary at a particular time under a trust means a person that is a beneficiary under the trust solely because of a right of the person to receive all or part of the trust's income or capital, provided that under that right the person may receive that income or capital only on or after the death after the particular time of an individual who, at the particular time, is alive and

 (a) is a contributor to the trust;

 (b) is related to (including, for the purposes of this paragraph and paragraph c, an uncle, aunt, niece or nephew of) a contributor to the trust; or

 (c) would have been related to a contributor to the trust if every individual who was alive before the particular time were alive at that time;

tax-liable taxpayer in respect of a trust at a particular time in a taxation year means

 (a) in the case of a taxpayer who is, at the particular time, either a resident contributor to the trust, a resident beneficiary under the trust or an electing contributor under the trust, or a joint contributor in respect of a contribution to the trust, a person (other than a corporation) who is resident in Québec at the end of the taxation year or a corporation that has an establishment in Québec in the taxation year; or

 (b) in the case of a taxpayer who is, at the particular time, a connected contributor to the trust, a person (other than a corporation) who was resident in Québec at a time that is before the particular time and at which the person made a contribution to the trust, or a corporation that had an establishment in Québec at a time that is before the particular time and at which the corporation made a contribution to the trust;

transaction includes an arrangement or event.

In this chapter, “trust” includes, for greater certainty, a succession.

An educational institution referred to in subparagraph 2 of subparagraph ii of paragraph b of the definition of “exempt foreign trust” in the first paragraph and in subparagraph 2 of subparagraph iv of that paragraph b is an educational institution located outside Canada that

 (a) is a university, college or any other institution that provides courses at a post-secondary school level; or

 (b) provides courses designed to furnish a person with skills for, or improve a person's skills in, an occupation.

Chapter V.2 of Title II of Book I applies in relation to an election made under the definition of “electing contributor”, “electing trust”, “exempt foreign trust” and “resident portion” in subsection 1 of section 94 of the Income Tax Act or in relation to an election made before 20 December 2006 under paragraph h of the definition of “exempt foreign trust” in the first paragraph.

1975, c. 22, s. 164; 1984, c. 15, s. 130; 1994, c. 22, s. 209; 1996, c. 39, s. 273; 1997, c. 3, s. 71; 2015, c. 36, s. 28.

594. For the purposes of this chapter and Chapter VI.2, the following rules apply:

 (a) a person or partnership is deemed to have transferred, at any time, property to a trust if

(i)  at that time the person or partnership transfers or loans property to another person or partnership and the transfer or loan is not an arm's length transfer, and

(ii)  because of that transfer or loan

(1)  the fair market value of one or more properties held by the trust increases at that time, or

(2)  a liability or potential liability of the trust decreases at that time;

 (b) the fair market value, at any time, of property deemed under paragraph a to be transferred at that time by a person or partnership is deemed to be equal to the amount of the absolute value of the increase or decrease referred to in subparagraph ii of paragraph a in respect of the property, and if that time is after 27 August 2010 and the property that the person or partnership transfers or loans at that time is restricted property of the person or partnership, the property deemed under paragraph a to be transferred at that time to a trust is deemed to be restricted property transferred at that time to the trust;

 (c) a person or partnership is deemed to have transferred, at any time, property to a trust if

(i)  at that time the person or partnership transfers restricted property, or loans property other than by way of an arm's length transfer, to another person (in this paragraph and paragraph d referred to as the “intermediary”),

(ii)  at or after that time, the trust holds property (other than property described in subparagraph b of the first paragraph of section 597.0.12) the fair market value of which is derived in whole or in part, directly or indirectly, from property held by the intermediary, and

(iii)  it is reasonable to conclude that one of the reasons the transfer or loan is made is to avoid or minimize a liability under this Act;

 (d) the fair market value, at any time, of property deemed under paragraph c to be transferred at that time by a person or partnership is deemed to be equal to the fair market value of the property referred to in subparagraph i of paragraph c, and if that time is after 24 October 2012 and the property that the person or partnership transfers or loans to the intermediary is restricted property of the intermediary, the property deemed under paragraph c to be transferred at that time by the person or partnership to a trust is deemed to be restricted property transferred at that time to the trust throughout the period in which the intermediary holds the restricted property;

 (e) where, at any time, a particular person or partnership is obligated, either absolutely or contingently, to effect any undertaking including any guarantee, covenant or agreement given to ensure the repayment, in whole or in part, of a loan or other indebtedness incurred by another person or partnership, or has provided any other financial assistance to another person or partnership,

(i)  the particular person or partnership is deemed to have transferred, at that time, property to that other person or partnership, and

(ii)  the property, if any, transferred to the particular person or partnership from the other person or partnership in exchange for the guarantee or other financial assistance is deemed to have been transferred to the particular person or partnership in exchange for the property deemed to have been transferred under subparagraph i;

 (f) the fair market value at any time of property deemed under subparagraph i of paragraph e to have been transferred at that time to another person or partnership is deemed to be equal to the amount at that time of the loan or indebtedness incurred by the other person or partnership to which the property relates;

 (g) where, at any time after 22 June 2000, a particular person or partnership renders any service (other than an exempt service) to, for or on behalf of another person or partnership,

(i)  the particular person or partnership is deemed to have transferred, at that time, property to that other person or partnership, and

(ii)  the property, if any, transferred to the particular person or partnership from the other person or partnership in exchange for the service is deemed to have been transferred to the particular person or partnership in exchange for the property deemed under subparagraph i to have been transferred;

 (h) each of the following acquisitions of property by a particular person or partnership is deemed to be a transfer of the property, at the time of the acquisition of the property, to the particular person or partnership from the person or partnership from which the property was acquired, namely, the acquisition by the particular person or partnership of

(i)  a share of a corporation from the corporation,

(ii)  an interest as a beneficiary under a trust (otherwise than from a beneficiary under the trust),

(iii)  an interest in a partnership (otherwise than from a member of the partnership),

(iv)  a debt owing by a person or partnership from the person or partnership, and

(v)  a right (granted after 22 June 2000 by the person or partnership from which the right was acquired) to acquire or to be loaned property;

 (i) the fair market value at any time of property deemed under subparagraph i of paragraph g to have been transferred at that time is deemed to be equal to the fair market value at that time of the service to which the property relates;

 (j) where, at any time, a person or partnership that becomes obligated to do an act that would, if done, constitute the transfer or loan of property to another person or partnership, the person or partnership is deemed to have become obligated at that time to transfer or loan, as the case may be, property to that other person or partnership;

 (k) where a trust acquires property of an individual as a consequence of the death of the individual and the individual was immediately before death resident in Canada, the individual is deemed, in applying at any time the definition of “non-resident time” in the first paragraph of section 593, to have transferred the property to the trust immediately before the individual's death;

 (l) a transfer or loan of property at any time is deemed to be made at that time jointly by a particular person or partnership and a second person or partnership (in this paragraph referred to as the “specified person”) if

(i)  the particular person or partnership transfers or loans property at that time to another person or partnership,

(ii)  the transfer or loan is made at the direction, or with the consent, of the specified person, and

(iii)  it is reasonable to conclude that one of the reasons the transfer or loan is made is to avoid or minimize the liability, of any person or partnership, under this Act that arose, or that would otherwise have arisen, because of the application of this chapter;

 (m) a transfer or loan of property made at any time after 8 November 2006 is deemed to be made at that time jointly by a particular person or partnership and a second person or partnership (in this paragraph referred to as the “specified person”) if

(i)  the particular person or partnership transfers or loans property at that time to another person or partnership, and

(ii)  a purpose or effect of the transfer or loan may reasonably be considered to be to provide benefits in respect of services rendered by a person as an employee of the specified person (whether or not such a benefit may be received under a right that is immediate or future, absolute or contingent, or conditional on or subject to the exercise of any discretionary power by any person or partnership);

 (n) a transfer or loan of property at a particular time is deemed to be made at the particular time jointly by a corporation and a person or partnership (in this paragraph referred to as the “specified person”) if

(i)  the corporation transfers or loans property at the particular time to another person or partnership,

(ii)  the transfer or loan is made at the direction, or with the consent, of the specified person,

(iii)  the particular time is not, or would not be if the transfer or loan were a contribution of the specified person,

(1)  a non-resident time of the specified person, or

(2)  if the specified person is a partnership, a non-resident time of one or more members of the partnership, and

(iv)  the corporation is, at the particular time, a controlled foreign affiliate of the specified person, or would at that time be a controlled foreign affiliate of the specified person if the specified person were at the particular time resident in Canada, or it is reasonable to conclude that the transfer or loan was made in contemplation of the corporation becoming after the particular time such a controlled foreign affiliate of the specified person;

 (o) a particular person or partnership is deemed to have transferred, at a particular time, particular property or a particular part of it, as the case may be, to a corporation described in subparagraph i or a second person or partnership described in subparagraph ii if

(i)  the particular property is a share of the capital stock of a corporation held at the particular time by the particular person or partnership, and as consideration for the disposition at or before the particular time of the share, the particular person or partnership received at the particular time (or became entitled at the particular time to receive) from the corporation a share of the capital stock of the corporation, or

(ii)  the particular property (or property for which the particular property is substituted) was acquired, before the particular time, from the second person or partnership by any person or partnership, in circumstances that are described in any of subparagraphs i to v of paragraph h (or would be so described if it applied at the time of that acquisition) and at the particular time,

(1)  the terms or conditions of the particular property change,

(2)  the second person or partnership redeems, acquires or cancels the particular property or the particular part of it,

(3)  if the particular property is a debt owing by the second person or partnership, the debt or the particular part of it is settled or cancelled, or

(4)  if the particular property is a right to acquire or to be loaned property, the particular person or partnership exercises the right;

 (p) a contribution made at any time by a particular trust to another trust is deemed to be made at that time jointly by the particular trust and by each person or partnership that is at that time a contributor to the particular trust;

 (q) a contribution made at any time by a particular partnership to a trust is deemed to be made at that time jointly by the particular partnership and by each person or partnership that is at that time a member of the particular partnership;

 (r) subject to paragraph s and section 597.0.7, the amount of a contribution to a trust at the time it was made is deemed to be equal to the fair market value, at that time, of the property that was the subject of the contribution;

 (s) a person or partnership that at any time acquires a fixed interest in a trust (or a right, issued by the trust, to acquire a fixed interest in the trust) from another person or partnership (other than from the trust that issued the interest or the right) is deemed to have made at that time a contribution to the trust and the amount of the contribution is deemed to be equal to the fair market value at that time of the interest or right, as the case may be;

 (t) a particular person or partnership that has acquired a fixed interest in a trust because of making a contribution to the trust–or that has made a contribution to the trust because of having acquired a fixed interest in the trust or a right described in paragraph s–is, for the purpose of applying this chapter from the time after the time that the particular person or partnership transfers the fixed interest or the right, as the case may be, to another person or partnership (which transfer is referred to in this paragraph as the “sale”), deemed not to have made the contribution in respect of the fixed interest, or right, that is the subject of the sale if

(i)  in exchange for the sale, the other person or partnership transfers or loans, or undertakes to transfer or loan, property (in subparagraph ii referred to as the “consideration”) to the particular person or partnership, and

(ii)  it is reasonable to conclude

(1)  having regard only to the sale and the consideration that the particular person or partnership would be willing to make the sale if the particular person or partnership were dealing at arm's length with the other person or partnership, and

(2)  that the terms and conditions made or imposed in respect of the exchange would be acceptable to the particular person or partnership if the particular person or partnership were dealing at arm's length with the other person or partnership;

 (u) a transfer to a trust by a particular person or partnership is deemed not to be, at a particular time, a contribution to the trust if

(i)  the particular person or partnership has transferred, at or before the particular time and in the ordinary course of business of the particular person or partnership, property to the trust,

(ii)  the transfer is not an arm's length transfer, but would be an arm's length transfer if the definition of “arm's length transfer” in the first paragraph of section 593 were read without reference to paragraph a and subparagraphs i, ii and iv to vii of paragraph b,

(iii)  it is reasonable to conclude that the particular person or partnership was the only person or partnership that acquired, in respect of the transfer, an interest as a beneficiary under the trust,

(iv)  the particular person or partnership was required, in accordance with the securities law of a country or of a political subdivision of such a country in respect of the issuance by the trust of interests as a beneficiary under the trust, to acquire an interest because of the particular person or partnership's status at the time of the transfer as a manager or promoter of the trust,

(v)  at the particular time the trust is not an exempt foreign trust, but would be at that time an exempt foreign trust if it had not made an election under paragraph h of the definition of “exempt foreign trust” in the first paragraph of section 593, and

(vi)  the particular time is before the earliest of

(1)  the first time at which the trust becomes an exempt foreign trust,

(2)  the first time at which the particular person or partnership ceases to be a manager or promoter of the trust, and

(3)  the time that is 24 months after the first time at which the total fair market value of consideration received by the trust in exchange for interests as a beneficiary (other than the particular person or partnership's interest referred to in subparagraph iii) under the trust is greater than $500,000;

 (v) a transfer, by a Canadian corporation of property, that is at a particular time a contribution by the Canadian corporation to a trust, is deemed not to be, after the particular time, such a contribution to the trust if

(i)  the trust acquired the property before the particular time from the Canadian corporation in circumstances described in subparagraph i or iv of paragraph h,

(ii)  as a result of a transfer (in this paragraph referred to as the “sale”) at the particular time by any person or partnership (in this paragraph referred to as the “seller”) to another person or partnership (in this paragraph referred to as the “buyer”) the trust no longer holds any property that is

(1)  shares of the capital stock of, or debt issued by, the Canadian corporation, or

(2)  property the fair market value of which is derived in whole or in part, directly or indirectly, from shares of the capital stock of, or debt issued by, the Canadian corporation,

(iii)  the buyer deals at arm's length immediately before the particular time with the Canadian corporation, the trust and the seller,

(iv)  in exchange for the sale, the buyer transfers or becomes obligated to transfer property (in this paragraph referred to as the “consideration”) to the seller, and

(v)  it is reasonable to conclude

(1)  having regard only to the sale and the consideration that the seller would be willing to make the sale if the seller were dealing at arm's length with the buyer,

(2)  that the terms and conditions made or imposed in respect of the exchange would be acceptable to the seller if the seller were dealing at arm's length with the buyer, and

(3)  that the value of the consideration is not, from the particular time, determined in whole or in part, directly or indirectly, by reference to shares of the capital stock of, or debt issued by, the Canadian corporation;

 (w) a transfer, before 11 October 2002, to a personal trust by an individual (other than a trust) of particular property is deemed not to be a contribution of the particular property by the individual to the trust if the transfer is deemed not to be a contribution of the particular property by the individual to the trust for the purposes of section 94 of the Income Tax Act (R.S.C. 1985, c. 1, (5th Suppl.)) in accordance with paragraph u of subsection 2 of that section 94; and

 (x) a loan made by a specified financial institution to a trust is deemed not to be a contribution to the trust if

(i)  the loan is made on terms and conditions that would have been agreed to by persons dealing at arm's length, and

(ii)  the loan is made by the specified financial institution in the ordinary course of the business carried on by it.

1975, c. 22, s. 164; 1984, c. 15, s. 130; 1986, c. 19, s. 129; 1993, c. 16, s. 236; 1997, c. 3, s. 71; 2015, c. 36, s. 28.

595. Where, but for this section, a trust would not be resident in Canada at a specified time in a particular taxation year and, at that time, there is a resident contributor to the trust or a resident beneficiary under the trust, the following rules apply, unless the trust is an exempt foreign trust at that time:

 (a) the trust is deemed to be resident in Canada throughout the particular taxation year for the purpose of

(i)  computing the trust's income for the particular year,

(ii)  applying Chapter V of Title XII (except sections 669.3 and 669.4) and section 688.1 in respect of the trust and a beneficiary under the trust,

(iii)  applying subparagraph 3 of subparagraph i.1 of paragraph n of section 257, paragraph c of section 597.1, section 688.0.0.2 and Part II, in respect of a beneficiary under the trust,

(iv)  applying section 733.1,

(v)  determining the rights and obligations of the trust under Book IX, and

(vi)  determining whether a foreign affiliate of a taxpayer (other than the trust) is a controlled foreign affiliate of the taxpayer;

 (b) no deduction is to be made under section 146 by the trust in computing its income for the particular taxation year, and for the purpose of applying section 146.1 and Chapter I of Title III of Book V to the trust for the particular taxation year, the following rules apply:

(i)  in determining the non-business-income tax (within the meaning assigned by section 772.2 for the purposes of this section) paid by the trust for the particular taxation year, paragraph b of the definition of that expression does not apply, and

(ii)  where, at that specified time, the trust is resident in a country other than Canada,

(1)  the trust's income for the particular taxation year is deemed to be from sources in that country and not to be from any other source, and

(2)  the business-income tax (within the meaning assigned by section 772.2), and the non-business-income tax, paid by the trust for the particular taxation year are deemed to be paid by the trust to the government of that country and not to any other government;

 (c) where section 94 of the Income Tax Act (R.S.C. 1985, c. 1, (5th Suppl.)) did not apply to deem, for the purposes of that Act, the trust to be resident in Canada throughout its taxation year (in this paragraph referred to as the “preceding year”) immediately preceding the particular taxation year, the trust is deemed to have

(i)  immediately before the end of the preceding year, disposed of each property (other than property described in any of subparagraphs i to iv of paragraph b of section 785.1) held by the trust at that time for proceeds of disposition equal to its fair market value at that time, and

(ii)  at the beginning of the particular taxation year, acquired each of the properties deemed to be disposed of in accordance with subparagraph i at a cost equal to the property's proceeds of disposition determined under subparagraph i;

 (d) where section 94 of the Income Tax Act applied to deem, for the purposes of that Act, the trust to be resident in Canada for its last taxation year that ended before 1 January 2007, the trust is deemed, from the particular taxation year, to have

(i)  disposed of each property (other than property described in any of subparagraphs i to iv of paragraph b of section 785.1) at the time the trust is deemed to have disposed of the property under section 128.1 of the Income Tax Act, because of the application of that section 94, for proceeds of disposition equal to the proceeds determined at that time under that section 128.1, and

(ii)  at the time the trust is deemed to have acquired the property under section 128.1 of the Income Tax Act, because of the application of that section 94, acquired each of the properties deemed to be disposed of in accordance with subparagraph i at a cost equal to the property's proceeds of disposition determined under subparagraph i;

 (e) if the trust (in this paragraph referred to as the “particular trust”) is an electing trust in respect of the particular taxation year, the following rules apply:

(i)  an inter vivos trust (in this paragraph referred to as the “non-resident portion trust”) is deemed for the purposes of this Act (other than for the purposes of the first and second paragraphs of section 647) to be created at the first time at which the particular trust exists in its first taxation year in respect of which the particular trust is an electing trust and to continue in existence until the earliest of

(1)  the time at which the particular trust ceases to be resident in Canada because of section 597 or 597.0.1,

(2)  the time at which the particular trust ceases to exist, and

(3)  the time at which the particular trust becomes resident in Canada otherwise than because of this section,

(ii)  all of the particular trust's property that is part of the particular trust's non-resident portion is deemed to be the property of the non-resident portion trust and not to be, except for the purposes of this paragraph and the definition of “electing trust” in the first paragraph of section 593, the particular trust's property,

(iii)  the terms and conditions of, and rights and obligations of beneficiaries under, the particular trust (determined with reference to all the circumstances including the terms of a trust, an intention, the laws of a country or the existence of an agreement, a memorandum, a letter of wishes or any other arrangement) are deemed to be the terms and conditions of, and rights and obligations of beneficiaries under, the non-resident portion trust,

(iv)  the trustees of the particular trust are deemed to be the trustees of the non-resident portion trust,

(v)  the beneficiaries under the particular trust are deemed to be the beneficiaries under the non-resident portion trust,

(vi)  the non-resident portion trust is deemed not to have a resident contributor or connected contributor to it,

(vii)  the non-resident portion trust is deemed to be, without affecting the liability of its trustees for their own income tax, in respect of its property an individual,

(viii)  if all or part of property becomes at a particular time part of the particular trust's non-resident portion and immediately before the particular time the property or that part of property was part of its resident portion, the particular trust is deemed to have transferred at the particular time the property or that part of property to the non-resident portion trust,

(ix)  if all or part of property becomes at a particular time part of the particular trust's resident portion and immediately before the particular time the property or that part of property was part of its non-resident portion, the non-resident portion trust is deemed to have transferred at the particular time the property or that part of property to the particular trust,

(x)  the particular trust and the non-resident portion trust are deemed at all times to be affiliated with each other and to not deal with each other at arm's length,

(xi)  the particular trust has solidarily with the non-resident portion trust the rights and obligations of the non-resident portion trust in respect of any taxation year under Book IX, and the Tax Administration Act (chapter A-6.002) applies in respect of those rights and obligations, and

(xii)  if the non-resident portion trust ceases to exist at a particular time determined in accordance with any of subparagraphs 1 to 3 of subparagraph i, the following rules apply:

(1)  the non-resident portion trust is deemed, at the time (in this subparagraph xii referred to as the “disposition time”) that is immediately before the time that is immediately before the particular time, to have disposed of each of its properties that is property described in any of subparagraphs i to iv of paragraph b of section 785.1 for proceeds of disposition equal to the cost amount to it of the property at the disposition time and of each of its other properties for proceeds of disposition equal to its fair market value of the property at the disposition time,

(2)  the particular trust is deemed to have acquired, at the time that is immediately before the particular time, each property described in subparagraph 1 at a cost equal to the proceeds of disposition determined under subparagraph 1 in respect of the property, and

(3)  each person or partnership that is at the time immediately before the particular time a beneficiary under the non-resident portion trust is deemed at the disposition time to have disposed of the beneficiary's interest as a beneficiary under the non-resident portion trust for proceeds of disposition equal to the beneficiary's cost amount in the interest at the disposition time and to have ceased to be, other than for purposes of this subparagraph 3, a beneficiary under the non-resident portion trust;

 (f) where there is, at that time, a resident contributor to the trust that is a tax-liable taxpayer in respect of the trust or a resident beneficiary under the trust that is a tax-liable taxpayer in respect of the trust if a connected contributor to the trust at that time is a tax-liable taxpayer in respect of the trust at that time, the trust is deemed, for the purpose of applying Book II and determining the trust's tax liability under this Part, to be resident in Québec on the last day of the particular year and, where the trust is an electing trust in respect of the particular year, its income for the particular year is deemed to be equal to the portion of that income, otherwise determined, that may reasonably be considered as being attributable to property that was contributed to the trust on or before that time by a contributor that is at that time a resident contributor to the trust and a tax-liable taxpayer in respect of the trust, or, if there is at that time a resident beneficiary under the trust that is a tax-liable taxpayer in respect of the trust, a connected contributor to the trust and a tax-liable taxpayer in respect of the trust; and

 (g) each person that at any time in the particular taxation year is a resident contributor to the trust (other than an electing contributor to the trust at the specified time) or a resident beneficiary under the trust and that is a tax-liable taxpayer in respect of the trust at any time has, solidarily with the trust and with each other such person that is such a resident contributor or such a resident beneficiary, the rights and obligations of the trust in respect of the particular taxation year under Book IX, and the Tax Administration Act applies in respect of those rights and obligations.

1975, c. 22, s. 164; 1997, c. 3, s. 71; 2015, c. 36, s. 28.

596. For greater certainty, section 595 does not deem a trust to be resident in Canada

 (a) for the purposes of subparagraph i of subparagraph b of the second paragraph of section 248;

 (b) for the purposes of sections 440, 454 and 597.0.6, the definition of “Canadian partnership” in the first paragraph of section 599, paragraph c of section 692.5 and paragraph a of section 1120;

 (c) for the purpose of determining whether section 467 applies;

 (d) for the purposes of the definitions of “arm's length transfer” and “exempt foreign trust” in the first paragraph of section 593;

 (e) for the purpose of determining whether section 692 applies in respect of a distribution of property to the trust after 17 July 2005;

 (f) for the purpose of determining whether, in applying section 785.1, the trust becomes resident in Canada at a particular time; and

 (g) for the purpose of determining whether, in applying section 785.2, the trust ceases to be resident in Canada at a particular time.

1975, c. 22, s. 164; 1984, c. 15, s. 131; 1994, c. 22, s. 210; 1996, c. 39, s. 273; 1997, c. 3, s. 71; 1997, c. 14, s. 92; 2015, c. 36, s. 28.

597. A trust is deemed to cease to be resident in Canada at the earliest time at which there is neither a resident contributor to the trust nor a resident beneficiary under the trust in a particular taxation year (determined without reference to section 785.2) of the trust if

 (a) the particular taxation year immediately follows a taxation year of the trust throughout which the trust was deemed under section 595 to be resident in Canada for the purpose of computing its income; and

 (b) at a specified time in the particular taxation year, the trust

(i)  is not resident in Canada,

(ii)  is not an exempt foreign trust, and

(iii)  has no resident contributor to it or resident beneficiary under it.

1975, c. 22, s. 164; 1987, c. 67, s. 127; 1990, c. 59, s. 210; 2015, c. 36, s. 28.

597.0.1. A trust is deemed to cease to be resident in Canada at the earliest time at which the trust becomes an exempt foreign trust in a particular taxation year (determined without reference to section 785.2) of the trust if

 (a) the particular taxation year immediately follows a taxation year throughout which the trust was deemed under section 595 to be resident in Canada for the purpose of computing its income; and

 (b) at a specified time in the particular taxation year,

(i)  there is a resident contributor to the trust or a resident beneficiary under the trust, and

(ii)  the trust is an exempt foreign trust.

2015, c. 36, s. 29.

597.0.2. Where a trust is deemed under section 597 or 597.0.1 to cease to be resident in Canada at a particular time, the following rules apply in respect of the trust in relation to the particular taxation year that is, because of that cessation of residence, deemed to end immediately before the particular time:

 (a) the trust's fiscal return for the particular taxation year is deemed to be filed with the Minister on a timely basis if it is filed with the Minister on or before the 90th day after the end of the trust's taxation year that is deemed to start at the particular time because of that cessation of residence; and

 (b) an amount that is included in computing the trust's income (determined without reference to paragraphs a and b of section 657 and section 657.1) for the particular taxation year but that otherwise became payable by the trust in the period after the particular taxation year and before the end of the trust's taxation year that is deemed to start at the particular time because of that cessation of residence, is deemed to have become payable by the trust immediately before the end of the particular taxation year and not at any other time.

2015, c. 36, s. 29.

597.0.3. Where at a specified time in a taxation year a trust is an exempt foreign trust, at a particular time in the immediately following taxation year (determined without reference to this section) the trust ceases to be an exempt foreign trust (otherwise than because of becoming resident in Canada), and at the particular time there is a resident contributor to, or resident beneficiary under, the trust, the trust's taxation year (determined without reference to this section) that includes the particular time is deemed to end immediately before the particular time and a new taxation year of the trust is deemed to begin at the particular time.

2015, c. 36, s. 29.

597.0.4. The maximum amount recoverable under paragraph g of section 595 at a particular time from a person in respect of a trust (other than a person that is deemed, under section 597.0.10 or 597.0.11, to be a contributor or a resident contributor to the trust) and a particular taxation year of the trust is equal to the person's recovery limit at the particular time in respect of the trust and the particular year if

 (a) either

(i)  the person is liable under paragraph g of section 595 in respect of the trust and the particular taxation year solely because the person was a resident beneficiary under the trust that is a tax-liable taxpayer in respect of the trust at a specified time in respect of the trust in the particular taxation year, or

(ii)  at a specified time in respect of the trust in the particular taxation year, the aggregate of all amounts each of which is the amount, at the time it was made, of a contribution to the trust made before the specified time by the person or by another person or partnership not dealing at arm's length with the person, is not more than the greater of

(1)  $10,000, and

(2)  10% of the aggregate of all amounts each of which is the amount, at the time it was made, of a contribution made to the trust before the specified time;

 (b) the person has complied with the requirements of paragraph b of subsection 7 of section 94 of the Income Tax Act (R.S.C. 1985, c. 1, (5th Suppl.)) in respect of the particular time; and

 (c) it is reasonable to conclude that for each transaction that occurred before the end of the particular taxation year at the direction of, or with the consent of, the person

(i)  none of the purposes of the transaction was to enable the person to reduce or avoid any liability under paragraph g of section 595 in respect of the trust, and

(ii)  the transaction was not part of a series of transactions any of the purposes of which was to enable the person to reduce or avoid any liability under paragraph g of section 595 in respect of the trust.

2015, c. 36, s. 29.

597.0.5. The recovery limit referred to in section 597.0.4 at a particular time of a particular person in respect of a trust and a particular taxation year of the trust is equal to the amount by which the amount determined under the second paragraph is exceeded by the greater of

 (a) the aggregate of all amounts each of which is

(i)  an amount received or receivable after 31 December 2000 and before the particular time by the particular person on the disposition of all or part of the person's interest as a beneficiary under the trust, or by a person or partnership (that was, when the amount became receivable, a specified party in respect of the particular person) on the disposition of all or part of the specified party's interest as a beneficiary under the trust,

(ii)  an amount (other than an amount described in subparagraph i) made payable by the trust after 31 December 2000 and before the particular time to the particular person because of the interest of the particular person as a beneficiary under the trust, or a person or partnership (that was, when the amount became payable, a specified party in respect of the particular person) because of the interest of the specified party as a beneficiary under the trust,

(iii)  an amount received after 27 August 2010 by the particular person, or a person or partnership (that was, when the amount was received, a specified party in respect of the particular person), as a loan from the trust to the extent that the amount has not been repaid,

(iv)  an amount (other than an amount described in any of subparagraphs i to iii) that is the fair market value of a benefit received or enjoyed, after 31 December 2000 and before the particular time, from or under the trust by the particular person, or a person or partnership (that was, when the benefit was received or enjoyed, a specified party in respect of the particular person), or

(v)  the amount determined in respect of the particular person in accordance with subparagraph v of paragraph a of subsection 8 of section 94 of the Income Tax Act (R.S.C. 1985, c. 1, (5th Suppl.)); and

 (b) the aggregate of all amounts each of which is the amount, when made, of a contribution to the trust before the particular time by the particular person.

The amount referred to in the first paragraph is equal to the aggregate of all amounts each of which is

 (a) an amount recovered before the particular time from the particular person in connection with a liability of the particular person (in respect of the trust and the particular year or a preceding taxation year of the trust) that arose because of the application of section 94 of the Income Tax Act or section 595;

 (b) an amount (other than an amount to which this subparagraph has applied in respect of any other person) recovered before the particular time from a specified party in respect of the particular person in connection with a liability of the particular person (in respect of the trust and the particular year or a preceding taxation year of the trust) that arose because of the application of section 94 of the Income Tax Act or section 595;

 (c) the amount by which the particular person's tax payable under this Part for any taxation year in which an amount described in any of subparagraphs i to iv of subparagraph a of the first paragraph was paid, became payable, was received, became receivable or was enjoyed by the particular person exceeds the amount that would have been the particular person's tax payable under this Part for that taxation year if no such amount were paid, became payable, were received, became receivable or were enjoyed by the particular person in that taxation year; or

 (d) the amount determined in respect of the particular person in accordance with paragraph e of subsection 8 of section 94 of the Income Tax Act.

2015, c. 36, s. 29.

597.0.6. The rules in the second paragraph apply at a particular time in respect of a particular person, and to a particular property, in respect of a trust not resident in Canada, if at that time

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

 (b) the trust holds the particular property on condition that the particular property or property substituted for the particular property may revert to the particular person or pass to one or more persons or partnerships to be determined by the particular person, or may not be disposed of by the trust during the existence of the particular person, except with the particular person's consent or in accordance with the particular person's direction.

In applying this chapter in respect of the trust for a taxation year of the trust that includes the particular time, the rules referred to in the first paragraph are as follows:

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

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

(ii)  that is, for the purposes of paragraph c of section 594 and section 597.0.7, a transfer or loan of restricted property; and

 (b) paragraph c of section 594 is to be read without reference to its subparagraph iii in its application to each transfer and loan described in subparagraph a.

2015, c. 36, s. 29.

597.0.7. Where a person or partnership contributes at any time restricted property to a trust, the amount of the contribution at that time is deemed, for the purposes of this chapter, to be equal to the greater of

 (a) the amount, determined without reference to this section, of the contribution at that time; and

 (b) the amount that is the greatest fair market value of the restricted property, or property substituted for it, in the period that begins immediately after that time and ends at the end of the third calendar year that ends after that time.

2015, c. 36, s. 29.

597.0.8. In applying this chapter at any specified time, in respect of a trust's taxation year, that is before the particular time at which a contributor to the trust becomes resident in Canada within 60 months after making a contribution to the trust, the contribution is deemed to have been made at a time other than a non-resident time of the contributor if

 (a) in applying the definition of “non-resident time” in the first paragraph of section 593 at each of those specified times, the contribution was made at a non-resident time of the contributor; and

 (b) in applying the definition of “non-resident time” in the first paragraph of section 593 immediately after the particular time, the contribution is made at a time other than a non-resident time of the contributor.

2015, c. 36, s. 29.

597.0.9. Sections 597.0.10 and 597.0.11 apply to a trust or a person in respect of a trust if

 (a) at any time property of a trust (in this section and sections 597.0.10 and 597.0.11 referred to as the “original trust”) is transferred or loaned, directly or indirectly, in any manner whatever, to another trust (in this section and sections 597.0.10 and 597.0.11 referred to as the “transferee trust”);

 (b) the original trust

(i)  is deemed to be resident in Canada immediately before that time under paragraph a of section 595,

(ii)  would be deemed to be resident in Canada immediately before that time under paragraph a of section 595 if this chapter, as it read in its application to the taxation year 2013, were read without reference to paragraph a of the definition of “connected contributor” in the first paragraph of section 593 and paragraph a of the definition of “resident contributor” in that first paragraph, or

(iii)  is an original trust to which subparagraph iii or iv of paragraph b of subsection 11 of section 94 of the Income Tax Act (R.S.C. 1985, c. 1, (5th Suppl.)) applies; and

 (c) it is reasonable to conclude that one of the reasons the transfer or loan is made is to reduce or avoid a liability under this Part, where the liability arose, or would otherwise have arisen, because of the application of this chapter, or under Part I of the Income Tax Act, where the liability arose, or would otherwise have arisen, because of the application of section 94 of that Act.

2015, c. 36, s. 29.

597.0.10. The original trust described in section 597.0.9 is deemed to be–at and after the time of the transfer or loan referred to in that section and for the purpose of applying this chapter in respect of the transferee trust referred to in that section–a resident contributor to the transferee trust, even if the original trust has ceased to exist.

2015, c. 36, s. 29.

597.0.11. A person that is, at the time of the transfer or loan referred to in section 597.0.9, a contributor to the original trust referred to in that section, is deemed to be at and after that time, even if the person has ceased to exist,

 (a) a contributor to the transferee trust referred to in section 597.0.9; and

 (b) a connected contributor to the transferee trust, if at that time the person is a connected contributor to the original trust.

2015, c. 36, s. 29.

597.0.12. A particular property that is, or will be, at a particular time held, loaned or transferred by a particular person or partnership is not restricted property held, loaned or transferred, as the case may be, at that time by the particular person or partnership if

 (a) the particular property is property in respect of which the conditions of paragraph a of subsection 14 of section 94 of the Income Tax Act (R.S.C. 1985, c. 1, (5th Suppl.)) are met in respect of the particular person or partnership; or

 (b) at the particular time

(i)  the particular property is

(1)  a share of the capital stock of a corporation,

(2)  a fixed interest in a trust, or

(3)  an interest, as a member of a partnership, under which, by operation of any law governing the arrangement in respect of the partnership, the liability of the member as a member of the partnership is limited,

(ii)  there are at least 150 persons each of whom holds at the particular time property that at that time

(1)  is identical to the particular property, and

(2)  has a total fair market value of at least $500,

(iii)  the aggregate of all amounts each of which is the fair market value, at the particular time, of the particular property (or of identical property that is held, at that time, by the particular person or partnership or a person with whom the particular person or partnership does not deal at arm's length) does not exceed 10% of the aggregate of all amounts each of which is the fair market value, at the particular time, of the particular property or of identical property held by any person or partnership,

(iv)  property that is identical to the particular property can normally be acquired by and sold by members of the public in the open market, and

(v)  the particular property, or identical property, is listed on a designated stock exchange.

Chapter V.2 of Title II of Book I applies in relation to property identified by a particular person or partnership for the purposes of subparagraph iii of paragraph a of subsection 14 of section 94 of the Income Tax Act.

2015, c. 36, s. 29.

597.0.13. For the purposes of this chapter, the following rules apply:

 (a) if it can reasonably be considered that one of the main reasons that a person or partnership

(i)  is at any time a shareholder of a corporation is to cause the condition of paragraph b of the definition of “closely held corporation” in the first paragraph of section 593 to be satisfied in respect of the corporation, the condition is deemed not to have been satisfied at that time in respect of the corporation,

(ii)  holds at any time an interest in a trust is to cause the condition of subparagraph 1 of subparagraph ii of paragraph h of the definition of “exempt foreign trust” in the first paragraph of section 593 to be satisfied in respect of the trust, the condition is deemed not to have been satisfied at that time in respect of the trust, and

(iii)  holds at any time a property is to cause the condition of subparagraph ii of subparagraph b of the first paragraph of section 597.0.12 to be satisfied in respect of the property or an identical property held by any person, the condition is deemed not to have been satisfied at that time in respect of the property or the identical property;

 (b) where, at or before a specified time in a trust's particular taxation year, a resident contributor to the trust contributes to the trust property that is restricted property of the trust, or property for which restricted property of the trust is substituted, and the trust is at that specified time an exempt foreign trust because of paragraph f of the definition of “exempt foreign trust” in the first paragraph of section 593, the amount of the trust's income for the particular year from the restricted property, and the amount of any taxable capital gain from the disposition in the particular year by the trust of the restricted property, are to be included in computing the income of the resident contributor for its taxation year in which the particular taxation year of the trust ends and not in computing the income of the trust for that particular year; and

 (c) where at a specified time in a particular taxation year a trust is an exempt foreign trust because of paragraph h of the definition of “exempt foreign trust” in the first paragraph of section 593, at a time immediately before a particular time in the immediately following taxation year (determined without reference to section 597.0.3) there is a resident contributor to, or resident beneficiary under, the trust, at the time that is immediately before the particular time a beneficiary under the trust holds a fixed interest in the trust, and at the particular time the interest ceases to be a fixed interest in the trust, the following rules apply:

(i)  the trust is deemed, other than for the purposes of section 597.0.3, not to be an exempt foreign trust at any time in the trust's taxation year (in this section referred to as the “assessment year”) that ends, in accordance with section 597.0.3, at the time that is immediately before the particular time,

(ii)  the trust shall include in computing its income for its assessment year the amount determined by the formula


A - B - C, and


(iii)  if the trust has tax payable for its assessment year, then throughout the period that begins at the trust's balance-due day for each taxation year that ends in the interest gross-up period, within the meaning assigned by subparagraph c of the second paragraph, and ends at the trust's balance-due day for its assessment year, the trust is deemed to have unpaid tax (in addition to any unpaid tax otherwise determined in respect of the trust under that section) for the purposes of section 1037 equal to the amount determined by the formula


D/E × 25.75%.


In the formulas in the first paragraph,

 (a) A is the amount by which the aggregate of all amounts each of which is equal to the fair market value of a property held by the trust at the end of its assessment year exceeds the aggregate of all amounts each of which is equal to the principal amount outstanding at the end of the assessment year of a liability of the trust;

 (b) B is the amount by which the aggregate of all amounts each of which is equal to the fair market value of a property held by the trust at the earliest time (in this paragraph referred to as the “initial time”) at which there is a resident contributor to, or resident beneficiary under, the trust and at which the trust is an exempt foreign trust exceeds the aggregate of all amounts each of which is equal to the principal amount outstanding at the initial time of a liability of the trust;

 (c) C is the aggregate of all amounts each of which is the amount of a contribution made to the trust in the period that begins at the initial time and ends at the end of its assessment year (in this paragraph referred to as the “interest gross-up period”);

 (d) D is the amount determined in accordance with subparagraph ii of subparagraph c of the first paragraph in respect of the trust for the assessment year; and

 (e) E is the number of the trust's taxation years that end in the interest gross-up period.

2015, c. 36, s. 29.

597.0.14. Where at a specified time in respect of a trust for a taxation year of the trust (in this section referred to as the “trust's year”), there is an electing contributor in respect of the trust, the following rules apply:

 (a) the electing contributor is required to include in computing income for the contributor's taxation year (in this section referred to as the “contributor's year”) in which the trust's year ends, the amount determined by the formula


A/B (C × D);


 (b) subject to subparagraph c, the amount, if any, required to be included in the electing contributor's income, in accordance with subparagraph a, for the contributor's year is deemed to be income from property from a source in Canada;

 (c) for the purposes of this subparagraph, subparagraph d and sections 772.2 to 772.13, an amount in respect of the trust's income for the trust's year from a source in a foreign country is deemed to be income of the electing contributor for the contributor's year from that source if the amount is deemed to be such income of the contributor for the purposes of the Income Tax Act (R.S.C. 1985, c. 1, (5th Suppl.)) under paragraph c of subsection 16 of section 94 of that Act;

 (d) for the purposes of this subparagraph and sections 772.2 to 772.13, the electing contributor is deemed to have paid to the government of a foreign country or of a political subdivision of such a country, as business-income tax or non-business-income tax, as the case may be, for the contributor's year in respect of a particular source in that country, an amount equal to the amount determined by the formula


E × F/G;


 (e) in applying section 146.1 and sections 772.2 to 772.13 in respect of the trust's year there must be deducted

(i)  in computing the trust's income from a particular source for the trust's year the aggregate of all amounts each of which is an amount that, in accordance with subparagraph c, is deemed to be income from the particular source of the electing contributor for the contributor's year, and

(ii)  in computing the business-income tax or non-business-income tax paid by the trust for the trust's year in respect of a particular source the aggregate of all amounts in respect of that source each of which is an amount that, in accordance with subparagraph d, is deemed to be paid by the electing contributor as business-income tax or non-business-income tax in respect of the particular source;

 (f) in computing the trust's income for the trust's year the trust may deduct an amount that does not exceed the amount included by the electing contributor, under subparagraph a, in computing the electing contributor's income for the contributor's year; and

 (g) where before the specified time the electing contributor made a contribution to the trust as part of a series of transactions in which another person made the same contribution, in applying subparagraphs a to f in respect of the electing contributor and the other person, the other person is deemed not to be a joint contributor in respect of the contribution if the other person is deemed not to be a joint contributor in respect of that contribution for the purposes of the Income Tax Act under paragraph g of subsection 16 of section 94 of that Act.

In the formulas in the first paragraph,

 (a) A is the aggregate of all amounts each of which is

(i)  where at or before the specified time the electing contributor has made a contribution to the trust and is not a joint contributor in respect of the trust and the contribution, the amount of the contribution, or

(ii)  where at or before the specified time the electing contributor has made a contribution to the trust and is a joint contributor in respect of the trust and the contribution, the quotient obtained when the amount of the contribution is divided by the number of joint contributors in respect of the contribution;

 (b) B is the aggregate of all amounts each of which is the amount that would be determined in accordance with subparagraph a for each resident contributor, or connected contributor, to the trust at the specified time if all of those contributors were electing contributors in respect of the trust;

 (c) C is the trust's income, computed without reference to subparagraph f of the first paragraph, for the trust's year;

 (d) D is the amount deducted by the trust under sections 727 to 737 in computing its taxable income for the trust's year;

 (e) E is the amount that, in the absence of subparagraph i of subparagraph e of the first paragraph, would be the business-income tax or non-business-income tax, as the case may be, paid by the trust to the government of a foreign country or of a political subdivision of such a country in respect of the particular source referred to in subparagraph d of the first paragraph for the trust's year;

 (f) F is the aggregate of all amounts each of which is an amount deemed under subparagraph c of the first paragraph to be an income of the electing contributor for the contributor's year from the particular source referred to in subparagraph d of the first paragraph; and

 (g) G is the trust's income for the trust's year from the particular source referred to in subparagraph d of the first paragraph.

In this section, “business-income tax” and “non-business-income tax” have the meaning assigned by section 772.2.

2015, c. 36, s. 29.

597.0.15. Where, at or before a specified time in a trust's taxation year (in this section referred to as the “trust's year”), there is an electing contributor who is both a tax-liable taxpayer in respect of the trust and a joint contributor in respect of a contribution to the trust, the following rules apply:

 (a) each person who is both a joint contributor in respect of the contribution and a tax-liable taxpayer in respect of the trust has, in respect of the contribution, solidarily, the rights and obligations under Book IX of each other person (in this section referred to as the “specified person”) who is, at or before the specified time, a joint contributor in respect of the contribution and a tax-liable taxpayer in respect of the trust, for the specified person's taxation year in which the trust's year ends, and the Tax Administration Act (chapter A-6.002) applies in respect of those rights and obligations; and

 (b) the maximum amount recoverable under subparagraph a at a particular time from the person in respect of the contribution and a taxation year, of another person who is the specified person, in which the trust's year ends is the amount determined by the formula


A - B - C.


In the formula in the first paragraph,

 (a) A is the aggregate of the amounts payable by the specified person under this Part for the specified person's taxation year in which the trust's year ends;

 (b) B is the amount that would be determined in accordance with subparagraph a if the aggregate of the amounts payable by the specified person under this Part for the specified person's taxation year in which the trust's year ends were computed without reference to the contribution; and

 (c) C is the amount recovered before the particular time from the specified person, and any other joint contributor in respect of the trust and the contribution, in connection with the liability of the specified person in respect of the contribution.

2015, c. 36, s. 29.

CHAPTER VI.1 
OFFSHORE INVESTMENT FUNDS
1986, c. 15, s. 90.

597.1. In this chapter, the expression

 (a) “offshore investment fund property” of a taxpayer means a share of the capital stock of, an interest in, or a debt of, a particular foreign entity other than a controlled foreign affiliate of the taxpayer or a prescribed foreign entity or an interest in or a right or option to acquire such a share, interest or debt that may reasonably be considered to derive its value, directly or indirectly, primarily from portfolio investments of that or any other foreign entity in one or more of the assets listed in section 597.2;

 (b) “designated cost” to a taxpayer at any time in a taxation year of an offshore investment fund property that he holds or has an interest in means the amount determined in respect thereof at that time under section 597.3;

 (c) “foreign entity” at any time means a corporation that is at that time not resident in Canada, a partnership, organization, fund or entity that is at that time not resident in Canada or is not at that time situated in Canada, or an exempt foreign trust, within the meaning assigned to that expression by the first paragraph of section 593, other than a trust described in any of paragraphs a to g of the definition of that expression.

1986, c. 15, s. 90; 1997, c. 3, s. 71; 2015, c. 36, s. 30.

597.2. For the purposes of paragraph a of section 597.1, the assets referred to therein are the following:

 (a) shares of the capital stock of a corporation;

 (b) indebtedness or annuities;

 (c) interests in a fund, organization, corporation, entity, trust or partnership;

 (d) commodities;

 (e) immovable property;

 (f) Canadian of foreign resource properties;

 (g) foreign currency; and

 (h) rights or options to acquire or dispose of any of the assets listed in paragraphs a to g.

1986, c. 15, s. 90; 1997, c. 3, s. 71; 2010, c. 5, s. 52.

597.3. The amount contemplated in paragraph b of section 597.1 at any time in a taxation year in respect of an offshore investment fund property that the taxpayer holds or has an interest in is the aggregate of

 (a) the cost amount to the taxpayer of the property at that time determined without reference to paragraphs c.5 and h.1 of section 255, paragraphs b and b.1 and subparagraph i.3 of paragraph l of section 257 and Title VIII of Book VI;

 (b) where an additional amount has been made available by a person to another person after the calendar year 1984 and before that time, whether by way of gift, loan, payment for a share, transfer of property at less than its fair market value or otherwise, in circumstances such that it may reasonably be concluded that one of the main reasons for so making the additional amount available to the other person was to increase the value of the offshore investment fund property, the aggregate of all amounts each of which is the amount by which such an additional amount exceeds any increase in the cost amount to the taxpayer of the offshore investment fund property by virtue of that additional amount;

 (c) the aggregate of all amounts each of which is an amount included in respect of the offshore investment fund property by virtue of this chapter in computing the taxpayer's income for a preceding taxation year;

 (d) where the taxpayer has held or has had the interest in the property at all times since the end of the calendar year 1984, the amount by which the fair market value of the property at the end of the calendar year 1984 exceeds the cost amount to the taxpayer of the property at the end of the calendar year 1984, or, in any other case, the aggregate of

(i)  the amount by which the fair market value of the property at the time the taxpayer acquired the property exceeds the cost amount to the taxpayer of the property at that time, and

(ii)  the amount by which the aggregate of all amounts each of which is an amount that would have been included in respect of the property because of section 597.6 in computing the taxpayer’s income for a taxation year that began before 20 June 1996 if the cost to the taxpayer of the property had been equal to the fair market value of the property at the time the taxpayer acquired it exceeds the aggregate of all amounts each of which is an amount that was included in respect of the property because of section 597.6 in computing the taxpayer’s income for a taxation year that began before 20 June 1996.

Notwithstanding the foregoing, where the property is a prescribed offshore investment fund property, the amount determined under the first paragraph in respect thereof is deemed nil.

1986, c. 15, s. 90; 2001, c. 7, s. 60.

597.4. Where in a taxation year a taxpayer holds or has an interest in an offshore investment fund property and it may reasonably be concluded, taking all the circumstances into account, that one of the main reasons for the taxpayer acquiring, holding or having the interest in such property was to derive a benefit from portfolio investments in assets listed in paragraphs a to h of section 597.2 in such a manner that the taxes on the income, profits and gains from such assets for a particular year are significantly less than the tax that would have been payable under this Part if the income, profits and gains had been earned directly by the taxpayer, the amount determined under section 597.6 for that year in respect of that property is to be included in computing the taxpayer's income for the year.

1986, c. 15, s. 90; 1997, c. 3, s. 71; 2015, c. 36, s. 31.

597.5. For the purposes of section 597.4, the circumstances that must be taken into account include

 (a) the nature, organization and operation of any foreign entity and the form of, and the terms and conditions governing, the taxpayer's interest in, or connection with, any such entity;

 (b) the extent to which any income, profits and gains that may reasonably be considered to be earned or accrued, whether directly or indirectly, for the benefit of any foreign entity are subject to an income or profits tax that is significantly less than the income tax that would be applicable to such income, profits and gains if they were earned directly by the taxpayer;

 (c) the extent to which the income, profits and gains of any foreign entity for any fiscal period are distributed in that or the following fiscal period.

1986, c. 15, s. 90.

597.6. The amount to be included in computing a taxpayer's income for a taxation year under section 597.4 in respect of an offshore investment fund property is equal to the amount by which the taxpayer's income for the year from the offshore investment fund property, determined without reference to this section or to section 597.4, is exceeded by the aggregate of all amounts each of which is the product obtained when the designated cost to the taxpayer of the offshore investment fund property at the end of a particular month in the year is multiplied by the quotient obtained when the rate of interest that is the total of the rates determined in accordance with clauses A and B of subparagraph ii of paragraph f of subsection 1 of section 94.1 of the Income Tax Act (R.S.C. 1985, c. 1, (5th Suppl.)) for the period including the particular month is divided by 12.

For the purposes of subparagraph b of the first paragraph, the taxpayer's income does not include a capital gain.

1986, c. 15, s. 90; 2010, c. 31, s. 175; 2015, c. 36, s. 32.

CHAPTER VI.2 
FOREIGN COMMERCIAL TRUSTS
2015, c. 36, s. 33.

597.7. Section 597.8 applies to a beneficiary under a trust, and to a particular person of which such a beneficiary is a controlled foreign affiliate, at a particular time if

 (a) the trust is at that time an exempt foreign trust (other than a trust described in any of paragraphs a to g of the definition of “exempt foreign trust” in the first paragraph of section 593);

 (b) either

(i)  the total fair market value at that time of all fixed interests of a particular class in the trust held by the beneficiary, persons or partnerships not dealing at arm's length with the beneficiary, or persons or partnerships that acquired their interests in the trust in exchange for consideration given to the trust by the beneficiary, is at least 10% of the total fair market value at that time of all fixed interests of the particular class, or

(ii)  the beneficiary or the particular person has at or before that time contributed restricted property to the trust; and

 (c) the beneficiary is at that time a

(i)  resident beneficiary,

(ii)  mutual fund,

(iii)  controlled foreign affiliate of the particular person, or

(iv)  partnership of which a person listed in any of subparagraphs i to iii is a member.

2015, c. 36, s. 33.

597.8. If, because of section 597.7, this section applies at a particular time to a beneficiary under, or a particular person in respect of, a trust, for the purposes of sections 571 to 576.1, 578 and 579 to 583, paragraph a of section 597.1 and section 598, the following rules apply:

 (a) the trust is deemed to be at that time a corporation not resident in Canada

(i)  controlled by each of the beneficiary and the particular person, and

(ii)  having, for each particular class of fixed interests in the trust, a separate class of capital stock of 100 issued shares that have the same attributes as the interests of the particular class; and

 (b) each beneficiary under the trust is deemed to hold at that time a percentage of the number of shares of each separate class described in subparagraph ii of paragraph a equal to the percentage representing the proportion that the fair market value at that time of that beneficiary's fixed interests in the corresponding particular class of fixed interests in the trust is of the fair market value at that time of all fixed interests in the particular class.

2015, c. 36, s. 33.

597.9. For the purposes of this chapter in respect of a taxpayer for a taxation year, the fair market value of interests in a trust for the purposes of sections 597.7 and 597.8 in respect of the taxpayer for the year is deemed to be equal to the fair market value determined for the year, in respect of those interests, in accordance with subsection 4 of section 94.2 of the Income Tax Act (R.S.C. 1985, c. 1, (5th Suppl.)).

2015, c. 36, s. 33.

CHAPTER VII 
SPECIAL RULES
1975, c. 22, s. 164.

598. For the purposes of this Title, except section 577,

 (a) any person or partnership having a right under a contract or otherwise, either immediately or in the future and either absolutely or contingently, to shares of the capital stock of a corporation or interests in a partnership, is deemed to own those shares or interests, if it can reasonably be considered that the principal purpose for the existence of the right is to permit any person to avoid, reduce or defer the payment of tax or any other amount that would otherwise be payable under this Act; and

 (b) where a person or partnership acquires or disposes of shares of the capital stock of a corporation or interests in a partnership, either directly or indirectly, and it can reasonably be considered that the principal purpose for the acquisition or disposition of the shares or interests is to permit a person to avoid, reduce or defer the payment of tax or any other amount that would otherwise be payable under this Act, those shares or interests are deemed not to have been acquired or disposed of, as the case may be, and not to have been issued if the corporation or partnership had not issued them immediately prior to the acquisition.

1975, c. 22, s. 164; 1990, c. 59, s. 211; 1996, c. 39, s. 163; 1997, c. 3, s. 71; 2004, c. 8, s. 124.

598.1. For the purposes of this Part, an individual resident in Québec who is a shareholder of a corporation described in the second paragraph may agree, with the approval in writing of the Minister and subject to the terms and conditions set out in the approval, to apply the following rules for the period during which the agreement is effective:

 (a) the corporation is deemed to be a controlled foreign affiliate of the individual;

 (b) the income of the corporation is deemed to be foreign accrual property income of a controlled foreign affiliate of the individual;

 (c) for the purposes of section 146, the portion of the income that is included in computing the individual's income for a taxation year is deemed not to be income from a property; and

 (d) the individual shall not include any amount in computing the individual's income in respect of a dividend paid to the individual on a share of the capital stock of the corporation and shall deduct the amount of the dividend in computing the adjusted cost base to the individual of the share.

The corporation to which the first paragraph refers is an S corporation within the meaning of the United States Internal Revenue Code of 1986, as amended from time to time.

2000, c. 39, s. 36; 2009, c. 15, s. 92.

TITLE XI 
PARTNERSHIPS AND THEIR MEMBERS
1972, c. 23; 1997, c. 3, s. 71.

CHAPTER I 
GENERALITIES
1972, c. 23.

599. For the purposes of this Title, the expression Canadian partnership means a partnership all the members of which, at any time when the expression applies, are resident in Canada.

Moreover, a reference to a member of a particular partnership or a reference to a person or a taxpayer who is a member of a particular partnership shall include a reference to another partnership that is a member of the particular partnership.

1972, c. 23, s. 454; 1988, c. 18, s. 49; 1997, c. 3, s. 71.

600. Each member of a partnership shall compute, for a taxation year, his income, non-capital loss, net capital loss, restricted farm loss, farm loss or taxable income earned in Canada, as the case may be, as if each of the following hypotheses governing the interpretation of the provisions of this Title applied:

 (a) the partnership is a separate person resident in Canada;

 (b) the taxation year of the partnership is its fiscal period;

 (c) the partnership carries on as a separate person each of its activities, including the ownership of property and for each of its taxation years, computes the amount of:

(i)  each taxable capital gain and allowable capital loss from the disposition of property, and

(ii)  each income and loss of the partnership from each other source in Canada or from sources in another place;

 (d) in computing each income or loss of the partnership for a taxation year, no account shall be taken of paragraph z.4 of section 87, sections 145 and 217.2 to 217.9.1, 217.18 to 217.34, paragraphs a, d, e and e.1 of section 330 and section 418.12, and no deduction is permitted under section 88.4 of the Act respecting the application of the Taxation Act (chapter I-4), section 217.13, the first paragraph of section 360 or sections 362 to 418.12;

 (e) each gain of the partnership from the disposition of land used in a farming business of the partnership is computed without reference to paragraph l of section 255;

 (e.1) the amount by which the aggregate of all amounts determined under sections 222 to 224 in respect of the partnership at the end of a taxation year exceeds the aggregate of all amounts determined under section 225 in respect of the partnership at the end of the year was deducted under the said sections in computing the income of the partnership for the year;

 (f) subject to section 600.0.1, the income of the partnership, for a taxation year, from any source in Canada or from sources in another place is, to the extent of the taxpayer's share thereof, his income for his taxation year during which the taxation year of the partnership ends, from such source in Canada or sources situated in such other place, as the case may be; and

 (g) subject to section 600.0.1, the amount by which the loss of the partnership for a taxation year from any source in Canada or from sources in another place exceeds, in the case of a taxpayer who would be a specified member of the partnership in the year if the definition of specified member in section 1 were read without reference to paragraph b thereof, the amount deducted by the partnership under sections 222 to 230 in computing its income for the taxation year from that source or those sources, as the case may be, and, in any other case, nil, is the loss of the taxpayer from such source in Canada or sources situated in such other place, as the case may be, for the taxation year of the taxpayer in which the partnership's taxation year ends, to the extent of the taxpayer's share thereof.

1972, c. 23, s. 455; 1975, c. 22, s. 165; 1978, c. 26, s. 106; 1980, c. 11, s. 54; 1982, c. 5, s. 129; 1985, c. 25, s. 104; 1986, c. 19, s. 130; 1989, c. 5, s. 73; 1989, c. 77, s. 67; 1994, c. 22, s. 211; 1997, c. 3, s. 71; 1997, c. 31, s. 55; 1998, c. 16, s. 175; 2000, c. 5, s. 293; 2004, c. 8, s. 125; 2013, c. 10, s. 36.

600.0.1. Except for the purposes of Chapter II.1 of this Title, paragraph i of section 255 and paragraph l of section 257, where, in a particular taxation year, an individual is a member of a particular partnership and the particular partnership deducted, in computing its income for its taxation year ending in the particular taxation year, an amount under paragraph a of section 130 or the second paragraph of section 130.1 in respect of a certified Québec film, within the meaning of the regulations under the said section 130, or another partnership deducted, in the same respect, an amount under one of the said paragraphs which may reasonably be considered to have contributed to the creation or increase of the individual's share of the loss of the particular partnership which, but for this section, would be determined for the particular taxation year, or to the reduction or cancellation of the individual's share of the income of the particular partnership which, but for this section, would be determined for the particular taxation year, the following rules apply:

 (a) where the individual would, but for this section, have a share of the income of the particular partnership for the particular taxation year, that share is deemed, notwithstanding paragraph f of section 600, to be equal to the aggregate of his share of the income of the particular partnership for the particular taxation year which, but for this section, would be determined in the said paragraph f of his share of the amount so deducted by the particular partnership in computing its income for the particular taxation year pursuant to the said paragraph a of section 130 or the said second paragraph of section 130.1 and, as the case may be, of the amount so deducted by the other partnership pursuant to the said paragraph a of section 130 or the said second paragraph of section 130.1 to the extent that it may reasonably be considered that the deduction of that amount by the other partnership contributed to the reduction of that share of the income of the particular partnership for the particular taxation year which, but for this section, would have been determined in the said paragraph f,

 (b) where the individual would, but for this section, have a share of the loss of the particular partnership for the particular taxation year, that share is deemed, notwithstanding paragraph g of section 600, to be equal to the amount by which his share of the loss of the particular partnership for the particular taxation year which, but for this section, would be determined in the said paragraph g exceeds the lesser of

(i)  the aggregate of his share of the amount so deducted by the particular partnership, in computing its income for that taxation year, pursuant to the said paragraph a of section 130 or the said second paragraph of section 130.1 and, as the case may be, of the amount so deducted by the other partnership pursuant to the said paragraph a of section 130 or the said second paragraph of section 130.1 to the extent that it may reasonably be considered that the deduction of that amount by the other partnership contributed to the creation or increase of that share of the loss of the particular partnership for the particular taxation year which, but for this section, would have been determined in the said paragraph g; and

(ii)  his share of the loss of the particular partnership for the particular taxation year which, but for this section, would be determined in paragraph g of section 600;

 (c) where the amount determined in subparagraph i of paragraph b for the particular year exceeds the amount referred to in subparagraph ii of the said paragraph for the same year, the excess amount is deemed to constitute the individual's share of the income of the particular partnership for the particular taxation year;

 (d) where, for the particular taxation year, the individual would, but for this section, have neither a share of the income of the particular partnership nor a share of the loss of the particular partnership, he is deemed to have a share of the income of the particular partnership for the particular taxation year in an amount equal to the aggregate of his share of the amount so deducted by the particular partnership, in computing its income for that taxation year, pursuant to the said paragraph a of section 130 or the said second paragraph of section 130.1 and, as the case may be, of the amount so deducted by the other partnership under the said paragraph a of section 130 or the said second paragraph of section 130.1 to the extent that it may reasonably be considered that the deduction of that amount by the other partnership contributed to the cancellation of the individual's share of the income of the particular partnership for the particular taxation year which, but for this section, would otherwise have been determined in paragraph f of section 600.

1989, c. 5, s. 74; 1990, c. 7, s. 19; 1997, c. 3, s. 71.

600.0.2. An individual's share of the loss of a partnership, determined pursuant to section 600.0.1 for a fiscal period of the partnership at the end of which the individual was a member of the partnership, in this section referred to as corrected loss, shall not however exceed the proportion of at-risk amount of the individual in respect of the partnership at that date, within the meaning of sections 613.2 to 613.5, that his share of the corrected loss of the partnership which, but for this section, would be so determined under section 600.0.1 is of his share of the corrected loss of the partnership which, but for this section and section 600.0.1, would be determined under paragraph g of section 600.

1989, c. 5, s. 74; 1997, c. 3, s. 71.

600.0.3. Notwithstanding sections 231, 231.2 and 600, where, 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 taxable capital gain, other than that part of the gain that can reasonably be attributed to an amount deemed under section 105.3 to be a taxable capital gain of the partnership, allowable capital loss or allowable business investment loss of the taxpayer for the particular year in respect of the partnership is determined by the formula


A × B / C.


In the formula provided for in the first paragraph,

 (a) A is the taxpayer’s taxable capital gain, other than that part of the gain that can reasonably be attributed to an amount deemed under section 105.3 to be a taxable capital gain of the partnership, allowable capital loss or allowable business investment loss, as the case may be, for the particular year, in respect of the partnership that would, but for this section, be determined under section 600;

 (b) B is the fraction that applies under section 231 or 231.2, as the case may be, for the particular year in respect of the taxpayer; and

 (c) C is the fraction that is used under any of sections 231 and 231.2 for the fiscal period of the partnership.

1990, c. 59, s. 212; 1997, c. 3, s. 71; 2003, c. 2, s. 137; 2004, c. 8, s. 126.

600.0.4. For the purposes of section 600.0.3, where the fraction referred to in subparagraph c of the second paragraph of that section cannot be determined by a taxpayer in respect of a fiscal period of a partnership that ended before 28 February 2000, or includes 28 February 2000 or 17 October 2000, the fraction is deemed to be

 (a) where the fiscal period ended before or began before 28 February 2000, 3/4;

 (b) where the fiscal period began after 27 February 2000 but before 18 October 2000, 2/3; and

 (c) in any other case, 1/2.

2003, c. 2, s. 138.

600.1. Subject to section 600.2, the share of a member of a partnership of any amount that would be an amount referred to in paragraph e of section 398, paragraph b or e of section 399, paragraph d of section 411, subparagraph i of paragraph b or paragraph c or h of section 412, paragraph d of section 418.5 or subparagraph i of paragraph b or paragraph c or e of section 418.6, in respect of the partnership for a taxation year of the partnership, but for paragraph d of section 600, is deemed to be an amount referred to in paragraph e of section 398, paragraph b or e of section 399, paragraph d of section 411, subparagraph of paragraph b or paragraph c or h of section 412, paragraph d of section 418.5 or subparagraph i of paragraph b or paragraph c or e of section 418.6, as the case may be, in respect of the member for the taxation year of the member in which the taxation year of the partnership ends.

1978, c. 26, s. 107; 1982, c. 5, s. 130; 1993, c. 16, s. 237; 1997, c. 3, s. 71.

600.2. However, where a person not resident in Canada is a member of a partnership that is deemed under section 1096.2 to have disposed of a property, the deemed amount in respect of the person under section 600.1 respecting section 411, 412, 418.5 or 418.6, as the case may be, is then so deemed for his taxation year that ended at the particular time referred to in section 1096.1.

1982, c. 5, s. 130; 1986, c. 19, s. 131; 1993, c. 16, s. 237; 1997, c. 3, s. 71; 2009, c. 5, s. 188.

601. If an individual who is a member of a partnership immediately before its dissolution, or who is a member of a partnership that, but for section 618, would have been dissolved at a particular time, makes a valid election under subsection 2 of section 99 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) after 19 December 2006 in relation to a fiscal period of the partnership that is referred to in the third or fourth paragraph of section 7, the partnership's fiscal period is deemed, for the purpose of computing the individual's income, to have ended immediately before the time it would normally have ended if the partnership had continued to exist.

Chapter V.2 of Title II of Book I applies in relation to an election made under subsection 2 of section 99 of the Income Tax Act.

1972, c. 23, s. 456; 1978, c. 26, s. 108; 1996, c. 39, s. 164; 1997, c. 3, s. 71; 1997, c. 31, s. 56; 2009, c. 5, s. 189.

602. (Repealed).

1972, c. 23, s. 457; 1973, c. 17, s. 67; 1997, c. 3, s. 71; 2009, c. 5, s. 190.

602.1. If, at any time in a fiscal period of a partnership, a taxpayer ceases to be a member of the partnership, the following rules apply:

 (a) for the purposes of subparagraph b of the second paragraph of section 7, sections 217.2 to 217.9.1, 600, 607, 634 and 635 and despite section 643, the taxpayer is deemed to be a member of the partnership at the end of the fiscal period; and

 (b) for the purpose of applying subparagraphs i and viii of paragraph i of section 255, subparagraph i of paragraph l of section 257, section 261.2 and the second paragraph of section 613.1 to the taxpayer, the fiscal period of the partnership is deemed to end

(i)  immediately before the time at which the taxpayer is deemed under section 436 to have disposed of the interest in the partnership, if the taxpayer ceased to be a member of the partnership because of the taxpayer's death, and

(ii)  immediately before the time that is immediately before the time that the taxpayer ceased to be a member of the partnership, in any other case.

2009, c. 5, s. 191; 2015, c. 21, s. 207.

603. If a taxpayer who was a member of a partnership during a fiscal period has, for the purpose of computing the taxpayer's income from the partnership for the fiscal period, entered into an agreement or made an election, a designation or a specification under the regulations made under section 104, under any of sections 96, 105.2.1, 105.2.2, 119.15, 156, 180 to 182, 230, 279, 280.3, 299, 485.6, 485.9 to 485.11, 485.42 to 485.52, 614, 832.23 and 832.24 or, because of subparagraph a of the second paragraph of section 614, under the first paragraph of section 522, that, but for this section, would be a valid agreement, designation, specification or election, as the case may be, the following rules apply:

 (a) the agreement, designation, specification or election is not valid unless it was entered into or made on behalf of the taxpayer and each other member of the partnership during the fiscal period and the taxpayer had authority to act for the partnership;

 (b) if the agreement, designation, specification or election is valid under paragraph a, each other member of the partnership during the fiscal period is deemed to have entered into the agreement or made the designation, specification or election, as the case may be; and

 (c) despite paragraph a, any agreement, designation, specification or election deemed to have been entered into or made, as the case may be, by a member under paragraph b is deemed to be a valid agreement, designation, specification or election entered into or made by that member.

1973, c. 17, s. 68; 1975, c. 22, s. 166; 1982, c. 5, s. 131; 1986, c. 19, s. 132; 1993, c. 16, s. 238; 1994, c. 22, s. 212; 1995, c. 1, s. 47; 1996, c. 39, s. 165; 1997, c. 3, s. 71; 1997, c. 31, s. 57; 1997, c. 85, s. 96; 2001, c. 7, s. 61; 2001, c. 53, s. 86; 2003, c. 9, s. 39; 2009, c. 5, s. 192; 2009, c. 15, s. 93.

603.1. If a SIFT partnership becomes liable to pay the tax provided for in Part III.17 for a taxation year, the following rules apply:

 (a) paragraph f of section 600 is to be read as if “the income of the partnership, for a taxation year, from any source in Canada or from sources in another place” was replaced by “the amount by which the partnership's income for a taxation year from any source in Canada or from sources in another place exceeds, the portion, determined in respect of each such source, of the partnership's taxable non-portfolio earnings for the year that is applicable to that source”; and

 (b) the SIFT partnership is deemed to have received a dividend in the taxation year from a taxable Canadian corporation equal to the amount by which the amount of the SIFT partnership's taxable non-portfolio earnings for the taxation year exceeds the amount determined by the formula


A × (B + C).


In the formula in the first paragraph,

 (a) A is the amount of the SIFT partnership's taxable non-portfolio earnings for the taxation year;

 (b) B is the basic rate determined in respect of the SIFT partnership for the taxation year under the third paragraph of section 1129.71 or, if the SIFT partnership has an establishment outside Québec in the year, the aggregate of the following rates:

(i)  that basic rate represented by the proportion that its business carried on in Québec is of the aggregate of its business carried on in Canada or in Québec and elsewhere, as that proportion would be determined under Chapters I and II of Title XXVII of the Regulation respecting the Taxation Act (chapter I-3, r. 1) if the SIFT partnership were a corporation, and

(ii)  the provincial SIFT tax rate, within the meaning assigned by subsection 1 of section 248 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) and expressed as a percentage, that would be applicable to the SIFT partnership for the year if that definition applied in respect of the SIFT partnership for that year and if section 414 of the Income Tax Regulations made under that Act were read without reference to its subsection 4; and

 (c) C is the net corporate income tax rate, within the meaning assigned by subsection 1 of section 248 of the Income Tax Act and expressed as a percentage, that is applicable to the SIFT partnership for the taxation year.

For the purposes of this section, “taxable non-portfolio earnings” of a SIFT partnership has the meaning assigned by section 1129.70.

2009, c. 5, s. 193; 2009, c. 15, s. 94.

604. (Repealed).

1975, c. 22, s. 167; 1997, c. 85, s. 97.

605. (Repealed).

1975, c. 22, s. 167; 1977, c. 26, s. 65; 1986, c. 15, s. 91; 1995, c. 63, s. 261; 1997, c. 3, s. 71; 1997, c. 14, s. 93; 1997, c. 85, s. 97.

605.1. For the purposes of this Part, where at a particular time a person resident in Canada becomes a member of a partnership, or a person who is a member of a partnership becomes resident in Canada, and immediately before the particular time no member of the partnership is resident in Canada, the following rules apply for the purpose of computing the partnership's income for fiscal periods ending after the particular time:

 (a) where, at or before the particular time, the partnership held depreciable property of a prescribed class, other than taxable Canadian property,

(i)  no amount shall be included in determining the amounts under subparagraphs i, ii.1 and ii.2 of subparagraph e of the first paragraph of section 93 and under subparagraphs c to f of the second paragraph of that section in respect of the acquisition or disposition before the particular time of the property, and

(ii)  where the property is the partnership's property at the particular time, the property is deemed to have been acquired, immediately after the particular time, by the partnership at a capital cost equal to the lesser of its fair market value and its capital cost to the partnership otherwise determined;

 (b) in the case of the partnership's property that is inventory, other than inventory of a business carried on in Canada, or non-depreciable capital property, other than taxable Canadian property, of the partnership at the particular time, its cost to the partnership is deemed to be, immediately after the particular time, equal to the lesser of its fair market value and its cost to the partnership otherwise determined;

 (c) any loss in respect of the disposition of a property, other than inventory of a business carried on in Canada or taxable Canadian property, by the partnership before the particular time is deemed to be nil; and

 (d) where 4/3 of the eligible incorporeal capital amount in respect of a business carried on at the particular time outside Canada by the partnership exceeds the total of the fair market value of each incorporeal capital property in respect of the business at that time, the partnership is deemed to have, immediately after that time, disposed of incorporeal capital property in respect of the business for proceeds equal to the excess and to have received those proceeds.

1995, c. 49, s. 149; 1997, c. 3, s. 71; 2001, c. 53, s. 87; 2005, c. 1, s. 121.

605.2. For the purposes of section 605.1 and this section,

 (a) where it can reasonably be considered that one of the main reasons that a member of a partnership is resident in Canada is to avoid the application of section 605.1, the member is deemed not to be resident in Canada; and

 (b) where at any time a particular partnership is a member of another partnership, the following rules apply:

(i)  each person or partnership that is, at that time, a member of the particular partnership is deemed to be a member of the other partnership at that time,

(ii)  each person or partnership that becomes a member of the particular partnership at that time is deemed to become a member of the other partnership at that time, and

(iii)  each person or partnership that ceases to be a member of the particular partnership at that time is deemed to cease to be a member of the other partnership at that time.

1995, c. 49, s. 149; 1997, c. 3, s. 71; 2015, c. 21, s. 208.

CHAPTER II 
SHARING AGREEMENTS
1972, c. 23.

606. Section 607 applies where there is an agreement among the members of a partnership to share, according to an agreed proportion, any income or loss of the partnership from or arising out of any source in Canada or from sources in another place or any amount in respect of any activity of the partnership that is relevant to the computation of the income or taxable income of such members.

1972, c. 23, s. 458; 1975, c. 22, s. 168; 1997, c. 3, s. 71; 2009, c. 5, s. 194.

607.  (1) Where the principal purpose for an agreement contemplated in section 606 may reasonably be considered to be the reduction of the tax that might otherwise be or become payable under this Part of the postponement of such payment, the share of each member in the income, loss or amount that is the object of that agreement shall be the amount that is reasonable, having regard to all the circumstances including the proportions in which the members have agreed to share profits and losses from other sources in Canada or from sources in another place.

 (1.1) Where an agreement described in section 606 is entered into between members of a partnership not dealing with each other at arm's length, the share of each member in the income, loss or amount that is the object of that agreement is the amount that is reasonable, having regard to the work performed for the partnership by its members, the capital invested therein by them or any other relevant factor.

 (2) For the purposes of this chapter, the word losses when used in the expression profits and losses means losses determined without reference to the other provisions of this Part.

1972, c. 23, s. 459; 1982, c. 5, s. 132; 1997, c. 3, s. 71.

608. For the purposes of sections 7 to 7.0.6, 217.2 to 217.34, 600, 607, 634 and 635, where the principal activity of a partnership is carrying on a business in Canada and its members have entered into an agreement to allocate a share of the income or loss of the partnership from any source in Canada or from sources in another place to any person described in section 609, that person is deemed to be a member of the partnership and the amount so allocated for a particular fiscal period of the partnership must be included in computing the person's income for the taxation year in which that fiscal period of the partnership ends.

1975, c. 22, s. 169; 1997, c. 3, s. 71; 1997, c. 31, s. 58; 2000, c. 5, s. 293; 2013, c. 10, s. 37.

609. The person to whom section 608 applies is:

 (a) a taxpayer who at any time ceased to be a member of the partnership described therein or of any other partnership that has been dissolved at any time, or would, but for section 618, have been dissolved, where the members thereof or the members of a third partnership in which a member of such other partnership became a member immediately after the other partnership was dissolved, have entered into an agreement described in section 608 in favour of the taxpayer or of any person described in paragraph b; and

 (b) the spouse, succession or legatee by particular title of the taxpayer referred to in paragraph a or a person referred to in section 611.

1975, c. 22, s. 169; 1997, c. 3, s. 71; 1998, c. 16, s. 251; 2000, c. 5, s. 134.

610. A taxpayer who, in a taxation year, disposes of a right to a share of the income or loss of a partnership under an agreement referred to in section 608 shall include in computing his income for the year the proceeds of the disposition and he is deemed to have acquired each property received as consideration for its fair market value at the time of such disposition.

1975, c. 22, s. 169; 1997, c. 3, s. 71.

611. A taxpayer who has included an amount in computing his income for the year by virtue of section 608 or 610 may deduct for the year the lesser of such amount and the amount by which the cost to him of the right to a share of the income or loss of a partnership under an agreement referred to in section 608 exceeds the aggregate of the amounts in respect of that right that were deductible by virtue of this section in computing his income for previous taxation years.

1975, c. 22, s. 169; 1997, c. 3, s. 71.

612. For the purposes of this Part, a right to a share of the income or loss of a partnership under an agreement referred to in section 608 is deemed not to be capital property and sections 429 and 430 apply with respect to such a right that a taxpayer had at his death.

1975, c. 22, s. 169; 1997, c. 3, s. 71.

612.1. Where a partnership carries on a business in Québec at any time during a taxation year, each taxpayer who is deemed to be a member of the partnership under section 608 is deemed, for the purposes of section 25, to carry on that business in Québec at any time during the year.

1994, c. 22, s. 213; 1997, c. 3, s. 71.

613. Where a partnership carries on a business in Canada at any time, each taxpayer who is deemed under section 608 to be a member of the partnership at that time is deemed, for the purposes of sections 26 and 1000 to 1003 and of Divisions VIII.1 and VIII.3 of Chapter V of Title III, subject to section 217.34, to carry on that business in Canada at that time.

1975, c. 22, s. 169; 1997, c. 3, s. 71; 1997, c. 31, s. 59; 2000, c. 5, s. 135; 2015, c. 24, s. 90.

CHAPTER II.1 
TAXPAYER'S AT-RISK AMOUNT
1988, c. 4, s. 40.

613.1. Notwithstanding section 600, where a taxpayer is, at any time in a taxation year, a limited partner of a partnership, the amount, if any, by which the aggregate of all amounts each of which is his share of the amount of any loss of the partnership for a fiscal period of the partnership ending in the taxation year from a business, other than a farming business, or from property, computed pursuant to section 600, exceeds the amount determined under the second paragraph shall not be deducted in computing his income for the year, shall not be included in computing his non-capital loss for the year, and shall be deemed to be his limited partnership loss in respect of the partnership for the year.

The amount referred to in the first paragraph is the amount, if any, by which the at-risk amount of the taxpayer in respect of the partnership at the end of its fiscal period exceeds the aggregate of

 (a) the amount required by subsection 8 of section 127 of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement) in respect of the partnership to be added in the year in computing the investment tax credit of the taxpayer for the year within the meaning assigned to that expression by the said Act for the purposes of the said subsection;

 (b) the taxpayer's share of any losses of the partnership for the fiscal period from a farming business; and

 (c) the taxpayer's share of the foreign resource pool expenses, Canadian exploration expense, Canadian development expense and Canadian oil and gas property expense incurred by the partnership in the fiscal period.

1988, c. 4, s. 40; 1989, c. 5, s. 75; 1997, c. 3, s. 71; 2004, c. 8, s. 127.

613.2. For the purposes of sections 600, 603 to 605.2, 608 to 613.10 and 727 to 737, the at-risk amount of a taxpayer, in respect of a partnership of which the taxpayer is a limited partner, at any particular time is the amount by which the aggregate of the following amounts exceeds the amount determined under section 613.3:

 (a) the adjusted cost base to the taxpayer of his partnership interest at that time, computed in accordance with section 613.5, where applicable;

 (b) where the particular time is the end of the fiscal period of the partnership, the aggregate of

(i)  the taxpayer's share of the income of the partnership from a particular source for that fiscal period, computed under the method described in subparagraph i of paragraph i of section 255, and

(ii)  the amount referred to in subparagraph viii of paragraph i of section 255 in respect of the taxpayer for that fiscal period.

1988, c. 4, s. 40; 1990, c. 59, s. 213; 1997, c. 3, s. 71; 2001, c. 7, s. 62.

613.3. The amount referred to in section 613.2 is equal to the aggregate of the following amounts:

 (a) the aggregate of all amounts each of which is an amount owing at the particular time to the partnership, or to a person or partnership not dealing at arm’s length with the partnership, by the taxpayer or by a person or partnership not dealing at arm’s length with the taxpayer, other than any amount deducted under subparagraph i.3 of paragraph l of section 257 in computing the adjusted cost base, or under Title VIII of Book VI in computing the cost, to the taxpayer of the taxpayer’s partnership interest at that time; and

 (b) any amount or benefit that the taxpayer or a person not dealing at arm’s length with the taxpayer is entitled, either immediately or in the future and either absolutely or contingently, to receive or to obtain, whether by way of reimbursement, compensation, revenue guarantee, proceeds of disposition, loan or any other form of indebtedness, or in any other form or manner whatever, granted or to be granted for the purpose of reducing the impact, in whole or in part, of any loss that the taxpayer may sustain because the taxpayer is a member of the partnership or holds or disposes of an interest in the partnership, except to the extent that the amount or benefit is referred to in paragraph e of section 399, paragraph h of section 412 or paragraph e of section 418.6 in respect of the taxpayer, or the entitlement arises

(i)  by virtue of a contract of insurance with an insurance corporation dealing at arm's length with each member of the partnership under which the taxpayer is insured against any claim arising as a result of a liability incurred in the ordinary course of carrying on the partnership business;

(ii)  (subparagraph repealed);

(iii)  as a consequence of the death of the taxpayer;

(iv)  (subparagraph repealed);

(v)  (subparagraph repealed);

(vi)  in respect of an amount not included in the at-risk amount of the taxpayer in respect of the partnership determined without reference to this paragraph; or

(vii)  by reason of an excluded obligation, within the meaning of the regulations made under section 359.1, in relation to a share issued to the partnership by a corporation.

1988, c. 4, s. 40; 1988, c. 18, s. 50; 1993, c. 16, s. 239; 1995, c. 63, s. 46; 1996, c. 39, s. 166; 1997, c. 3, s. 71; 1997, c. 31, s. 60; 2001, c. 7, s. 63.

613.4. For the purposes of sections 613.2 and 613.3,

 (a) the amount or benefit to which the taxpayer referred to in section 613.2, or a person not dealing at arm’s length with the taxpayer, is at any time entitled and that is provided by way of an agreement or other arrangement under which the taxpayer or the person has a right, either immediately or in the future and either absolutely or contingently, otherwise than as a consequence of the death of the taxpayer, to acquire other property in exchange for all or any part of the taxpayer’s interest in the partnership referred to in that section shall not be considered to be less than the fair market value of the other property at that time; and

 (b) the amount or benefit to which the taxpayer or the person is at any time entitled and that is provided by way of a guarantee, security or similar covenant in respect of any loan or other obligation of the taxpayer or the person shall not be considered to be less than the aggregate of the unpaid amount of the loan or obligation at that time and all other amounts outstanding in respect of the loan or obligation at that time.

1988, c. 4, s. 40; 1997, c. 3, s. 71; 2001, c. 7, s. 64.

613.5. For the purposes of sections 613.2 to 613.4, where a taxpayer has acquired his partnership interest at any time from a transferor other than the partnership, the adjusted cost base to the taxpayer of that interest shall be computed as if the cost to him of the interest were the lesser of

 (a) his cost otherwise determined, and

 (b) the greater of the adjusted cost base of that interest to the transferor immediately before that time, and nil.

Notwithstanding the foregoing, where the adjusted cost base to the transferor cannot be determined, it is deemed to be equal to the aggregate of the amounts determined in respect of the taxpayer under paragraphs a and b of section 613.3 immediately after that time.

1988, c. 4, s. 40; 1997, c. 3, s. 71.

613.6. For the purposes of sections 600, 603 to 605.2, 608 to 613.10 and 727 to 737, a taxpayer who is a member of a partnership at a particular time is a limited partner of the partnership at that time if the member’s partnership interest is not an exempt interest, within the meaning assigned by section 613.7, at that time and if, at that time or within three years after that time,

 (a) by operation of any law governing the partnership arrangement, the liability of the member as a member of the partnership is limited, except by operation of a provision of a statute of Canada or a province that limits the member’s liability only for debts and other obligations of the partnership, or any member of the partnership, arising from the misconduct or faults or omissions or negligent acts that another member of the partnership or an employee, agent or mandatary, or representative of that member or of the partnership commits in the course of the partnership’s business while the partnership is a limited liability partnership referred to in that provision;

 (b) the member or a person not dealing at arm’s length with the member is entitled, either immediately or in the future and either absolutely or contingently, to receive an amount or to obtain a benefit that would be described in paragraph b of section 613.3 if that paragraph were read without reference to subparagraphs ii, as it applies before being struck out, and vi thereof;

 (c) where the member who owns the interest is a corporation, partnership or trust, one of the reasons for the existence of the member can reasonably be considered to be to limit the liability of any person with respect to that interest, and cannot reasonably be considered to be to permit any person who has an interest in the corporation, partnership or trust, as the case may be, to carry on that person’s business, other than an investment business, in the most effective manner; or

 (d) one of the main reasons for the existence of an agreement or other arrangement for the disposition of an interest in the partnership can reasonably be considered to be to attempt to avoid the application of this section to the member.

1988, c. 4, s. 40; 1997, c. 3, s. 71; 2001, c. 7, s. 65; 2003, c. 2, s. 139.

613.7. For the purposes of section 613.6, an exempt interest in a partnership at any time means a prescribed partnership interest or an interest in a partnership that was actively carrying on business on a regular and a continuous basis immediately before 26 February 1986 and continuously thereafter until that time or that was earning income from the rental or leasing of property immediately before 26 February 1986 and continuously thereafter until that time, where there has not after 25 February 1986 and before that time been a substantial contribution of capital to the partnership or a substantial increase in the indebtedness of the partnership and, for this purpose, an amount will not be considered to be substantial where

 (a) the amount was used by the partnership to make an expenditure required to be made pursuant to the terms of a written agreement entered into by it before 26 February 1986, or to repay a loan, debt or contribution of capital that had been received or incurred in respect of any such expenditure;

 (b) the amount was raised pursuant to the terms of a final prospectus, preliminary prospectus or registration statement filed before 26 February 1986 with a public authority in Canada pursuant to and in accordance with the securities legislation of Canada or of any province, and, where required by law, accepted for filing by such public authority; or

 (c) the amount was used for the activity that was carried on by the partnership on 25 February 1986 but was not used for a significant expansion of the activity.

1988, c. 4, s. 40; 1997, c. 3, s. 71; 2001, c. 53, s. 88.

613.8. For the purposes of section 613.7, the following rules apply:

 (a) a partnership in respect of which paragraph b of section 613.7 applies shall be considered to have been actively carrying on a business on a regular and a continuous basis immediately before 26 February 1986 and continuously thereafter until the earlier of the closing date, if any, stipulated in the document referred to in paragraph b of section 613.7, and 1 January 1987; and

 (b) an expenditure shall not be considered to have been required to be made pursuant to the terms of an agreement where the obligation to make the expenditure is conditional in any way on the consequences under this Part relating to the expenditure and the condition has not been satisfied or waived before 12 June 1986.

1988, c. 4, s. 40; 1997, c. 3, s. 71.

613.9. For the purposes of paragraph a of section 613.3, where at any time an amount owing by a taxpayer or a person with whom the taxpayer does not deal at arm's length is repaid and it is established, by subsequent events or otherwise, that the repayment was made as part of a series of loans or other transactions and repayments, the amount owing is deemed not to have been repaid.

1988, c. 4, s. 40.

613.10. For the purposes of paragraph a of section 613.2, where at any time a taxpayer makes a contribution of capital to a partnership and the partnership or a person or partnership with whom the partnership does not deal at arm's length makes a loan to the taxpayer or to a person with whom the taxpayer does not deal at arm's length or repays the contribution of capital, and it is established, by subsequent events or otherwise, that the loan or repayment, as the case may be, was made as part of a series of loans or other transactions and repayments, the contribution of capital is deemed not to have been made to the extent of the loan or repayment, as the case may be.

1988, c. 4, s. 40; 1997, c. 3, s. 71.

CHAPTER III 
CONTRIBUTION OF PROPERTY
1972, c. 23.

614. Where at a particular time after 1971 a partnership acquires property from a taxpayer who is, immediately after such acquisition, a member of the partnership, it is deemed to acquire it at its fair market value at that time and the member is deemed to dispose of it for proceeds equal to such value.

Despite any other provision of this Part, other than section 93.3.1 and the third paragraph, where a taxpayer disposes of any property that is a capital property, Canadian resource property, foreign resource property, incorporeal capital property or inventory to a partnership that, immediately after the disposition, is a Canadian partnership of which the taxpayer is a member, and the taxpayer and all the other members of the partnership make a valid election for the purposes of subsection 2 of section 97 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) in respect of the disposition or, where that election cannot be made because of subsection 21.2 of section 13 of that Act, make an election, in the prescribed form referred to in the first paragraph of section 520.1, the following rules apply:

 (a) sections 520.1, 520.2, 521.2, 522 and 523 to 526 and paragraph a of section 528 apply in respect of the disposition as if the references therein to section 518 were references to this paragraph, and replacing therein

(i)  except in section 525.1, the words “and the corporation” and “and by the corporation” respectively by the words “and all the other members of the partnership” and “and by all the other members of the partnership”,

(ii)  the words “a share of the capital stock of the corporation” and “a right to receive any such share” respectively by the words “an interest in the partnership” and “a right to receive any such interest”,

(iii)  the words “shareholder of the corporation” by the words “member of the partnership”,

(iv)  except in the second paragraph of section 522 and in section 526, any other occurrence of the word corporation by the word partnership, and

(v)  in the portion of subparagraph a of the third paragraph of section 520.1 before subparagraph i, the words “the taxation year which, of the taxation years of those persons, ends the latest” by the words “that taxation year of the taxpayer or the fiscal period of the partnership in which the disposition was made, whichever year or period in the latter case ends later”;

 (a.1) (subparagraph repealed);

 (b) in computing, after the disposition, the adjusted cost base of the taxpayer's interest in the partnership immediately after the disposition, the taxpayer shall

(i)  add the amount by which the taxpayer's proceeds of disposition of the property exceed the fair market value at the time of the disposition, of the consideration other than an interest in the partnership, received by the taxpayer for the property, and

(ii)  deduct the amount by which the fair market value, at the time of the disposition, of the consideration other than an interest in the partnership, received by the taxpayer for the property exceeds the fair market value of the property at that time; and

 (c) where the taxpayer so disposes of any taxable Canadian property or any taxable Québec property as consideration for an interest in the partnership, the interest is deemed to be also, at any time that is within 60 months after the disposition, a taxable Canadian property or a taxable Québec property, as the case may be.

The second paragraph does not apply in respect of a disposition of a property by a taxpayer to a partnership if

 (a) as part of a transaction or event or series of transactions or events that includes the disposition

(i)  control of a taxable Canadian corporation is acquired by another taxable Canadian corporation (in this paragraph referred to as the “subsidiary” and the “parent”, respectively),

(ii)  the subsidiary is amalgamated with one or more other corporations in the course of an amalgamation to which section 550.9 applies or is wound up in accordance with Chapter VII of Title IX, and

(iii)  the parent designates an amount in accordance with paragraph d of subsection 1 of section 88 of the Income Tax Act in respect of an interest in a partnership;

 (b) the disposition of the property occurs after the acquisition of control of the subsidiary;

 (c) the property is a capital property whose disposition may not be the subject of a valid election for the purposes of subsection 2 of section 97 of the Income Tax Act because of subsection 21.2 of section 13 of that Act but could, in the absence of this paragraph, be the subject of an election under the second paragraph given the inapplicability of section 93.3.1 in respect of the disposition; and

 (d) the subsidiary is the taxpayer or has, before the disposition of the property, directly or indirectly in any manner whatever, an interest in the taxpayer.

1972, c. 23, s. 460; 1975, c. 22, s. 170; 1984, c. 15, s. 132; 1986, c. 19, s. 133; 1997, c. 3, s. 71; 1997, c. 31, s. 153; 1997, c. 85, s. 98; 2000, c. 5, s. 136; 2002, c. 40, s. 43; 2003, c. 9, s. 40; 2004, c. 8, s. 128; 2005, c. 1, s. 122; 2009, c. 5, s. 195; 2011, c. 6, s. 138; 2011, c. 34, s. 32; 2015, c. 21, s. 209.

614.1. Except for the purposes of this section, where a property is disposed of to a partnership before 26 March 1997 by a taxpayer, the second paragraph of section 614 and Divisions I to III of Chapter IV of Title IX, as they read in respect of property disposed of on 26 March 1997 and not as they read in respect of the disposition, apply in respect of the disposition where

 (a) the disposition is made after 18 December 1996, or is part of a series of transactions or events that began before 19 December 1996 and ended after 18 December 1996; and

 (b) it may not reasonably be considered that all or substantially all of an excess amount is attributable to the difference between the cost amount of the property to the taxpayer, immediately before the disposition, for the purposes of this Part and the cost amount of the property to the taxpayer, at that time, for the purposes of Part I of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement), where that excess amount is

(i)  the amount by which the taxpayer's income for the taxation year in which the disposition is made is reduced by reason of the application of the second paragraph of section 614 in respect of the disposition, exceeds the amount, if any, by which the taxpayer's income for that year, established for the purposes of Part I of the Income Tax Act, is reduced by reason of the application of subsection 2 of section 97 of that Act in respect of the disposition, or

(ii)  the amount by which the cost amount of the property to the partnership, immediately after the disposition, for the purposes of this Part, exceeds the cost amount of the property to the partnership established at that time for the purposes of Part I of the Income Tax Act.

However, the first paragraph does not apply where the disposition is of property in respect of which section 522, as it reads in respect of property disposed of on 26 March 1997, would apply if

 (a) the disposition had been made on 26 March 1997;

 (b) where the election referred to in the second paragraph of section 614, as that paragraph reads in respect of property disposed of on 26 March 1997, was not made in respect of the disposition, the election had been made for an amount agreed on equal to the fair market value of the property at the time of the disposition; and

 (c) an amount had been agreed on in respect of the property in the prescribed form for the purposes of that section 522, and was equal to the amount agreed on in its respect in the election made under the second paragraph of section 614, as that paragraph reads in respect of the disposition, or to the fair market value of the property at the time of the disposition if no election were made.

1997, c. 85, s. 99; 1997, c. 85, s. 781.

615. (Repealed).

1972, c. 23, s. 461; 1984, c. 15, s. 133; 1996, c. 39, s. 167; 1997, c. 3, s. 71; 2000, c. 5, s. 137.

616. (Repealed).

1972, c. 23, s. 462; 1982, c. 5, s. 133; 1984, c. 15, s. 133; 1989, c. 77, s. 68; 1990, c. 59, s. 214; 1997, c. 3, s. 71; 2000, c. 5, s. 137.

617. For the purposes of sections 93 to 104, 130 and 130.1 and of the regulations made under paragraph a of section 130, where the second paragraph of section 614 applies to depreciable property the capital cost of which, to the taxpayer who disposed of it to the partnership, exceeds the proceeds of its disposition:

 (a) the capital cost of the property, to the partnership, is deemed to be equal to the capital cost of the property to the taxpayer; and

 (b) the excess is deemed to have been allowed to the partnership as depreciation for the taxation years preceding the acquisition of that property by it.

1972, c. 23, s. 463; 1974, c. 18, s. 24; 1979, c. 18, s. 50; 1997, c. 3, s. 71.

617.1. Where the second paragraph of section 614 has applied in respect of the disposition of any property by an individual to a partnership, the cost of the property to the individual was included in computing an amount determined under section 75.2.1 or 75.3 in respect of the individual, the property is depreciable property of the partnership, and the amount, in this section referred to as the “individual’s original cost”, that would be the cost of the property to the individual immediately before its disposition if this Act were read without reference to section 75.5 exceeds the individual’s proceeds of disposition of the property, the following rules apply:

 (a) the capital cost to the partnership of the property is deemed to be equal to the individual’s original cost; and

 (b) the amount by which the individual’s original cost exceeds the individual’s proceeds of disposition of the property is deemed to have been allowed to the partnership as depreciation in respect of the property for taxation years that end before the time of disposition.

2004, c. 8, s. 129; 2007, c. 12, s. 68.

CHAPTER IV 
DISPOSITION OF PROPERTY
1972, c. 23.

DIVISION I 
GENERALITIES
1972, c. 23.

618. For the purposes of this Part, where, but for this section, at any time after 31 December 1971 a partnership would be dissolved, the following rules apply:

 (a) until such time as all the partnership property and any property substituted therefor has been distributed to the persons entitled by law to receive it, the partnership is deemed to continue to exist, and each person who was a member of the partnership is deemed to still be a member of the partnership;

 (b) the right of each such person to share in that property is deemed to be an interest in the partnership; and

 (c) notwithstanding section 261, where at the end of a fiscal period of the partnership, in respect of an interest in the partnership, the aggregate of all amounts required by section 257, to be deducted in computing the adjusted cost base to a taxpayer of the interest at that time exceeds the aggregate of the cost to the taxpayer of the interest determined for the purpose of computing the adjusted cost base to the taxpayer of that interest at that time and all amounts required by section 255 to be added to the cost to the taxpayer of the interest in computing the adjusted cost base to the taxpayer of that interest at that time, the amount of the excess is deemed to be a gain of the taxpayer for the taxpayer's taxation year that includes that time from a disposition at that time of that interest and, for the purposes of Title VI.5.1 of Book IV, that interest is deemed to have been disposed of by the taxpayer at that time.

1972, c. 23, s. 464; 1977, c. 26, s. 66; 1996, c. 39, s. 168; 1997, c. 3, s. 71.

619. Subject to sections 529 to 533 and 620 to 631, a partnership disposing, at a particular time after 1971, of property to a taxpayer who is, immediately before such time, one of its members, is deemed to have received therefrom proceeds equal to its fair market value at that time and the taxpayer is deemed to have acquired the property at that same value.

1972, c. 23, s. 465; 1975, c. 22, s. 171; 1997, c. 3, s. 71.

DIVISION II 
DISSOLUTION OF THE PARTNERSHIP
1972, c. 23; 1997, c. 3, s. 71.

620. The rules provided in this division apply where, at a particular time after 1971, a Canadian partnership is dissolved and its property is distributed to persons who were members thereof immediately before that time.

However, the rules referred to in the first paragraph apply only if each of those persons has in each such property, immediately after that time, an undivided interest equal, when expressed as a percentage, to the person's undivided interest, when so expressed, in each other property of the partnership, if all those persons make a valid election for the purposes of subsection 3 of section 98 of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement) in respect of the property and if sections 530 to 533 and 626 to 631 do not apply.

The percentage of the undivided interest of each member of the partnership shall be referred to, in this division, as his share.

1972, c. 23, s. 466; 1975, c. 22, s. 172; 1984, c. 35, s. 16; 1997, c. 3, s. 71; 1997, c. 85, s. 100.

620.1. Where the rules provided for in this division apply in respect of the dissolution of a partnership, the prescribed form must be sent to the Minister.

In addition, where the form is not sent to the Minister on or before the date that is the earliest of the filing-due dates for the persons referred to in section 620 in respect of the dissolution, for the taxation year in which the dissolution occurred, those persons incur a penalty equal to the lesser of

 (a) 0.25%, for each month or part of a month during the period from the earliest date of those filing-due dates until the day on which the form is sent to the Minister, of the amount by which the aggregate of the amounts of money and the fair market value of partnership property received by those persons as consideration for the disposition of their interests in the partnership at the time the partnership is dissolved, exceeds the aggregate of the proceeds of disposition determined in respect of each of those persons under section 621; and

 (b) the lesser of $5,000 and the product obtained by multiplying $100 by the number of months each of which is a month all or part of which is during the period referred to in subparagraph a.

Notwithstanding sections 1010 to 1011, such assessments of tax, interest and penalties under this Part shall be made as are necessary by the Minister for any taxation year to give effect to the rules provided for in this division in respect of the dissolution of partnerships.

1997, c. 85, s. 101; 2000, c. 39, s. 37.

621. Each person contemplated in section 620 is deemed to receive, as proceeds of disposition of his interest in the partnership, an amount equal to the greater of:

 (a) the adjusted cost base of his interest in the partnership, immediately before the particular time; and

 (b) the amount of any money received by him on the dissolution of the partnership and of his share of the cost amount, to the partnership, of each of its properties, immediately before their distribution.

1972, c. 23, s. 467; 1997, c. 3, s. 71.

622. The cost to each person contemplated in section 620 of undivided interest in each property of the partnership is deemed to be equal to that person's share of the cost amount to the partnership of the property immediately before its distribution, plus, where the property is incorporeal capital property, a particular amount that is that person's share of 4/3 of the amount determined under subparagraph a of the second paragraph of section 107 in respect of the partnership's business immediately before the particular time and, where the amount determined under paragraph a of section 621 in respect of that person exceeds the aggregate determined under paragraph b of that section 621 in respect of that person, the following amount:

 (a) in the case of a non-depreciable capital property of the partnership, the portion of such excess designated by that person;

 (b) (paragraph repealed).

1972, c. 23, s. 468; 1988, c. 18, s. 51; 1994, c. 22, s. 214; 1997, c. 3, s. 71; 2003, c. 2, s. 140; 2005, c. 1, s. 123.

623. The amount designated under paragraph a of section 622 by a person contemplated in section 620 shall not exceed the excess of his share of the fair market value of the property concerned, immediately after its distribution, over his share of the cost amount of that property, to the partnership, immediately before its distribution.

Likewise, the aggregate of such designated amounts shall not exceed, in the case of non-depreciable capital property, the excess contemplated in section 622.

1972, c. 23, s. 469; 1988, c. 18, s. 52; 1997, c. 3, s. 71.

624. For the purposes of sections 93 to 104, 130 and 130.1 and of the regulations made under paragraph a of section 130, where depreciable property of a prescribed class is distributed and the share of a person contemplated in section 620, in the capital cost of that property, to the partnership, exceeds the cost, to such person, of his undivided interest in that property, as determined under section 622,

 (a) the capital cost to that person of his undivided interest in the property is deemed to be equal to his former share of the capital cost of such property to the partnership; and

 (b) the excess is deemed to have been allowed to that person as depreciation for the taxation years before the acquisition by him of this undivided interest.

1972, c. 23, s. 470; 1979, c. 18, s. 51; 1997, c. 3, s. 71.

624.1. Where incorporeal capital property in respect of a business is distributed by the partnership contemplated in section 620 to persons who were members thereof immediately before its dissolution, the following rules apply:

 (a) for the purpose of determining, under this Part, any amount relating to an eligible incorporeal capital amount, an incorporeal capital amount or to incorporeal capital property, each such person is deemed to have continued to carry on the business, in respect of which the property was incorporeal capital property and that was previously carried on by the partnership, until the time that the person disposes of the person's undivided interest in the property;

 (b) for the purpose of determining the person's eligible incorporeal capital amount in respect of the business, an amount equal to 3/4 of the particular amount determined under section 622 in respect of the business shall be added to the amount otherwise determined in respect thereof under subparagraph i of subparagraph a of the second paragraph of section 107; and

 (c) for the purpose of determining after the particular time the amount required by paragraph b of section 105 to be included in computing the person’s income in respect of any subsequent disposition of the property of the business, the amount determined under subparagraph ii of subparagraph a of the second paragraph of section 107 is deemed to be equal to that person’s share of the amount determined under that subparagraph ii in respect of the partnership’s business immediately before the particular time.

1994, c. 22, s. 215; 1996, c. 39, s. 169; 1997, c. 3, s. 71; 2003, c. 2, s. 141; 2005, c. 1, s. 124.

625. The partnership contemplated in section 620 is deemed to dispose of each of its properties for proceeds equal to the cost amount of the property, to such partnership, immediately before its distribution.

1972, c. 23, s. 471; 1997, c. 3, s. 71.

DIVISION III 
BUSINESS CARRIED ON AS SOLE PROPRIETORSHIP
1972, c. 23.

626.  (1) The rules provided in this division apply where, at a particular time after 1971, a Canadian partnership is dissolved and, within three months after that time, one only of the persons who were members of the partnership immediately before such time carries on itself the business formerly carried on by the partnership.

 (2) However, the rules contemplated in subsection 1 do not apply unless such person, whether an individual, a trust or a corporation, uses, in the business, any property that was partnership property immediately before that time and that was received by him as proceeds of disposition of his interest in the partnership.

1972, c. 23, s. 472; 1975, c. 22, s. 173; 1997, c. 3, s. 71.

627. The person contemplated in section 626 is deemed to receive, as consideration for the disposition of his interest in the partnership, an amount equal to the greater of:

 (a) the aggregate of the adjusted cost base of his interest in the partnership immediately before the particular time, and the adjusted cost base to him of each other interest in the partnership deemed under section 632 to have been acquired by him at the particular time; and

 (b) the aggregate of the cost amount, to the partnership, immediately before the particular time, of each property so received by that person and of the amount of any other proceeds from the disposition of his interest in the partnership.

1972, c. 23, s. 473; 1975, c. 22, s. 174; 1993, c. 16, s. 240; 1997, c. 3, s. 71.

628. The cost to the person contemplated in section 626 of property so received is deemed to be equal to the cost amount to the partnership of the property immediately before the particular time, plus, where the property is incorporeal capital property, an amount that is 4/3 of the amount determined under subparagraph a of the second paragraph of section 107 in respect of the partnership's business immediately before the particular time, and where the aggregate determined under paragraph a of section 627 exceeds the aggregate determined under paragraph b of section 627, the following amount:

 (a) in the case of a non-depreciable capital property of such person, the portion of that excess designated by him;

 (b) (paragraph repealed).

1972, c. 23, s. 474; 1975, c. 22, s. 175; 1988, c. 18, s. 53; 1994, c. 22, s. 216; 1997, c. 3, s. 71; 2003, c. 2, s. 142; 2005, c. 1, s. 125.

629. The amount designated under paragraph a of section 628 shall not exceed the excess of the fair market value of the property concerned, immediately after the particular time, over its cost amount to the partnership immediately before that time.

Likewise, the aggregate of such designated amounts shall not exceed, in the case of non-depreciable capital property, the excess contemplated in section 628.

1972, c. 23, s. 475; 1973, c. 17, s. 69; 1988, c. 18, s. 54; 1997, c. 3, s. 71.

630. For the purposes of sections 93 to 104, 130 and 130.1 and of the regulations made under paragraph a of section 130, where property received by a person contemplated in section 626 is depreciable property of a prescribed class and where its capital cost to the partnership exceeds its capital cost, to such person, as determined under section 628,

 (a) the capital cost to him of the property is deemed to be the capital cost of the property to the partnership; and

 (b) the excess is deemed to have been allowed to that person as depreciation for the taxation years before its acquisition by him.

1972, c. 23, s. 476; 1979, c. 18, s. 52; 1997, c. 3, s. 71.

630.1. Where incorporeal capital property in respect of a business is so received by the person contemplated in section 626, the following rules apply:

 (a) for the purpose of determining the person's eligible incorporeal capital amount in respect of the business, an amount equal to 3/4 of the particular amount determined under section 628 in respect of the business shall be added to the amount otherwise determined in respect thereof under subparagraph i of subparagraph a of the second paragraph of section 107; and

 (b) for the purpose of determining after the particular time the amount required by paragraph b of section 105 to be included in computing the person’s income in respect of any subsequent disposition of the property of the business, the amount determined under subparagraph ii of subparagraph a of the second paragraph of section 107 is deemed to be equal to the amount determined under that subparagraph ii in respect of the partnership’s business immediately before the particular time.

1994, c. 22, s. 217; 1996, c. 39, s. 170; 1997, c. 3, s. 71; 2003, c. 2, s. 143; 2005, c. 1, s. 126.

631. The partnership contemplated in section 626 is deemed to have disposed of each of the properties referred to therein for proceeds equal to the cost amount of the property, to such partnership, immediately before the particular time.

1972, c. 23, s. 477; 1982, c. 5, s. 134; 1997, c. 3, s. 71.

632. Where, at the particular time referred to in section 626, all other persons who were members of the partnership immediately before that time dispose of their interests in the partnership to the person referred to in the said section, such person is deemed to acquire at that time partnership interests from those other persons and not partnership property.

1975, c. 22, s. 176; 1997, c. 3, s. 71.

DIVISION IV 
BUSINESS CONTINUED BY A NEW PARTNERSHIP
1972, c. 23; 1997, c. 3, s. 71.

633. Where a Canadian partnership is dissolved at a particular time after 1971 and, at or before that time, all of its property has been transferred to another Canadian partnership all the members of which were members of the dissolved partnership, such new partnership is deemed to be a continuation of the dissolved partnership and any member's interest in the new partnership is deemed to be a continuation of his interest in the dissolved partnership.

1972, c. 23, s. 478; 1997, c. 3, s. 71.

DIVISION V 
DISPOSITION OF FARMING LAND
1972, c. 23.

634. Any taxpayer who was a member of a partnership at the end of a taxation year of the partnership in which it disposed of land used in a farming business may deduct, in computing his income for his taxation year in which the taxation year of the partnership ended, subject to section 635.1, 1/2 of the aggregate of amounts each of which is an amount equal to the taxpayer's loss from the farming business for such taxation year or any preceding taxation year ending after 31 December 1971.

1972, c. 23, s. 479; 1990, c. 59, s. 215; 1997, c. 3, s. 71; 2003, c. 2, s. 144.

635. The taxpayer shall not make the deduction provided for in section 634 except to the extent that such loss:

 (a) is not deductible in computing his income for the year under sections 205 to 207;

 (b) was not deducted in computing his taxable income for his taxation year in which the partnership's taxation year in which the land was disposed of ended or for any previous taxation year;

 (c) does not exceed his share of the aggregate of the following amounts, to the extent that those amounts are included in computing the loss of the partnership from the farming business for its taxation year ending in the year:

 (1) taxes, other than income or profits taxes or taxes imposed by reference to the transfer of the property, paid by the partnership in its taxation year ending in the year or payable by it in respect of that taxation year to a province or a Canadian municipality in respect of the property, and

 (2) interest paid by the partnership in its taxation year ending in the year or payable by it in respect of that taxation year, pursuant to a legal obligation to pay interest on borrowed money used to acquire the property or on any amount as consideration payable for the property; and

 (d) does not exceed the amount obtained by subtracting from, subject to section 635.1, twice the taxpayer’s taxable capital gain from the disposition of the land contemplated in section 634 the aggregate of his losses from the farming business for taxation years preceding the year which must be included in computing the amount deductible under this division in respect of the taxpayer.

1972, c. 23, s. 480; 1985, c. 25, s. 105; 1990, c. 59, s. 216; 1995, c. 49, s. 150; 1997, c. 3, s. 71; 2003, c. 2, s. 145.

635.1. Where the taxation year of the taxpayer includes 28 February 2000 or 17 October 2000, or begins after 28 February 2000 and ends before 17 October 2000, the following rules apply:

 (a) the reference to the fraction “1/2” in section 634 shall be read as a reference to the fraction in paragraphs a to d of section 231.0.1 that applies to the taxpayer for the year; and

 (b) the reference to the word twice in paragraph d of section 635 shall be read, with the necessary modifications, as a reference to the fraction that is the reciprocal of the fraction in paragraphs a to d of section 231.0.1 that applies to the taxpayer for the year.

2003, c. 2, s. 146.

CHAPTER V 
DISPOSITION OF AN INTEREST IN A PARTNERSHIP
1972, c. 23; 1997, c. 3, s. 71.

636. The rules provided for in paragraphs a to c of section 645 apply where, by virtue of the death of an individual, a taxpayer acquires a property that was an interest in a partnership immediately before the individual's death, other than an interest to which section 639 to 644 applied, and the taxpayer is not a member of the partnership and does not become a member of such partnership by reason of such acquisition.

1977, c. 26, s. 67; 1997, c. 3, s. 71.

637. If, as part of a transaction or event or series of transactions or events, a taxpayer disposes of an interest in a particular partnership and an interest in the partnership is acquired by a person or partnership described in any of paragraphs a to d of section 637.1, the taxpayer's taxable capital gain from the disposition of the interest is deemed, despite section 231, to be equal to the total of

 (a) subject to the second paragraph, 1/2 of the portion of the taxpayer's capital gain for the year from the disposition that can reasonably be attributed to the increase in the value of a property of the particular partnership that is capital property other than depreciable property held directly or indirectly by the particular partnership through one or more other partnerships; and

 (b) the whole of the remaining portion of such capital gain.

However, where the taxation year of the taxpayer includes 28 February 2000 or 17 October 2000, or begins after 28 February 2000 and ends before 17 October 2000, the reference to the fraction “1/2” in subparagraph a of the first paragraph, as it read in respect of that taxation year, is to be read as a reference to the fraction in paragraphs a to d of section 231.0.1 that applies to the taxpayer for the year.

1972, c. 23, s. 481; 1984, c. 15, s. 134; 1990, c. 59, s. 217; 1997, c. 3, s. 71; 2003, c. 2, s. 147; 2015, c. 21, s. 210.

637.1. Subject to section 637.2, section 637 applies in respect of a disposition of a partnership interest by a taxpayer if the interest is acquired by

 (a) a person exempt from tax under sections 980 to 999.1;

 (b) a person not resident in Canada;

 (c) another partnership to the extent that the interest can reasonably be considered to be held, at the time of its acquisition by the other partnership, indirectly through one or more partnerships, by a person that is

(i)  a person exempt from tax under sections 980 to 999.1,

(ii)  a person not resident in Canada, or

(iii)  a trust resident in Canada (other than a mutual fund trust) if

(1)  an interest as a beneficiary under the trust is held, directly or indirectly through one or more other partnerships, by a person exempt from tax under sections 980 to 999.1 or by a trust (other than a mutual fund trust), and

(2)  the fair market value of all the interests as beneficiaries under the trust held by persons referred to in subparagraph 1 exceeds 10% of the fair market value of all the interests as beneficiaries under the trust; or

 (d) a trust resident in Canada (other than a mutual fund trust) to the extent that the trust can reasonably be considered to have a beneficiary that is

(i)  a person exempt from tax under sections 980 to 999.1,

(ii)  a partnership, if

(1)  an interest in the partnership is held, whether directly or indirectly through one or more other partnerships, by one or more persons exempt from tax under sections 980 to 999.1 or by one or more trusts (other than mutual fund trusts), and

(2)  the fair market value of all the interests in the partnership held by persons referred to in subparagraph 1 exceeds 10% of the fair market value of all the interests in the partnership, or

(iii)  another trust (other than a mutual fund trust), if

(1)  at least one beneficiary under the other trust is a person exempt from tax under sections 980 to 999.1, a partnership or a trust (other than a mutual fund trust), and

(2)  the fair market value of all the interests as beneficiaries under the other trust held by the persons referred to in subparagraph 1 exceeds 10% of the fair market value of all the interests as beneficiaries under the other trust.

2015, c. 21, s. 211.

637.2. Section 637 does not apply in respect of a taxpayer's disposition of a partnership interest to a partnership or trust described in paragraph c or d of section 637.1 if the extent to which section 637 would, but for this section, apply to the taxpayer's disposition of the interest because of that paragraph c or d does not exceed 10% of the taxpayer's interest.

The first paragraph does not apply in respect of a disposition to a trust under which the amount of the income or capital to be distributed at any time in respect of any interest as a beneficiary under the trust depends on the exercise by any person or partnership of, or the failure by any person or partnership to exercise, a power to appoint.

2015, c. 21, s. 211.

637.3. Section 637 does not apply in respect of a taxpayer's disposition of a partnership interest to a person not resident in Canada if

 (a) property of the partnership is used, immediately before and immediately after the acquisition of the interest by that person, in carrying on a business in an establishment situated in Canada; and

 (b) the fair market value of all the property referred to in paragraph a is not less than 90% of the fair market value of all property of the partnership.

2015, c. 21, s. 211.

637.4. The rules of the second paragraph apply in respect of a taxpayer's particular interest in a partnership if

 (a) it may be reasonable to conclude that one of the purposes of a dilution, reduction or alteration of the particular interest was to avoid the application of section 637 in respect of the particular interest; and

 (b) as part of a transaction or event or series of transactions or events that includes the dilution, reduction or alteration of the particular interest, there is

(i)  an acquisition of an interest in the partnership by a person or partnership described in any of paragraphs a to d of section 637.1, or

(ii)  an increase in, or alteration of, an interest in the partnership held by a person or partnership described in any of paragraphs a to d of section 637.1.

For the purposes of section 637,

 (a) the taxpayer is deemed to have disposed of an interest in the partnership at the time of the dilution, reduction or alteration;

 (b) the taxpayer is deemed to have a capital gain from the disposition equal to the amount by which the fair market value of the particular interest immediately before the time of the dilution, reduction or alteration exceeds the fair market value of the particular interest immediately after that time; and

 (c) the person or partnership referred to in subparagraph b of the first paragraph is deemed to have acquired an interest in the partnership as part of the transaction or event or series of transactions or events that includes the disposition referred to in subparagraph a.

2015, c. 21, s. 211.

638. A taxpayer shall include, in computing his gain from the disposition of an interest in a partnership, for a taxation year, in addition to the amount determined under section 234, the excess of the amounts to be deducted in computing the adjusted cost base of his interest in the partnership, immediately before the disposition, under section 257, over the aggregate of the cost of his interest in the partnership, determined for the purposes of computing the adjusted cost base of that interest at that time, and the amounts required by section 255 to be added to that cost in such computation at that time.

1972, c. 23, s. 482; 1973, c. 17, s. 70; 1975, c. 22, s. 177; 1997, c. 3, s. 71.

638.0.1. Where, as a result of an amalgamation or merger, an interest in a partnership owned by a predecessor corporation has become property of the new corporation formed as a result of the amalgamation or merger and the predecessor corporation was not related to the new corporation, the predecessor corporation is deemed to have disposed of the interest in the partnership to the new corporation immediately before the amalgamation or merger for proceeds of disposition equal to the adjusted cost base to the predecessor corporation of the interest in the partnership at the time of the disposition and the new corporation is deemed to have acquired the interest in the partnership from the predecessor corporation immediately after that time at a cost equal to the proceeds of disposition.

1989, c. 77, s. 69; 1997, c. 3, s. 71.

638.1. Notwithstanding the second paragraph of section 231, the capital loss of a taxpayer from the disposition at any time of an interest in a partnership is deemed to be equal to the amount of the loss otherwise determined minus the aggregate of all amounts each of which is an amount by which the taxpayer’s share of the partnership’s loss, in respect of a share of the capital stock of a corporation that is property of a particular partnership at that time, would be reduced under section 741.2 if the fiscal period of every partnership that includes that time had ended immediately before that time and the particular partnership had disposed of the share immediately before the end of that fiscal period for proceeds equal to its fair market value at that time.

1984, c. 15, s. 135; 1997, c. 3, s. 71; 2001, c. 7, s. 66.

638.2. A taxpayer who pays an amount at any time in a taxation year is deemed to have a capital loss from a disposition of property for the year if

 (a) the taxpayer disposed of an interest in a partnership before that time or, because of section 636, acquired before that time a right to receive property of a partnership;

 (b) that time is after the disposition or acquisition;

 (c) the amount would have been described in subparagraph i of paragraph i of section 255 had the taxpayer been a member of the partnership at that time; and

 (d) the amount is paid pursuant to a legal obligation of the taxpayer to pay the amount.

2009, c. 5, s. 196.

CHAPTER VI 
RESIDUAL INTEREST IN A PARTNERSHIP
1975, c. 22, s. 178; 1997, c. 3, s. 71.

639. This chapter applies to a taxpayer who would otherwise have ceased at any time after 1971 to be a member of a partnership.

1975, c. 22, s. 178; 1997, c. 3, s. 71.

640. Subject to sections 428 to 451, Title VI.5 of Book IV and Chapter I of Title I.1 of Book VI, and notwithstanding any other provision of this Part, the taxpayer referred to in section 639 is deemed not to have disposed of and to continue to have an interest in the partnership, in this chapter referred to as a residual interest, until such time as all his rights to receive any property as consideration for his interest in the partnership immediately before the time that he ceased to be a member of the partnership are satisfied in full.

For the purposes of this section, a right to receive any property does not include a right to a share of the income or loss of a partnership under a agreement referred to in section 608.

1975, c. 22, s. 178; 1980, c. 13, s. 61; 1995, c. 49, s. 151; 1997, c. 3, s. 71; 2001, c. 7, s. 67; 2004, c. 8, s. 130.

641. Notwithstanding section 640, a taxpayer is deemed not to have disposed of his residual interest before the end of the fiscal year of the partnership in which he ceased to be a member thereof even if all of his rights described in the said section have been satisfied in full before the end of that year.

1975, c. 22, s. 178; 1997, c. 3, s. 71.

642. Paragraph c of section 618 applies to the residual interest of a taxpayer at the end of a fiscal period of the partnership.

1975, c. 22, s. 178; 1996, c. 39, s. 171; 1997, c. 3, s. 71.

643. A taxpayer who holds a residual interest is deemed not to be a member of the partnership:

 (a) except for the purposes of sections 714 and 752.0.10.11, if he holds such interest by virtue of section 641; or

 (b) except for the purposes of sections 530 to 533, if he holds such interest otherwise than as provided in paragraph a.

1975, c. 22, s. 178; 1993, c. 64, s. 39; 1997, c. 3, s. 71.

644. Where a partnership has been dissolved, or would have been dissolved but for section 618, at a time when a taxpayer had rights referred to in section 640 in respect of that partnership and the members of another partnership agree to satisfy all or part of those rights, such other partnership is, for the purposes of section 640, deemed to be a continuation of the original partnership.

1975, c. 22, s. 178; 1997, c. 3, s. 71.

645. Where by virtue of the death of an individual a taxpayer acquires a property that is an interest in a partnership to which, immediately before the individual's death, sections 639 to 644 applied:

 (a) the taxpayer is deemed to acquire a right to receive partnership property and not to acquire an interest in the partnership;

 (b) the taxpayer is deemed to acquire the right referred to in paragraph a at a cost equal to the amount deemed to be the proceeds of the disposition of the interest in the partnership to the deceased individual under section 436 or subparagraph a of the first paragraph of section 440; and

 (c) section 254 does not apply to such right.

1975, c. 22, s. 178; 1994, c. 22, s. 218; 1997, c. 3, s. 71.

TITLE XII 
TRUSTS AND THEIR BENEFICIARIES
1972, c. 23.

CHAPTER I 
GENERALITIES
1972, c. 23.

646. In this Part, unless the context indicates a different meaning and subject to the third paragraph, a trust, wherever it is created, or a succession, in this Title referred to as a trust, also includes the trustee or other legal representative having ownership or control of the trust property.

Likewise, a beneficiary shall include every person having a beneficial interest in a trust.

However, except for the purposes of this section, subparagraph v of subparagraph b of the first paragraph of section 248, subparagraph g of the second paragraph of that section and section 646.1, an arrangement under which a trust can reasonably be considered to act as agent or mandatary for all of the beneficiaries under the trust in respect of all of the dealings with all of the trust’s property, is deemed not to be a trust, unless the trust is described in any of paragraphs a to d of the third paragraph of section 647.

1972, c. 23, s. 483; 1988, c. 18, s. 55; 1994, c. 22, s. 219; 1996, c. 39, s. 273; 1998, c. 16, s. 176; 2000, c. 5, s. 138; 2003, c. 2, s. 148.

646.1. Notwithstanding section 7.11.1 and for the purposes of subparagraph ii of paragraph b of section 454.2, section 646, subparagraph a.4 of the first paragraph of section 653 and paragraph e of section 692.5, a person or partnership is deemed not to be a beneficiary under a trust at a particular time where the person or partnership is beneficially interested in the trust at that time solely because of

 (a) a right that may arise as a consequence of the terms of the will of an individual who, at that time, is a beneficiary under the trust;

 (b) a right that may arise as a consequence of the law governing the intestacy of an individual who, at that time, is a beneficiary under the trust;

 (c) a right as a shareholder under the terms of the shares of the capital stock of a corporation that, at that time, is a beneficiary under the trust;

 (d) a right as a member of a partnership under the terms of the partnership agreement, where, at that time, the partnership is a beneficiary under the trust; or

 (e) any combination of rights described in paragraphs a to d.

2003, c. 2, s. 149; 2009, c. 5, s. 197.

647. A trust is, for the purposes of this Part and as regards its property, deemed to be an individual, without affecting the liability of the trustee or legal representative for their own income tax.

However, where there are several trusts most of the property of which has been received from one person and the income of which, according to the terms governing such trusts, will ultimately accrue to the same beneficiary or same group or class of beneficiaries, the trustees whom the Minister designates are deemed to be one individual.

For the purposes of sections 653 to 656.2, 659 and 660 and paragraph b of section 657 at any time, a trust does not include a unit trust or a particular trust described in the fourth paragraph and, for the purposes of sections 653 to 656.2, 659, 660, 661, 662, 663.1, 663.2, 665, 665.1, 684 to 688.2, 690.0.1 and 691 to 692.0.1 and paragraph b of section 657, a trust does not include any of the following trusts:

 (a) an amateur athlete trust, an employee trust, an employee life and health trust, a trust described in paragraph c.4 of section 998 or a trust governed by a foreign retirement arrangement, a registered pension plan, a pooled registered pension plan, a profit sharing plan, a registered supplementary unemployment benefit plan, a registered retirement savings plan, a deferred profit sharing plan, a registered education savings plan, a registered disability savings plan, an employee benefit plan, a registered retirement income fund or a tax-free savings account;

 (a.1) a trust, other than a trust described in subparagraph a or d, a trust to which section 53 or 58 applies or a trust prescribed for the purposes of section 688, 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 segregated fund trust referred to in section 851.2, a trust referred to in section 851.25 or an RCA trust within the meaning of subparagraph c of the first paragraph of section 890.1;

 (c) a trust each of the beneficiaries under which was at all times after it was created a trust referred to in subparagraph a or b, other than a trust referred to in section 851.25, or a person who is a beneficiary of the trust only because of being a beneficiary under a trust referred to in either of those subparagraphs, other than a trust referred to in section 851.25;

 (d) a cemetery care trust or a trust governed by an eligible funeral arrangement.

The particular trust referred to in the third paragraph is a trust all interests in which have vested indefeasibly at the time referred to in that paragraph, and that is not

 (a) an alter ego trust, a joint spousal trust, a post-1971 spousal trust or a trust to which subparagraph a.4 of the first paragraph of section 653 applies;

 (b) (subparagraph repealed);

 (c) a trust that, in its fiscal return under this Part for its first taxation year ending after 31 December 1992, has elected that this paragraph not apply;

 (d) 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 not resident in Canada exceeds 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;

 (e) 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 succession, of trust property if the fair market value of the property to be distributed is required to be proportional to the fair market value of that interest immediately before the distribution; or

 (f) a trust that, before that time and after 17 December 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 reasons for incurring the liability was to avoid taxes otherwise payable under this Part as a consequence of the death of an individual.

1972, c. 23, s. 484; 1975, c. 22, s. 179; 1978, c. 26, s. 109; 1979, c. 18, s. 53; 1982, c. 5, s. 135; 1989, c. 77, s. 70; 1990, c. 59, s. 218; 1991, c. 25, s. 81; 1993, c. 16, s. 241; 1994, c. 22, s. 220; 1996, c. 39, s. 172; 1997, c. 14, s. 94; 2000, c. 5, s. 139; 2003, c. 2, s. 150; 2005, c. 23, s. 53; 2009, c. 5, s. 198; 2009, c. 15, s. 95; 2011, c. 6, s. 139; 2015, c. 21, s. 212.

648. (Repealed).

1972, c. 23, s. 485; 1975, c. 22, s. 180; 1986, c. 15, s. 92; 1989, c. 5, s. 76.

649. For the purposes of this Part, a trust is a unit trust if, at a particular time, it is an inter vivos trust in which the interest of each beneficiary is described by reference to units of the trust, and

 (a) the issued units of the trust representing a value of not less than 95% of the fair market value of all the issued units, determined without regard to any voting rights which may be attached to such units, are

(i)  units which provide that the trust must accept, at the demand of the holder of such units and at prices determined and payable in accordance with the conditions attached to such units, the surrender, in whole or in part, of the fully paid units, and

(ii)  units qualified in accordance with prescribed conditions relating to their redemption by the trust;

 (b) it meets the following conditions:

(i)  throughout the taxation year in which the particular time occurs, 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 under paragraph a are not satisfied in respect of the trust, its only undertaking is

(1)  the investing of its funds in property, other than immovable property or an interest in immovable property,

(2)  the acquiring, holding, maintaining, improving, leasing or managing of any immovable property, or interest in immovable property, that is capital property of the trust, or

(3)  any combination of the activities described in subparagraphs 1 and 2,

(iii)  throughout the relevant periods at least 80% of its property consists of any combination of

(1)  shares,

(2)  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,

(3)  cash,

(4)  bonds, hypothecary claims, mortgages, debentures, notes and other similar obligations,

(5)  marketable securities,

(6)  immovable property situated in Canada and interests in such property, and

(7)  rights to and interests in any rental or royalty computed by reference to the volume 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)  one of the following conditions is met:

(1)  not less than 95% of its income for the current year, determined without reference to sections 262 and 295.1 and paragraph a of section 657, is derived from, or from the disposition of, investments described in subparagraph iii, or

(2)  not less than 95% of its income for each of the relevant periods, determined without reference to sections 262 and 295.1 and paragraph a of section 657 and as though each of those periods were a taxation year, is derived from, or from the disposition of, investments described in subparagraph iii,

(v)  throughout the relevant periods, not more than 10% of its property consists of bonds, securities or shares of capital stock of any one corporation or debtor other than the Government of Québec, the Government of Canada, the government of another province or a Canadian municipality, and

(v.1)  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 subparagraph 6, 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 located in Canada; or

(vi)  (subparagraph repealed);

 (c) (paragraph repealed);

 (d) the following conditions are met:

(i)  the fair market value of the property of the trust at the end of the year 1993 was primarily attributable to immovable property, or an interest in immovable property,

(ii)  the trust was a unit trust throughout any calendar year before the year 1994, and

(iii)  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 definition of qualified investment in section 204 of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement), immovable property, or an interest in immovable property, or any combination of those properties.

1972, c. 23, s. 486; 1973, c. 17, s. 71; 1987, c. 67, s. 128; 1993, c. 16, s. 242; 1996, c. 39, s. 173; 1997, c. 3, s. 71; 2000, c. 5, s. 140; 2001, c. 7, s. 68; 2003, c. 2, s. 151; 2005, c. 1, s. 127; 2010, c. 5, s. 53; 2015, c. 21, s. 213.

649.1. “Personal trust” means a trust (other than a trust that is, or was at any time after 31 December 1999, a unit trust) that is

 (a) a testamentary trust; or

 (b) an inter vivos trust no beneficial interest in which was acquired for consideration payable directly or indirectly to the trust or to any person or partnership that has made a contribution to the trust by way of transfer, assignment or other disposition of property.

1990, c. 59, s. 219; 1994, c. 22, s. 221; 1996, c. 39, s. 273; 2003, c. 2, s. 152; 2010, c. 25, s. 49.

650. For the purposes of the second paragraph of section 21.43, the definition of “exempt foreign trust” in the first paragraph of section 593 and the definition of “income interest” in section 683, the income of a trust is computed without reference to the provisions of this Part and, for the purposes of the second paragraph of sections 440 to 441.2, paragraph c of section 454.1, the definition of “pre-1972 spousal trust” in section 652.1 and subparagraph a of the first paragraph of section 653, the income of a trust is equal to its income computed without reference to the provisions of this Part minus any dividend included therein that is not included by reason of sections 501 to 503 in computing the income of the trust for the purposes of the other provisions of this Part, or that is referred to in section 1106 or 1116.

1972, c. 23, s. 487; 1973, c. 17, s. 72; 1975, c. 22, s. 181; 1982, c. 5, s. 136; 1984, c. 15, s. 136; 1990, c. 59, s. 220; 1994, c. 22, s. 222; 2003, c. 2, s. 153; 2004, c. 21, s. 85; 2009, c. 15, s. 96; 2015, c. 36, s. 34.

651. For the purposes of the second paragraph of sections 440 to 441.2, paragraph c of section 454.1, the definition of pre-1972 spousal trust in section 652.1 and subparagraph a of the first paragraph of section 653, where a trust has been created by an individual, no person is deemed to have received or otherwise obtained or to be entitled to receive or otherwise obtain enjoyment of any income or capital of the trust solely because of the payment, or provision for payment, by the trust of any duty by reason of the individual’s death or the death of the individual’s spouse who is a beneficiary under the trust, in respect of any property of, or interest in, the trust or any tax in respect of any income of the trust.

1973, c. 17, s. 73; 1990, c. 59, s. 220; 1994, c. 22, s. 222; 2003, c. 2, s. 153; 2004, c. 21, s. 86.

651.1. Except as otherwise provided in this Part and without restricting the application of sections 316.1, 456 to 458, 462.1 to 462.24, 467, 467.1, Division III of Chapter II.1 of Title I of Book V and section 1034.0.0.2, an amount included under any of sections 659 and 661 to 663 in computing the income for a taxation year of a beneficiary of a trust is 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 an amount deductible in computing the amount that would, but for paragraphs a and b of section 657 and section 657.1, be the income of a trust for a taxation year is not to be deducted by a beneficiary of the trust in computing the beneficiary's income for a taxation year.

1984, c. 15, s. 137; 1987, c. 67, s. 129; 1990, c. 59, s. 220; 2001, c. 53, s. 89; 2012, c. 8, s. 57; 2015, c. 21, s. 214.

651.2. Where at a particular time the terms that govern a trust are varied, the following rules apply:

 (a) subject to the second paragraph, for the purposes of sections 653 to 656.2, 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 the purposes of the definition of personal trust in section 1, paragraph n of section 257, section 686 and the definition of excluded right or interest in section 785.0.1, no interest of a beneficiary under the trust before its terms were varied is considered to be consideration for the interest of the beneficiary in that trust whose terms were varied.

Subparagraph a of the first paragraph does not affect the application of subparagraph a.1 of the first paragraph of section 653.

2003, c. 2, s. 154; 2004, c. 8, s. 131.

651.3. For the purposes of the definition of personal trust in section 1, paragraph n of section 257, section 686 and the definition of excluded right or interest in section 785.0.1, the following rules apply:

 (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) where all the beneficial interests in an inter vivos trust acquired by way of the transfer, assignment or other disposition of property to that trust were acquired by any of the persons described in the second paragraph, any beneficial interest in that trust acquired by such a person is deemed to be acquired for no consideration.

The person to which subparagraph b of the first paragraph refers is

 (a) one person; or

 (b) two or more persons who would be related to each other if

(i)  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

(ii)  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.

2003, c. 2, s. 154; 2004, c. 8, s. 132.

652. For the purposes of subparagraph i.1 of paragraph n of section 257, sections 597.0.2 and 597.0.5, paragraph a of section 657 and sections 657.1.2, 663, 663.4 and 667, an amount is deemed not to have become payable to a beneficiary in a taxation year unless it was paid in the year to the beneficiary or the beneficiary was entitled to enforce payment of it in that year.

1972, c. 23, s. 488; 1975, c. 22, s. 182; 1990, c. 59, s. 220; 2009, c. 5, s. 199; 2015, c. 36, s. 35.

CHAPTER II 
DEEMED DISPOSITION AND PAYMENT
1972, c. 23; 1994, c. 22, s. 223.

652.1. In this Title,

alter ego trust means a trust to which subparagraph a of the first paragraph of section 653 would apply if that subparagraph were read without reference to subparagraph i and subparagraph 2 of subparagraph ii;

excluded property means a share of the capital stock of an investment corporation owned by persons not resident in Canada that is not taxable Canadian property;

exempt property of a taxpayer at any time means property any income or gain from the disposition of which by the taxpayer at that time would not cause an increase in the taxpayer’s tax payable under this Part because the taxpayer is not resident in Canada or because of a provision contained in a tax agreement;

joint spousal trust means a trust to which subparagraph a of the first paragraph of section 653 would apply if that subparagraph were read without reference to subparagraph i and subparagraph 1 of subparagraph ii;

post-1971 spousal trust means a trust that would be described in subparagraph a of the first paragraph of section 653 if that subparagraph were read without reference to subparagraph ii;

pre-1972 spousal trust at a particular time means a trust that was created by the will of an individual who died before 1 January 1972, or created before 18 June 1971 by an individual during the individual's lifetime, that, throughout the period beginning at the time it was created and ending at the earliest of 1 January 1993, the day on which the individual's spouse died and the particular time, was a trust under which the individual's spouse was entitled to receive all of the income of the trust that arose before the spouse's death, but does not include a trust under which a person other than the individual's spouse received or otherwise obtained enjoyment of any of the income or capital of the trust before the end of that period.

1994, c. 22, s. 224; 1997, c. 3, s. 71; 2000, c. 5, s. 141; 2003, c. 2, s. 155.

652.2. (Repealed).

1994, c. 22, s. 224; 1997, c. 14, s. 95; 2003, c. 2, s. 156.

653. A trust is, at the end of each of the following days, deemed to dispose of each property of the trust, other than exempt property, that is capital property, other than excluded property, and to reacquire the property immediately after that day or land included in the inventory of a business of the trust:

 (a) the day on which

(i)  the spouse of the individual who created the trust died if the terms of the deed creating it entitled the spouse to receive all of the income of the trust that arose before the spouse's death and to receive or otherwise obtain, to the exclusion of any other person, enjoyment of the income or capital of the trust, or

(ii)  the individual died or, if it is later, the day on which the individual's spouse died, if the trust is a trust described in subparagraph ii of subparagraph d of the second paragraph and the terms of the deed creating it

(1)  entitled the individual to receive all of the income of the trust that arose before the individual's death and to receive or otherwise obtain, to the exclusion of any other person, enjoyment of the income or capital of the trust, or

(2)  entitled the individual and the individual's spouse to receive all of the income of the trust that arose before their deaths and to receive or otherwise obtain, to the exclusion of any other person, enjoyment of the income or capital of the trust;

 (a.1) where the trust is a pre-1972 spousal trust on 1 January 1993 and the spouse referred to in the definition of pre-1972 spousal trust in section 652.1 in respect of the trust was, in the case of a trust created by the will of an individual, alive on 1 January 1976, and, in the case of a trust created by an individual during the individual's lifetime, alive on 26 May 1976, the day that is the later of 1 January 1993 and the day on which that spouse dies;

 (a.2) where the trust distributes an amount in respect of a beneficiary as the beneficiary's capital interest in the trust, it can reasonably be considered that the distribution was financed by a liability of the trust and one of the reasons for incurring the liability was to avoid taxes otherwise payable under this Part as a consequence of the death of an individual, the day on which the distribution is made, determined as if a day ends for the trust immediately after the time at which each distribution is made by the trust to a beneficiary in respect of the beneficiary's capital interest in the trust;

 (a.3) where property, other than property described in the fourth paragraph, has been transferred by an individual after 17 December 1999 to the trust in circumstances in which section 454 applied, it can reasonably be considered that the property was so transferred in anticipation that the individual would subsequently cease to be resident in Canada and the individual subsequently ceases to be resident in Canada, the first day after that transfer during which the individual ceases to be resident in Canada, determined as if a day ends for the trust immediately after each time at which the individual ceases to be resident in Canada;

 (a.4) where the trust is a trust to which property was transferred by a taxpayer who is an individual, other than a trust, in circumstances in which sections 454 to 462.0.2 or section 692.8 applied, the transfer did not result in a change in beneficial ownership of that property and no person, other than the taxpayer, or partnership has any absolute or contingent right as a beneficiary under the trust, determined with reference to section 646.1, the day on which the taxpayer dies;

 (b) the day of the twenty-first anniversary of the latest of 1 January 1972, the day on which the trust was created and, where applicable, the day determined under any of subparagraphs a, a.1 and a.4 as those subparagraphs applied from time to time after 31 December 1971;

 (c) the day of the twenty-first anniversary of the day, other than a day determined under any of subparagraphs a to a.4, of any deemed disposition of such property under this section.

Subparagraph a of the first paragraph applies only where the trust contemplated therein is

 (a) a trust that was created by the will of an individual who died after 31 December 1971 and that, at the time it was created, was a trust described in that subparagraph a;

 (b) a trust that was created by the will of an individual who died after 31 December 1971 to which property was transferred in circumstances to which section 435 or subparagraph a of the first paragraph of section 440 applied and that, immediately after the property was indefeasibly vested in the trust as a consequence of the individual's death, was a trust described in subparagraph a of the first paragraph;

 (c) a trust that was created after 17 June 1971 by an individual during his lifetime and that, at any time after 31 December 1971, was a trust described in subparagraph a of the first paragraph; or

 (d) a trust, other than a trust the terms of which are described in subparagraph 1 of subparagraph ii of subparagraph a of the first paragraph that elects in its fiscal return filed under this Part for its first taxation year that this subparagraph not apply, that was created after 31 December 1999 by an individual during the individual's lifetime and that, at any time after that date, was

(i)  a trust described in subparagraph a of the first paragraph, or

(ii)  a trust that was created by a taxpayer who had attained 65 years of age.

However, subparagraph a of the first paragraph does not apply in respect of a trust described in subparagraph b of the second paragraph where the spouse who was the beneficiary of that trust died before 21 December 1991.

The property to which subparagraph a.3 of the first paragraph refers is

 (a) an immovable situated in Canada;

 (b) a Canadian resource property;

 (c) a timber resource property;

 (d) a capital property used in a business carried on through an establishment in Canada;

 (e) an incorporeal capital property in respect of a business carried on through an establishment in Canada;

 (f) a property described in the inventory of a business carried on through an establishment in Canada; or

 (g)  a prescribed property.

1972, c. 23, s. 489; 1977, c. 26, s. 68; 1984, c. 15, s. 138; 1986, c. 19, s. 134; 1994, c. 22, s. 225; 1997, c. 31, s. 61; 2003, c. 2, s. 157; 2004, c. 21, s. 87; 2005, c. 1, s. 128; 2009, c. 5, s. 200.

654. The trust is deemed to have disposed of each property contemplated in section 653, at the time determined under that section, for proceeds equal to its fair market value at that time, determined with reference to section 450.2, and to have reacquired the property immediately thereafter at a cost or a capital cost, as the case may be, equal to the proceeds of disposition.

1972, c. 23, s. 490; 1984, c. 15, s. 139; 1994, c. 22, s. 225; 2003, c. 2, s. 158.

655. (Repealed).

1972, c. 23, s. 491; 1977, c. 26, s. 69; 1994, c. 22, s. 226.

656. Notwithstanding section 654, where the capital cost to the trust of depreciable property of a prescribed class immediately before the deemed disposition thereof under section 653 exceeds the cost thereof to the trust as determined under section 654, for the purposes of sections 93 to 104, 130 to 130.1 and of the regulations made under paragraph a of section 130 as those sections and regulations apply to such property after that time,

 (a) the capital cost to the trust of the property on its deemed reacquisition under section 653 is deemed to be the same as before the deemed disposition thereof under that section; and

 (b) the excess is deemed to have been allowed to the trust as depreciation in respect of the property in computing the trust's income for the taxation years that ended before the deemed reacquisition under section 653 of the property by the trust.

1972, c. 23, s. 492; 1979, c. 18, s. 54; 1994, c. 22, s. 227; 1995, c. 49, s. 152.

656.1. For the purposes of sections 653 to 656,

 (a) the words “at the end of a taxation year” and “of a prescribed class of a taxpayer” in section 94 shall be read respectively “at the particular time a trust is deemed, under section 653, to have disposed of its depreciable property of a prescribed class” and “of that class”, and

 (b) for the purpose of computing the excess referred in section 94, at the end of the taxation year of the trust that included the day on which the trust is deemed, under section 653, to have disposed of its depreciable property of a prescribed class, any amount that was included on that day in computing the trust's income for the year under the said section 94, as it must be read pursuant to paragraph a, is deemed to be an amount included in computing the trust's income under sections 93 to 104 for a preceding taxation year.

1978, c. 26, s. 110; 1994, c. 22, s. 227.

656.2. Where a trust owns a Canadian resource property or a foreign resource property, other than an exempt property, at the end of a day determined under section 653 in respect of the trust, the following rules apply:

 (a) for the purpose of determining the amounts under paragraphs a, e and e.1 of section 330 and sections 371, 374, 411, 412, 418.1.3 to 418.1.5, 418.5, 418.6 and 418.12, the trust is deemed

(i)  to have a taxation year that ends at the end of that day and a new taxation year that begins immediately after that day, and

(ii)  to have disposed, immediately before the end of the taxation year so deemed to end, of each of those Canadian resource properties and foreign resource properties for proceeds that became receivable at that time equal to its fair market value at that time and to have reacquired, at the beginning of the new taxation year, each such property for an amount equal to that fair market value; and

 (b) for the particular taxation year of the trust that included that day, the trust shall

(i)  include in computing its income for the particular taxation year the amount, if any, determined under paragraph e of section 330 in respect of the taxation year deemed to end in accordance with subparagraph i of paragraph a and the amount so included is, for the purposes of paragraph b of section 411, deemed to have been included in computing its income for a preceding taxation year,

(i.1)  include in computing its income for the particular taxation year any amount determined under paragraph e.1 of section 330 in respect of the taxation year deemed to end in accordance with subparagraph i of paragraph a and the amount so included is, for the purposes of paragraph b of section 418.1.3, deemed to have been included in computing its income for a preceding taxation year, and

(ii)  deduct in computing its income for the particular taxation year the amount, if any, determined under sections 371 and 374 in respect of the taxation year deemed to end in accordance with subparagraph i of paragraph a and the amount so deducted is, for the purposes of paragraph a of section 371, deemed to have been deducted for a preceding taxation year.

1986, c. 19, s. 135; 2004, c. 8, s. 133.

656.3. Every trust that holds an interest in a NISA Fund No. 2 that was transferred to it in circumstances to which the second paragraph of section 441.1 applied is deemed, at the end of the day on which the spouse referred to in that paragraph dies, to have been paid an amount out of the fund equal to the amount by which the balance at the end of that day in the fund so transferred exceeds such portion of that balance as is deemed by section 660.1 to have been paid to the spouse.

1994, c. 22, s. 228.

656.3.1. Every trust that holds an interest in a farm income stabilization account that was transferred to it in circumstances to which the second paragraph of section 441.2 applied is deemed, at the end of the day on which the spouse referred to in that paragraph dies, to have been paid an amount out of the account equal to the amount by which the balance at the end of that day in the account so transferred exceeds such portion of that balance as is deemed by section 660.2 to have been paid to the spouse.

2004, c. 21, s. 88.

656.4. (Repealed).

1994, c. 22, s. 228; 1997, c. 31, s. 62; 2001, c. 7, s. 69; 2003, c. 2, s. 159; 2004, c. 21, s. 89; 2009, c. 5, s. 201; 2015, c. 21, s. 215.

656.4.1. (Repealed).

1997, c. 31, s. 63; 2015, c. 21, s. 215.

656.5. (Repealed).

1994, c. 22, s. 228; 2015, c. 21, s. 215.

656.6. (Repealed).

1994, c. 22, s. 228; 1996, c. 39, s. 273; 2015, c. 21, s. 215.

656.7. (Repealed).

1994, c. 22, s. 228; 1996, c. 39, s. 273; 1997, c. 3, s. 71; 2015, c. 21, s. 215.

656.8. (Repealed).

1994, c. 22, s. 228; 1997, c. 3, s. 71; 2015, c. 21, s. 215.

656.9. Where capital property, other than excluded property, land included in inventory, Canadian resource property or foreign resource property is transferred at a particular time by a trust, in this section referred to as the transferor trust, to another trust, in this section referred to as the transferee trust, in circumstances in which subparagraph b of the second paragraph of section 248 or section 688 or 692.8 applies, the following rules apply:

 (a) subject to paragraphs b to b.3, for the purposes of sections 653 to 656.3.1 after the particular time,

(i)  the first day, in this section referred to as the disposition day, that ends at or after the particular time that would, but for subparagraphs a.2 and a.3 of the first paragraph of section 653, be determined in respect of the transferee trust is deemed to be the earliest of

(1)  the first day ending at or after the particular time that would be determined in respect of the transferor trust under section 653 without regard to the transfer and any transaction or event occurring after the particular time,

(2)  the first day ending at or after the particular time that would otherwise be determined in respect of the transferee trust under section 653 without regard to any transaction or event occurring after the particular time,

(3)  where the transferor trust is a joint spousal trust, a post-1971 spousal trust or a pre-1972 spousal trust and the spouse referred to in subparagraph a of the first paragraph of section 653 or in the definition of pre-1972 spousal trust in section 652.1, is alive at the particular time, the first day that ends at or after the particular time,

(3.1)  where the transferor trust is an alter ego trust, a trust to which subparagraph a.4 of the first paragraph of section 653 applies or a joint spousal trust, and the taxpayer referred to in subparagraph a or a.4 of that first paragraph, as the case may be, is alive at the particular time, the first day that ends at or after the particular time, and

(4)  where the disposition day would, but for the application of this section to the transfer, be determined in respect of the transferee trust under paragraph a of section 656.4, and the particular time is after the day that would, but for section 656.4, be determined in respect of the transferee trust under subparagraph b of the first paragraph of section 653, the first day ending at or after the particular time, and

(ii)  where the disposition day determined in respect of the transferee trust under subparagraph i is earlier than the day referred to in subparagraph 2 of subparagraph i in respect of the transferee trust, sections 653 to 656.3.1 do not apply to the transferee trust on the day referred to in the said subparagraph 2 in respect of the transferee trust;

 (b) where the transferor trust is a trust, in this paragraph referred to as an eligible trust, that is a post-1971 spousal trust or a pre-1972 spousal trust, and the spouse referred to in subparagraph a of the first paragraph and the second paragraph of section 653 or in the definition of pre-1972 spousal trust in section 652.1 is alive at the particular time, paragraph a does not apply in respect of the transfer where the transferee trust is also an eligible trust;

 (b.1) paragraph a does not apply in respect of the transfer where

(i)  the transferor trust is an alter ego trust,

(ii)  the taxpayer referred to in subparagraph a of the first paragraph of section 653 is alive at the particular time, and

(iii)  the transferee trust is an alter ego trust;

 (b.2) paragraph a does not apply in respect of the transfer where

(i)  the transferor trust is a joint spousal trust,

(ii)  either the taxpayer referred to in subparagraph a of the first paragraph of section 653, or the taxpayer’s spouse referred to in that subparagraph, is alive at the particular time, and

(iii)  the transferee trust is a joint spousal trust;

 (b.3) paragraph a does not apply in respect of the transfer where

(i)  the transferor trust is a trust to which subparagraph a.4 of the first paragraph of section 653 applies,

(ii)  the taxpayer referred to in subparagraph a.4 of the first paragraph of section 653 is alive at the particular time, and

(iii)  the transferee trust is a trust to which subparagraph a.4 of the first paragraph of section 653 applies; and

 (c) for the purposes of section 656.4, unless a day ending before the particular time has been determined under subparagraph a.1 or b of the first paragraph of section 653, or would, but for section 656.4, have been so determined, a day determined under subparagraph i of paragraph a is deemed to be a day determined under the said subparagraph a.1 or b, as the case may be, in respect of the transferee trust.

1994, c. 22, s. 228; 2003, c. 2, s. 160; 2004, c. 21, s. 90.

CHAPTER III 
DEDUCTIONS
1972, c. 23.

657. Subject to sections 657.1.1 to 657.2, a trust may deduct, in computing its income for a taxation year, the following amounts:

 (a) such amount as the trust claims as a deduction not exceeding the amount by which

(i)  such part of the amount (in this section referred to as the trust's “adjusted distributions amount for the year”) that would be its income for the year as became payable in the year to a beneficiary or was included because of section 662 in computing the income of a beneficiary, but for

(1)  this paragraph and paragraph b,

(2)  sections 92.5.2 and 92.5.3.1, except to the extent that section 92.5.2 or section 92.5.3.1 applies to an amount paid to a trust described in the second paragraph of section 441.1 or of section 441.2 respectively and before the death of the spouse referred to in the second paragraph of either of those sections, as the case may be,

(3)  the application of sections 653 to 656.2 in respect of a day determined under subparagraph a of the first paragraph of section 653, and

(4)  sections 656.3, 656.3.1 and 691, exceeds

(ii)  where the trust is a post-1971 spousal trust that was created after 20 December 1991, or would be such a trust if the reference in subparagraph a of the second paragraph of section 653 to “at the time it was created” were read as a reference to “on 20 December 1991”, and the spouse referred to in subparagraph a of the first paragraph of that section in respect of the trust is alive throughout the year, such part of the amount that would be its income for the year as became payable in the year to a beneficiary other than the spouse or was included under section 662 in computing the income of a beneficiary other than the spouse, but for

(1)  this paragraph and paragraph b,

(2)  sections 92.5.2 and 92.5.3.1, except to the extent that section 92.5.2 or section 92.5.3.1 applies to an amount paid to a trust described in the second paragraph of section 441.1 or of section 441.2 respectively and before the death of the spouse referred to in the second paragraph of either of those sections, as the case may be, and

(3)  section 691,

(ii.1)  where the trust is an alter ego trust or a joint spousal trust and the death or the later death, as the case may be, referred to in subparagraph ii of subparagraph a of the first paragraph of section 653 has not occurred before the end of the year, such part of the amount that, but for this paragraph, paragraph b and sections 92.5.2, 92.5.3.1 and 691, would be its income as became payable in the year to a beneficiary, other than a taxpayer or a spouse referred to in subparagraph 1 or 2 of subparagraph ii of subparagraph a of the first paragraph of section 653 or is included under section 662 in computing the income of a beneficiary, other than such a taxpayer or spouse,

(iii)  where the trust is an alter ego trust, a joint spousal trust, a trust to which subparagraph a.4 of the first paragraph of section 653 applies or a post-1971 spousal trust and the death or the later death, as the case may be, referred to in subparagraph a or a.4 of that first paragraph in respect of the trust occurred in the year, an amount equal to the amount by which the maximum amount that would be deductible under this section in computing the trust's income for the year if this section were read without reference to this subparagraph, exceeds the aggregate of

(1)  the amount that, but for this paragraph, paragraph b and sections 92.5.2, 92.5.3.1 and 691, would be the trust's income that became payable in the year to the taxpayer or spouse referred to in subparagraph i of subparagraph a of the first paragraph of section 653, subparagraph 1 or 2 of subparagraph ii of that subparagraph a or subparagraph a.4 of the first paragraph of that section, and

(2)  the amount that would be the trust's income for the year if that income were computed without reference to this paragraph and paragraph b and as if the year began immediately after the end of the day on which the death occurred in the year, and

(iv)  if the trust is a SIFT trust for the year, the amount by which its adjusted distributions amount for the year exceeds the amount by which the amount that would, but for this section, be its income for the year exceeds its non-portfolio earnings for the year, within the meaning assigned by the first paragraph of section 1129.70;

 (b) the aggregate of all amounts determined in relation to the trust for the year under section 659; and

 (c) (paragraph repealed).

1972, c. 23, s. 493; 1973, c. 17, s. 74; 1975, c. 22, s. 183; 1977, c. 26, s. 70; 1984, c. 15, s. 140; 1986, c. 15, s. 93; 1990, c. 59, s. 221; 1994, c. 22, s. 229; 1997, c. 3, s. 71; 1997, c. 31, s. 64; 2003, c. 2, s. 161; 2004, c. 21, s. 91; 2006, c. 13, s. 42; 2009, c. 5, s. 202; 2015, c. 21, s. 216; 2015, c. 36, s. 36.

657.1. Notwithstanding paragraph a of section 657,

 (a) where that section applies to an employee trust, the amount that may be deducted by the trust under that paragraph a is equal to the amount by which the amount that would, but for this section and that paragraph a, be its income for the year exceeds the amount by which the aggregate of its income for the year from a business exceeds the aggregate of its losses for the year from a business;

 (b) where that section applies to a trust governed by an employee benefit plan or a trust the taxable income of which for the year is subject to tax under this Part because of section 921.1 or 961.16.1, the amount that may be deducted by such a trust under that paragraph a is equal to the part of the amount that, but for this section and that paragraph a, would be the income of the trust for the year, to the extent that that part is paid in the year to a beneficiary;

 (c) where that section applies to an inter vivos trust deemed by section 851.25 to exist in respect of a congregation that is a part of a religious organization, the amount that may be deducted by such a trust under that paragraph a is equal to such part of its income as became payable in the year to a beneficiary; and

 (d) where that section applies to an employee life and health trust, the amount that may be deducted by such a trust under that paragraph a is equal to the amount that became payable by the trust in the year as a designated employee benefit (as defined in section 869.1).

1982, c. 5, s. 137; 1984, c. 15, s. 141; 2000, c. 5, s. 142; 2003, c. 2, s. 162; 2011, c. 6, s. 140.

657.1.0.1. If a trust, in its fiscal return for a taxation year under Part I of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement), designates an amount in respect of a beneficiary under the trust, in accordance with subsection 13.1 or 13.2 of section 104 of that Act, the amount that the trust may deduct under paragraph a of section 657 in computing its income for the year may in no case be greater than the total obtained by adding the amount determined under the second paragraph to

 (a) if the trust deducts a particular amount for the year under subsection 6 of that section 104 in computing its income for the purposes of that Act, the amount by which that particular amount exceeds the amount by which the aggregate of all amounts each of which is an amount that, but for those subsections 13.1 and 13.2, would be included in computing the income of a beneficiary under the trust for the year for the purposes of that Act because of subsection 13 of that section 104 or subsection 2 of section 105 of that Act, exceeds the aggregate of all amounts each of which is an amount that, but for sections 663.1 and 663.2, would be included in computing the income of a beneficiary under the trust for the year because of section 662 or 663; and

 (b) zero, if subparagraph a does not apply.

The amount to which the first paragraph refers is the amount by which the aggregate of all amounts each of which is an amount that, but for sections 663.1 and 663.2, would be included in computing the income of a beneficiary under the trust for the year because of section 662 or 663, exceeds the aggregate of all amounts each of which is an amount that, but for subsections 13.1 and 13.2 of section 104 of the Income Tax Act, would be included in computing the income of a beneficiary under the trust for the year for the purposes of that Act because of subsection 13 of that section 104 or subsection 2 of section 105 of that Act.

2006, c. 13, s. 43.

657.1.1. No deduction may be made under paragraph a of section 657 in computing the income for a taxation year of a trust in respect of such part of an amount that would otherwise be its income for the year as became payable in the year to a beneficiary who was, at any time in the year, a designated beneficiary of the trust as that expression applies for the purposes of section 210.3 of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement) unless, throughout the year, the trust was resident in Canada.

1994, c. 22, s. 230.

657.1.2. A trust that is deemed, because of section 595, to be resident in Canada for a taxation year for the purpose of computing the trust's income for the year may not deduct, under paragraph a of section 657, in computing its income for the year, an amount greater than the amount determined in respect of the trust for the year in accordance with subsection 7.01 of section 104 of the Income Tax Act(R.S.C. 1985, c. 1, (5th Suppl.)).

2015, c. 36, s. 37.

657.2. Where it is reasonable to consider that one of the main purposes for the existence of any term, condition, right or other attribute of an interest in a trust, other than a personal trust, is to give a beneficiary a percentage interest in the property of the trust that is greater than his percentage interest in the income of the trust, no amount may be deducted by the trust in computing its income under paragraph a of section 657, except by reason of section 657.1.

1988, c. 18, s. 56; 1990, c. 59, s. 222.

657.3. Notwithstanding any other provision of this Act, where a taxpayer acquires a right to or to acquire an interest in a trust, or a right to or to acquire a property of a trust, and it is reasonable to consider that one of the main purposes of the acquisition is to avoid the application of section 657.2 in respect of the trust, there shall be included in computing the income of the taxpayer for the taxation year in which he disposes of the right, otherwise than pursuant to the exercise thereof, the interest or the property, the amount by which the proceeds of disposition of the right, interest or property, as the case may be, exceeds its cost amount to the taxpayer.

1988, c. 18, s. 56.

657.4. A trust shall, in computing its income for a taxation year, deduct tax paid by it for the year under Part XII.2 of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement).

1990, c. 59, s. 223.

CHAPTER IV 
PREFERRED BENEFICIARY
1972, c. 23.

658. In this Title,

accumulating income of 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 subparagraphs a and a.1 of the first paragraph of section 653, sections 656.2 to 656.3.1, paragraph b of section 657 and section 691;

 (b) as if the trust were deducting, in computing its income for the year under paragraph a of section 657, the greatest amount it would, but for section 657.1.0.1, be entitled to deduct for the year under that paragraph;

 (c) (paragraph repealed);

 (d) (paragraph repealed);

 (e) without reference to section 92.5.2, except where that section applies to an amount paid to a trust described in the second paragraph of section 441.1 and before the death of the spouse referred to in that paragraph;

 (f) without reference to section 92.5.3.1, except where that section applies to an amount paid to a trust described in the second paragraph of section 441.2 and before the death of the spouse referred to in that paragraph;

preferred beneficiary under a trust for a taxation year of the trust means a beneficiary under the trust at the end of the year who is resident in Canada at that time if

 (a) the beneficiary is

(i)  an individual in respect of whom subparagraphs a to c of the first paragraph of section 752.0.14 apply for the individual's taxation year, in this definition referred to as the beneficiary's year, that ends in the taxation year of the trust, or

(ii)  an individual

(1)  who attained the age of 18 years before the end of the beneficiary's year, was a dependant of another individual for the beneficiary's year and was dependent on the other individual because of an impairment in mental or physical functions, and

(2)  whose income, computed without reference to section 659, for the beneficiary's year does not exceed the amount used for that year under clause B of subparagraph ii of paragraph a of the definition of preferred beneficiary in subsection 1 of section 108 of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement); and

 (b) the beneficiary is

(i)  the settlor of the trust,

(ii)  the spouse or former spouse of the settlor of the trust, or

(iii)  a child, grandchild or great grandchild of the settlor of the trust or the spouse of any such person;

settlor

 (a) in relation to a testamentary trust, means the individual referred to in section 677; and

 (b) in relation to an inter vivos trust,

(i)  if the trust is created by the transfer, assignment or other disposition of property thereto by not more than one individual and the fair market value of that property and of the property subsequently disposed of to the trust by the same individual exceeds the fair market value, at the time of disposition, of property subsequently disposed of to the trust by any other person, means that individual, and

(ii)  if the trust is created by the transfer, assignment or any other disposition of property made jointly by an individual and his spouse and by no other person and the rule provided for in subparagraph i applies to that disposition, means that individual and his spouse.

In the first paragraph, a dependant of an individual for a taxation year means a person who, during the year, is described in paragraph f of section 752.0.1.

1972, c. 23, s. 496; 1984, c. 15, s. 142; 1985, c. 25, s. 106; 1990, c. 59, s. 224; 1994, c. 22, s. 231; 1997, c. 31, s. 65; 2000, c. 5, s. 143; 2003, c. 2, s. 163; 2004, c. 21, s. 92; 2005, c. 1, s. 129; 2005, c. 38, s. 81; 2006, c. 13, s. 44; 2006, c. 36, s. 44.

659. If a trust and a preferred beneficiary under the trust for a taxation year of the trust make, in respect of the year, a valid election for the purposes of subsection 14 of section 104 of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement), the lesser of the amount determined for the purposes of that subsection in respect of the beneficiary in relation to the trust for the year, in this section referred to as the “designated amount”, and the proportion of the amount attributable to the preferred beneficiary in respect of the trust for the year that the designated amount is of the aggregate of all amounts determined for the purposes of that subsection in respect of the preferred beneficiaries under the trust in relation to the trust for the year, is to be included in computing the income of the beneficiary for the beneficiary's taxation year in which the taxation year of the trust ends and is not to be included in computing the income of a beneficiary under the trust for a subsequent taxation year.

1972, c. 23, s. 497; 1973, c. 17, s. 75; 1997, c. 31, s. 65; 1999, c. 83, s. 55; 2006, c. 13, s. 45.

659.1. Where section 659 applies in respect of a taxation year, the trust and the preferred beneficiary having made, in respect of the year, a valid election under that section shall send to the Minister, on or before the trust's filing-due date for the year, a copy of every document sent to the Minister of Revenue of Canada in connection with that election.

Where, as a consequence of the operation of subsection 3.2 of section 220 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)), the time for making a valid election referred to in section 659 is extended or such an election that was made is amended or rescinded, the following rules apply:

 (a) the trust and the preferred beneficiary having made the election shall notify the Minister in writing and attach to the notice a copy of every document to that effect sent by the trust and the preferred beneficiary to the Minister of Revenue of Canada; and

 (b) the trust incurs, jointly with the preferred beneficiary, a penalty equal to $100 for each complete month in the period beginning on the trust's filing-due date for the year and ending on the day on which the notice referred to in subparagraph a is sent to the Minister, up to $5,000.

Notwithstanding sections 1010 to 1011, such assessments of tax, interest and penalties under this Part shall be made as are necessary by the Minister for any taxation year to take into account the election or the amended or rescinded election referred to in the second paragraph.

1999, c. 83, s. 56; 2000, c. 5, s. 293; 2009, c. 5, s. 203.

659.2. A trust and a preferred beneficiary under the trust may, for a taxation year that includes 22 February 1994, jointly make an election, or amend or revoke an election made, under section 659, as it read for that year, where the election, amendment or revocation

 (a) is made solely because of an election or revocation to which section 726.9.8, 726.9.9 or 726.9.10 applies; and

 (b) is filed with the Minister in the manner prescribed for the purposes of section 659 when the election or revocation referred to in subparagraph a is filed.

An election that is made or amended in accordance with the first paragraph in respect of the taxation year referred to in that paragraph is deemed to have been made on time for the purposes of section 659, as it read for that taxation year, and the election that is revoked in accordance with the first paragraph is deemed, otherwise than for the purposes of this section, never to have been made.

2000, c. 5, s. 144.

660. For the purposes of section 659, the allocable amount for a preferred beneficiary under a trust in respect of the trust for a taxation year is

 (a) where the trust is, at the end of the year, an alter ego trust, a joint spousal trust, a post-1971 spousal trust or a pre-1972 spousal trust and a beneficiary, referred to in subparagraph a of the first paragraph of section 653 or in the definition of pre-1972 spousal trust in section 652.1, is alive at the end of the year, an amount equal to the trust’s accumulating income for the year, if the preferred beneficiary is a beneficiary so referred to, and, in any other case, nil;

 (b) where paragraph a does not apply and the preferred beneficiary’s interest in the trust is not solely contingent on the death of another beneficiary who has a capital interest in the trust and who does not have an income interest in the trust, the trust’s accumulating income for the year; and

 (c) in any other case, nil.

1972, c. 23, s. 498; 1973, c. 17, s. 76; 1975, c. 22, s. 185; 1977, c. 26, s. 71; 1978, c. 26, s. 111; 1994, c. 22, s. 232; 1995, c. 49, s. 236; 1997, c. 31, s. 66; 2003, c. 2, s. 164.

660.1. If, at the end of the day on which a taxpayer dies and as a consequence of the death, an amount would, but for this section, be deemed under section 656.3 to have been paid to a trust out of the trust's NISA Fund No. 2, and the trust and the legal representative of the taxpayer make a valid election under subsection 14.1 of section 104 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) after 19 December 2006 in relation to that fund, the portion of the amount, corresponding to the portion designated in the election, is deemed to have been paid to the taxpayer out of the taxpayer's NISA Fund No. 2 immediately before the end of the day and, for the purposes of subparagraph b of the second paragraph of section 92.5.2 in respect of the trust, the amount is deemed to have been paid out of the trust's NISA Fund No. 2 immediately before the end of the day.

Chapter V.2 of Title II of Book I applies in relation to an election made under subsection 14.1 of section 104 of the Income Tax Act or in relation to an election made under this section before 20 December 2006.

1994, c. 22, s. 233; 2009, c. 5, s. 204.

660.2. Where, at the end of the day on which a taxpayer dies and as a consequence of the death, an amount would, but for this section, be deemed by section 656.3.1 to have been paid to a trust out of the trust’s farm income stabilization account and the trust and the legal representative of the taxpayer so elect in prescribed form, such portion of the amount as is designated in the election is deemed to have been paid to the taxpayer out of a farm income stabilization account of the taxpayer immediately before the end of the day and, for the purposes of subparagraph b of the second paragraph of section 92.5.3.1 in respect of the trust, the amount is deemed to have been paid out of the trust’s farm income stabilization account immediately before the end of the day.

2004, c. 21, s. 93.

CHAPTER V 
RULES RESPECTING THE COMPUTATION OF INCOME OF A BENEFICIARY
1972, c. 23.

661. A taxpayer shall include, in computing his income for a taxation year, the value of all benefits received by him in the year under a trust, irrespective of when it was created, except to the extent that the value of such benefits is otherwise required to be included in computing his income for a taxation year, or has been deducted under paragraph n of section 257 in computing the adjusted cost base of his interest in the trust or would be so deducted if that paragraph applied in respect of such interest and were read without reference to subparagraph 3 of subparagraph i.1 of the said paragraph.

1972, c. 23, s. 499; 1990, c. 59, s. 225.

662. A reasonable amount, according to the circumstances, paid in a taxation year by a trust out of its own income for outlays, maintenance and taxes respecting a property which, under the trust arrangement, must be maintained for the use of a usufructuary for life or a beneficiary, must be included in computing the income of the latter from the trust for that year.

1972, c. 23, s. 500.

663. A beneficiary of a trust shall include, in computing his income for a particular taxation year,

 (a) in the case of a trust, other than a trust referred to in subparagraph a of the third paragraph of section 647, such part of the amount that, but for paragraphs a and b of section 657, would be the trust’s income for the trust’s taxation year that ended in the particular year as became payable in the trust’s taxation year to the beneficiary; and

 (b) in the case of a trust governed by an employee benefit plan to which the beneficiary has contributed as an employer, such part of the amount that, but for paragraphs a and b of section 657, would be the trust's income for its taxation year that ended in the particular year as was paid to the beneficiary in that taxation year of the trust;

 (c) (paragraph repealed).

1972, c. 23, s. 501; 1978, c. 26, s. 112; 1982, c. 5, s. 138; 1984, c. 15, s. 143; 1990, c. 59, s. 226; 1991, c. 25, s. 176; 2003, c. 2, s. 165.

663.1. Subject to section 671.7, where a trust, in its fiscal return for a taxation year under Part I of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement), in accordance with subsection 13.1 of section 104 of that Act, designates an amount in respect of a beneficiary under the trust, the lesser of the amount so designated and the amount determined under the second paragraph in respect of the beneficiary for the year, is deemed, for the purposes of sections 662 and 663, not to have been paid or to have become payable in the year to or for the benefit of the beneficiary or out of income of the trust.

The amount referred to in the first paragraph is, in respect of a beneficiary under a trust for a taxation year of the trust, determined by the following formula:


(A / B) × (C − D − E).


For the purposes of the formula contemplated in the second paragraph,

 (a) A is the beneficiary's share of the income of the trust for the year, computed without reference to this Act;

 (b) B is the aggregate of all amounts each of which is a beneficiary's share of the income of the trust for the year, computed without reference to this Act;

 (c) C is the aggregate of all amounts each of which is an amount that, but for this section and section 663.2, would be included in computing the income of a beneficiary under the trust for the year by reason of section 662 or 663;

 (d) D is the amount deducted under paragraph a of section 657 in computing the income of the trust for the year;

 (e) E is the amount determined by the trust for the year and used as the value of C for the purposes of the formula contemplated in the second paragraph of section 663.2 or, if no amount is so determined, nil.

A trust that designates an amount in respect of a beneficiary, in accordance with the first paragraph, in respect of a taxation year shall notify the Minister in writing on or before its filing-due date for the year.

1990, c. 59, s. 227; 1999, c. 83, s. 57; 2004, c. 21, s. 94.

663.2. Subject to section 671.7, where a trust, in its fiscal return for a taxation year under Part I of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement), in accordance with subsection 13.2 of section 104 of that Act, designates an amount in respect of a beneficiary under the trust, the lesser of the amount so designated and the amount determined under the second paragraph in respect of the beneficiary for the year, is deemed, for the purposes of sections 662 and 663, except where section 663 applies for the purposes of section 668, not to have been paid or to have become payable in the year to or for the benefit of the beneficiary or out of income of the trust, and, except for the purposes of section 668 as it applies for the purposes of sections 668.0.1 to 668.2, shall reduce the amount of the taxable capital gain of the beneficiary otherwise included in computing the beneficiary’s income for the year by reason of section 668.

The amount referred to in the first paragraph is, in respect of a beneficiary under a trust for a taxation year of the trust, determined by the following formula:


(A / B) × C.


In the formula in the second paragraph,

 (a) A is the amount designated by the trust for the year in respect of the beneficiary under section 668;

 (b) B is the aggregate of all amounts each of which has been designated for the year under section 668 in respect of a beneficiary under the trust;

 (c) C is the amount determined by the trust and used in computing each of the amounts determined for the year in respect of its beneficiaries under the second paragraph, not exceeding the amount by which the aggregate of all amounts each of which is an amount that, but for this section and section 663.1, would be included in computing the income of a beneficiary under the trust by reason of section 662 or 663 for the year exceeds the amount deducted under paragraph a of section 657 in computing the income of the trust for the year;

 (d) where B is an amount equal to zero, the fraction of which it is the denominator is deemed to be equal to the fraction that would be established if A were the amount attributed by the trust for the year to the beneficiary under subsection 21 of section 104 of the Income Tax Act and if B were the aggregate of all amounts each of which is an amount attributed for the year to a beneficiary under the trust under that subsection 21.

A trust that designates an amount in respect of a beneficiary, in accordance with the first paragraph, in respect of a taxation year shall notify the Minister in writing on or before its filing-due date for the year.

1990, c. 59, s. 227; 1999, c. 83, s. 58; 2004, c. 21, s. 95; 2006, c. 13, s. 46.

663.3. For the purposes of section 663, an amount referred to in subsection 31 of section 104 of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement) regarding a beneficiary under a trust in respect of a taxation year of the trust is deemed to be income of the trust for the year that has become payable by the trust to the beneficiary at the end of that year.

1990, c. 59, s. 227.

663.4. If an amount (in this section referred to as the “SIFT trust's non-deductible distributions amount for the taxation year”) is determined under subparagraph iv of paragraph a of section 657 for a taxation year, in relation to a SIFT trust, the following rules apply:

 (a) each beneficiary under the SIFT trust to whom at any time in the year an amount became payable by the trust is deemed to have received at that time a taxable dividend that was paid at that time by a taxable Canadian corporation;

 (b) the amount of a dividend that, in accordance with subparagraph a, is deemed to have been received by a particular beneficiary at any time in a taxation year is equal to the amount determined by the formula


A/B × C; and


 (c) the amount of a dividend described in subparagraph a in relation to a beneficiary under the SIFT trust is deemed for the purposes of section 663 not to have become payable to the beneficiary.

In the formula in subparagraph b of the first paragraph,

 (a) A is the amount that became payable at the time determined under that subparagraph b by the SIFT trust to the particular beneficiary;

 (b) B is the aggregate of all amounts each of which is an amount that became payable at any time in the taxation year by the SIFT trust to a beneficiary; and

 (c) C is the SIFT trust's non-deductible distributions amount for the taxation year.

2009, c. 5, s. 205.

664. Notwithstanding section 652, any part of the amount that, but for paragraphs a and b of section 657, would be the income of a trust for a taxation year throughout which it was resident in Canada is, for the purposes of paragraph a of section 657 and section 663, deemed to have become payable to an individual in the year if

 (a) that part of the amount has not become payable in the year;

 (b) that part of the amount was held in trust for an individual who did not attain 21 years of age before the end of the year;

 (c) the right to that part of the amount vested in the individual at or before the end of the year otherwise than because of the exercise by any person of, or the failure of any person to exercise, any discretionary power; and

 (d) the right to that part of the amount is not subject to any future condition, other than a condition that the individual survive to an age not exceeding 40 years.

1972, c. 23, s. 502; 1990, c. 59, s. 228; 1997, c. 31, s. 67.

665. A taxpayer who has included in computing his income for a taxation year, under section 663 or 684, an amount in respect of his income interest in the trust may deduct, for the same year, except to the extent that an amount in respect thereof has been deducted in computing his taxable income pursuant to section 738 or 845, the lesser of such amount and the excess of the cost of his interest over the aggregate of the amounts deductible as such under this section in computing his income for previous taxation years.

1972, c. 23, s. 503; 1984, c. 15, s. 144; 1988, c. 18, s. 57; 1989, c. 5, s. 77.

665.1. The cost to a taxpayer of an income interest of the taxpayer in a trust is deemed to be nil unless any part of the interest was acquired by the taxpayer from a person who was the beneficiary in respect of the interest immediately before its acquisition by the taxpayer, or the cost of any part of the interest would be determined not to be nil under paragraph c of section 785.1 or subparagraph c of the first paragraph of section 785.2.

1984, c. 15, s. 144; 2003, c. 2, s. 166; 2009, c. 5, s. 206.

666. A portion of a taxable dividend received by a trust, in a particular taxation year of the trust, on a share of the capital stock of a taxable Canadian corporation, is deemed, for the purposes of the second paragraph of section 497, the third and fourth paragraphs of section 686 and sections 738 to 745, not to have been received by the trust and is deemed, for the purposes of this Part, to be a taxable dividend on the share received by a taxpayer in the taxpayer's taxation year in which the particular year ends if

 (a) an amount equal to that portion is designated by the trust, in respect of the taxpayer, in the trust's fiscal return filed under this Part for the particular year and may reasonably be considered, having regard to all the circumstances including the terms and conditions of the trust arrangement, to be part of the amount that, because of any of sections 659, 661 and 662 or paragraph a of section 663, was included in computing the income for that taxation year of the taxpayer;

 (b) the taxpayer is in the particular year a beneficiary under the trust;

 (c) the trust is, throughout the particular year, resident in Canada; and

 (d) the aggregate of all amounts each of which is an amount designated, under this section, by the trust in respect of a beneficiary under the trust in the trust's fiscal return filed under this Part for the particular year is not greater than the aggregate of all amounts each of which is the amount of a taxable dividend, received by the trust in the particular year, on a share of the capital stock of a taxable Canadian corporation.

1972, c. 23, s. 504; 1984, c. 15, s. 145; 1990, c. 59, s. 229; 1997, c. 3, s. 71; 2003, c. 2, s. 166; 2009, c. 5, s. 207.

667. For the purposes of subparagraph 3 of subparagraph i.1 of paragraph n of section 257, the third and fourth paragraphs of section 686 and sections 741.2, 742, 742.2 and 744.2, the portion of the aggregate of all amounts each of which is the amount of a dividend, other than a taxable dividend, paid to a trust in a taxation year throughout which it was resident in Canada, in respect of a share of the capital stock of a corporation resident in Canada, that may reasonably be considered, having regard to the circumstances and the terms and conditions of the trust arrangement, to be part of an amount that became payable in the year to a beneficiary under the trust shall be designated by the trust, in its fiscal return for the year, in respect of the beneficiary.

1972, c. 23, s. 505; 1990, c. 59, s. 230; 1997, c. 3, s. 71; 2000, c. 5, s. 145; 2001, c. 7, s. 70.

668. For the purposes of sections 28 and 727 to 737, except as they apply to Title VI.5 of Book IV, an amount of a trust's net taxable capital gains for a particular taxation year of the trust is deemed to be a taxable capital gain, for the taxation year of a taxpayer in which the particular year ends, from the disposition by the taxpayer of capital property if

 (a) the amount is designated by the trust, in respect of the taxpayer, in the trust's fiscal return filed under this Part for the particular year and may reasonably be considered, having regard to all the circumstances including the terms and conditions of the trust arrangement, to be part of the amount that, because of any of sections 659, 661 and 662 or paragraph a of section 663, was included in computing the income for that taxation year of the taxpayer;

 (b) the taxpayer is

(i)  in the particular year, a beneficiary under the trust, and

(ii)  resident in Canada, unless the trust is, throughout the particular year, a mutual fund trust;

 (c) the trust is, throughout the particular year, resident in Canada; and

 (d) the aggregate of all amounts each of which is an amount designated, under this section, by the trust in respect of a beneficiary under the trust in the trust's fiscal return filed under this Part for the particular year is not greater than the trust's net taxable capital gains for the particular year.

1972, c. 23, s. 506; 1975, c. 22, s. 186; 1977, c. 26, s. 72; 1985, c. 25, s. 107; 1987, c. 67, s. 130; 1990, c. 59, s. 231; 1996, c. 39, s. 273; 2009, c. 5, s. 208.

668.0.1. (Repealed).

1990, c. 59, s. 232; 2015, c. 21, s. 217.

668.0.2. A trust that has filed its fiscal return for its taxation year that includes 22 February 1994 may subsequently designate an amount under section 668 for that year, or amend or revoke a designation made under that section for that year where the designation, amendment or revocation

 (a) is made solely because of an increase or decrease in the net taxable capital gains of the trust for the year that results from an election or revocation to which section 726.9.8, 726.9.9 or 726.9.10 applies; and

 (b) is filed with the Minister, with an amended fiscal return for the year, when the election or revocation referred to in subparagraph a is filed with the Minister.

A designation, amendment or revocation made in accordance with the first paragraph for the taxation year referred to in that paragraph that affects an amount determined in respect of a beneficiary under section 668.1 may be made only where the trust

 (a) designates an amount, or amends or revokes a designation made, under section 668.1 for that year in respect of the beneficiary; and

 (b) files the designation, amendment or revocation referred to in subparagraph a with the Minister when required by subparagraph b of the first paragraph.

Where a trust designates an amount, or amends or revokes a designation, under section 668 or 668.1 in accordance with this section, the designation or amended designation, as the case may be, is deemed to have been made in the trust's fiscal return for the trust's taxation year that includes 22 February 1994, and the designation that was revoked is deemed, other than for the purposes of this section, never to have been made.

2000, c. 5, s. 146.

668.1. Where, for the purposes of section 668, a personal trust or a trust referred to in section 53 designates an amount in respect of a beneficiary in respect of its net taxable capital gains for a taxation year, in this section and sections 668.2 to 668.2.4 referred to as the “designation year”, the following rules apply:

 (a) the trust shall in its fiscal return under this Part for the designation year designate an amount in respect of its eligible taxable capital gains for the designation year in respect of the beneficiary equal to the amount determined in respect of the beneficiary under each of subparagraphs i to iii of paragraph b;

 (b) the beneficiary is deemed, for the purposes of sections 28, 462.8 to 462.10 and 727 to 737 as they apply for the purposes of Title VI.5 of Book IV, to have disposed of the capital property referred to in any of subparagraphs i to iii if a capital gain is determined under any of those subparagraphs in respect of the beneficiary for the beneficiary's taxation year in which the designation year ends and to have a taxable capital gain for that taxation year

(i)  from a disposition of capital property that is qualified farm property of the beneficiary equal to the amount determined by the formula


(A × B × C)/(D × E);


(ii)  from a disposition of capital property that is a qualified small business corporation share of the beneficiary equal to the amount determined by the formula


(A × B × F)/(D × E);


(iii)  from a disposition of a capital property that is a qualified fishing property of the beneficiary equal to the amount determined by the formula


(A × B × G)/(D × E); and


 (c) for the purposes of Title VI.5 of Book IV, the capital property referred to in paragraph b is deemed to have been disposed of by the beneficiary in the beneficiary's taxation year in which the designation year ends.

1987, c. 67, s. 130; 1990, c. 59, s. 233; 1996, c. 39, s. 174; 1997, c. 3, s. 71; 2003, c. 2, s. 167; 2007, c. 12, s. 69; 2009, c. 15, s. 97.

668.2. For the purposes of the formulas in subparagraphs i to iii of paragraph b of section 668.1,

 (a) A is the lesser of

(i)  the amount by which the aggregate of amounts designated under section 668 for the designation year by the trust exceeds the aggregate of the amounts determined in relation to the trust under section 663.2 for the designation year, and

(ii)  the trust's eligible taxable capital gains for the designation year;

 (b) B is the amount by which the amount designated under section 668 for the designation year by the trust in respect of the beneficiary exceeds the amount determined in relation to the trust in respect of the beneficiary under section 663.2 for the taxation year;

 (c) C is the amount that would be determined under paragraph b of section 28 for the designation year in respect of the trust's capital gains and capital losses if the only properties referred to in that paragraph were qualified farm properties of the trust disposed of by it after 31 December 1984;

 (d) D is the aggregate of all amounts each of which is the amount determined under paragraph b for the designation year in respect of a beneficiary under the trust;

 (e) E is the aggregate of the amounts determined under paragraphs c, f and g for the designation year in respect of the beneficiary;

 (f) F is the amount that would be determined under paragraph b of section 28 for the designation year in respect of the trust's capital gains and capital losses if the only properties referred to in that paragraph were qualified small business corporation shares of the trust, other than qualified farm property, disposed of by it after 17 June 1987; and

 (g) G is the amount that would be determined under paragraph b of section 28 for the designation year in respect of the trust's capital gains and capital losses if the only properties referred to in that paragraph were qualified fishing properties of the trust disposed of by it after 1 May 2006.

1987, c. 67, s. 130; 1990, c. 59, s. 233; 1993, c. 16, s. 243; 1994, c. 22, s. 234; 1996, c. 39, s. 174; 1997, c. 3, s. 71; 2006, c. 13, s. 47; 2007, c. 12, s. 70.

668.2.1. A beneficiary who, because of subparagraph i of paragraph b of section 668.1, is deemed, for the purposes of Title VI.5 of Book IV, to have a taxable capital gain (in this section referred to as the “specified taxable capital gain”) from a disposition of capital property that is qualified farm property of the beneficiary, for the beneficiary's taxation year that includes 19 March 2007 and in which the designation year of the trust ends, is deemed, for the purposes of section 726.7.3 and if the trust complies with the requirements of section 668.2.4, to have a taxable capital gain from the disposition of qualified farm property of the beneficiary after 18 March 2007 equal to the amount determined by the formula


A × B/C.


In the formula in the first paragraph,

 (a) A is the amount of the specified taxable capital gain;

 (b) B is, if the designation year of the trust includes 19 March 2007, the amount that would be determined in respect of the trust for the designation year under paragraph b of section 28 in respect of capital gains and capital losses if the only properties referred to in that paragraph were qualified farm properties of the trust that were disposed of by the trust after 18 March 2007; and

 (c) C is, if the designation year of the trust includes 19 March 2007, the amount that would be determined in respect of the trust for the designation year under paragraph b of section 28 in respect of capital gains and capital losses if the only properties referred to in that paragraph were qualified farm properties of the trust.

2009, c. 15, s. 98.

668.2.2. A beneficiary who, because of subparagraph ii of paragraph b of section 668.1, is deemed, for the purposes of Title VI.5 of Book IV, to have a taxable capital gain (in this section referred to as the “specified taxable capital gain”) from a disposition of capital property that is a qualified small business corporation share of the beneficiary, for the beneficiary's taxation year that includes 19 March 2007 and in which the designation year of the trust ends, is deemed, for the purposes of section 726.7.3 and if the trust complies with the requirements of section 668.2.4, to have a taxable capital gain from the disposition of a qualified small business corporation share of the beneficiary after 18 March 2007 equal to the amount determined by the formula


A × B/C.


In the formula in the first paragraph,

 (a) A is the amount of the specified taxable capital gain;

 (b) B is, if the designation year of the trust includes 19 March 2007, the amount that would be determined in respect of the trust for the designation year under paragraph b of section 28 in respect of capital gains and capital losses if the only properties referred to in that paragraph were qualified small business corporation shares of the trust that were disposed of by the trust after 18 March 2007; and

 (c) C is, if the designation year of the trust includes 19 March 2007, the amount that would be determined in respect of the trust for the designation year under paragraph b of section 28 in respect of capital gains and capital losses if the only properties referred to in that paragraph were qualified small business corporation shares of the trust.

2009, c. 15, s. 98.

668.2.3. A beneficiary who, because of subparagraph iii of paragraph b of section 668.1, is deemed, for the purposes of Title VI.5 of Book IV, to have a taxable capital gain (in this section referred to as the “specified taxable capital gain”) from a disposition of capital property that is qualified fishing property of the beneficiary, for the beneficiary's taxation year that includes 19 March 2007 and in which the designation year of the trust ends, is deemed, for the purposes of section 726.7.3 and if the trust complies with the requirements of section 668.2.4, to have a taxable capital gain from the disposition of qualified fishing property of the beneficiary after 18 March 2007 equal to the amount determined by the formula


A × B/C.


In the formula in the first paragraph,

 (a) A is the amount of the specified taxable capital gain;

 (b) B is, if the designation year of the trust includes 19 March 2007, the amount that would be determined in respect of the trust for the designation year under paragraph b of section 28 in respect of capital gains and capital losses if the only properties referred to in that paragraph were qualified fishing properties of the trust that were disposed of by the trust after 18 March 2007; and

 (c) C is, if the designation year of the trust includes 19 March 2007, the amount that would be determined in respect of the trust for the designation year under paragraph b of section 28 in respect of capital gains and capital losses if the only properties referred to in that paragraph were qualified fishing properties of the trust.

2009, c. 15, s. 98.

668.2.4. A trust shall determine and designate, in its fiscal return filed under this Part for the designation year of the trust, the following amounts in respect of a beneficiary:

 (a) the amount that is, under section 668.2.1, determined to be the beneficiary's taxable capital gain from the disposition, after 18 March 2007, of qualified farm property of the beneficiary;

 (b) the amount that is, under section 668.2.2, determined to be the beneficiary's taxable capital gain from the disposition, after 18 March 2007, of a qualified small business corporation share of the beneficiary; and

 (c) the amount that is, under section 668.2.3, determined to be the beneficiary's taxable capital gain from the disposition, after 18 March 2007, of qualified fishing property of the beneficiary.

2009, c. 15, s. 98.

668.3. For the purposes of sections 668 to 668.2, the net taxable capital gains of a trust for a taxation year are the amount determined by the formula


A + B - C - D.


In the formula in the first paragraph,

 (a) A is the aggregate of all amounts each of which is the taxable capital gain of the trust for the year from the disposition of a capital property that was held by the trust immediately before the disposition;

 (b) B is the aggregate of all amounts each of which is an amount deemed under section 668 to be a taxable capital gain of the trust for the year;

 (c) C is the aggregate of all amounts each of which is the allowable capital loss (other than an allowable business investment loss) of the trust for the year from the disposition of a capital property; and

 (d) D is the net capital losses deducted by the trust under section 729 in computing its taxable income for the year.

1987, c. 67, s. 130; 1989, c. 5, s. 78; 1990, c. 59, s. 234; 2015, c. 21, s. 218.

668.4. For the purposes of sections 668.1 to 668.2.4,

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

 (a) its annual gains limit, within the meaning assigned by the first paragraph of section 726.6, for the year; and

 (b) the amount by which its cumulative gains limit, within the meaning assigned by the first paragraph of section 726.6, at the end of the year, exceeds the aggregate of all amounts designated under sections 668.1 and 668.2 by the trust in respect of beneficiaries for taxation years before that year;

qualified farm property of an individual has the meaning assigned to it by subparagraph a of the first paragraph of section 726.6;

qualified fishing property of an individual has the meaning assigned by subparagraph a.0.1 of the first paragraph of section 726.6;

qualified small business corporation share of an individual has the meaning assigned to it by section 726.6.1.

1987, c. 67, s. 130; 1990, c. 59, s. 235; 1994, c. 22, s. 235; 1995, c. 49, s. 153; 1996, c. 39, s. 175; 1997, c. 3, s. 71; 2007, c. 12, s. 71; 2009, c. 15, s. 99.

668.5. (Repealed).

2003, c. 2, s. 168; 2015, c. 21, s. 219.

668.6. (Repealed).

2003, c. 2, s. 168; 2015, c. 21, s. 219.

668.7. (Repealed).

2003, c. 2, s. 168; 2009, c. 5, s. 209; 2015, c. 21, s. 219.

668.8. (Repealed).

2003, c. 2, s. 168; 2015, c. 21, s. 219.

669. (Repealed).

1975, c. 21, s. 17; 1975, c. 22, s. 187; 1978, c. 26, s. 113; 1982, c. 56, s. 14; 1987, c. 21, s. 15; 1989, c. 5, s. 79.

669.1. Where a testamentary trust has, in a taxation year throughout which it was resident in Canada, received a pension benefit or a benefit out of or under a foreign retirement arrangement and has designated, in its fiscal return for the year under this Part, an amount in respect of a beneficiary under the trust equal to such portion, in this section referred to as the beneficiary's share, of the benefit as was designated by the trust exclusively in respect of the beneficiary and as may reasonably be considered, having regard to all the circumstances including the terms and conditions of the trust arrangement, to be part of the amount that, by reason of section 663, was included in computing the income of the beneficiary for a particular taxation year, the beneficiary's share of the benefit is deemed, for the purposes of section 752.0.8, to be a payment described in subparagraph i of paragraph a of that section that is included in computing the beneficiary's income for the particular taxation year where the benefit is an amount described in that subparagraph i and the beneficiary was the spouse of the settlor of the trust.

1984, c. 15, s. 146; 1988, c. 18, s. 58; 1989, c. 5, s. 80; 1991, c. 25, s. 82; 1993, c. 16, s. 244; 1994, c. 22, s. 236; 1997, c. 85, s. 102; 1999, c. 83, s. 59.

669.1.1. (Repealed).

1991, c. 25, s. 83; 1999, c. 83, s. 60.

669.2. The amount received by a testamentary trust in a taxation year upon or after the death of an employee in recognition of his service in an office or employment shall be deemed to be an amount received by a particular beneficiary in the trust at the particular time upon or after the death of the employee in recognition of the employee's service in an office or employment and not to have been received by the trust to the extent that the amount may reasonably be considered, having regard to all the circumstances including the terms and conditions of the trust arrangement, to be paid or payable at the particular time to the particular beneficiary.

1984, c. 15, s. 146.

669.3. For the purposes of sections 657 and 663, the amount designated by a trust in its fiscal return filed under this Part for a taxation year beginning before 1 January 2007 throughout which it was resident in Canada which does not exceed the amount determined in accordance with section 669.4 is deemed to have become payable by the trust to its beneficiaries in the year according to the share designated in the fiscal return for each of the beneficiaries.

The first paragraph does not apply unless the designated shares referred to in that paragraph are reasonable having regard to the portions of the income of the trust for the year determined without reference to the provisions of this Act which are included in computing the income of the beneficiaries for the year.

1986, c. 15, s. 94; 1989, c. 5, s. 81; 1990, c. 59, s. 236; 2005, c. 1, s. 130.

669.4. For the purposes of the first paragraph of section 669.3, the amount that may be designated by a trust under that section in respect of a taxation year shall not exceed the amount determined by the formula


(A − B) × C / D.


In the formula provided for in the first paragraph,

 (a) A is the aggregate of all amounts each of which is an amount that

(i)  is not deductible in computing the trust’s income for the year, but that would be deductible were it not for section 144, or

(ii)  is required to be included in computing the trust’s income for the year under section 89 or 425 or because of an amount designated under section 669.3 by another trust;

 (b) B is the aggregate of all amounts each of which is an amount that

(i)  is deductible in computing the trust’s income for the year under section 145, otherwise than because of the membership of the trust in a partnership, or

(ii)  is not included in computing the trust’s income for the year, but that would be deductible were it not for section 486;

 (c) C is the aggregate of all amounts each of which is a portion of the trust’s income for the year, determined without reference to the provisions of this Act, that is payable in the year to a beneficiary of the trust or that is required to be included in computing the income of such a beneficiary for the year under section 662; and

 (d) D is the trust’s income for the year, determined without reference to the provisions of this Act.

1986, c. 15, s. 94; 1987, c. 67, s. 131; 1994, c. 22, s. 237; 1997, c. 3, s. 71; 2005, c. 1, s. 130.

669.5. If a testamentary trust receives, in a taxation year, an amount under an income-averaging annuity contract respecting income from artistic activities, that amount is deemed, for the purposes of paragraphs c and d.1 of section 312 and section 1129.68, to be an amount received at a particular time by a particular beneficiary under the trust, and not to have been received by the trust, to the extent that the amount may reasonably be considered, having regard to the circumstances and the terms and conditions of the trust arrangement, to be paid or payable at the particular time to the particular beneficiary.

2005, c. 23, s. 54.

670. (Repealed).

1972, c. 23, s. 507; 1978, c. 26, s. 114; 1990, c. 59, s. 237.

670.1. (Repealed).

1984, c. 15, s. 147; 1988, c. 18, s. 59; 1990, c. 59, s. 237.

670.2. (Repealed).

1988, c. 18, s. 60; 1990, c. 59, s. 237.

671. For the purposes of this section and sections 146.1, 671.1 and 772.2 to 772.13, an amount in respect of a trust's income for a particular taxation year of the trust from a source situated in a foreign country, is deemed to be income of a taxpayer, for the taxation year of the taxpayer in which the particular year ends, from that source if

 (a) the amount is designated by the trust, in respect of the taxpayer, in the trust's fiscal return filed under this Part for the particular year and may reasonably be considered, having regard to all the circumstances including the terms and conditions of the trust arrangement, to be part of the amount that, because of section 659 or paragraph a of section 663, was included in computing the income for that taxation year of the taxpayer;

 (b) the taxpayer is in the particular year a beneficiary under the trust;

 (c) the trust is, throughout the particular year, resident in Canada; and

 (d) the aggregate of all amounts each of which is an amount designated, under this section in respect of that source, by the trust in respect of a beneficiary under the trust in the trust's fiscal return filed under this Part for the particular year is not greater than the trust's income for the particular year from that source.

1972, c. 23, s. 508; 1972, c. 26, s. 52; 1973, c. 18, s. 23; 1982, c. 5, s. 139; 1984, c. 15, s. 148; 1990, c. 59, s. 238; 1995, c. 63, s. 47; 2009, c. 5, s. 210.

671.1. A taxpayer who is a beneficiary under a trust is deemed, for the purposes of this section and sections 146.1 and 772.2 to 772.13, to have paid to the government of a foreign country or political subdivision of a foreign country, as business-income tax or non-business-income tax, as the case may be, for a particular taxation year in respect of a particular source situated in that country, the amount determined by the formula


A × B / C.


For the purposes of the formula in the first paragraph,

 (a) A is the amount that, but for section 671.3, would be the business-income tax or non-business-income tax, as the case may be, paid by the trust to the government of the foreign country or political subdivision of the foreign country in respect of the particular source for a taxation year, referred to in this paragraph as that year, of the trust that ends in the particular year;

 (b) B is the amount deemed, because of a designation made in accordance with section 671 for that year by the trust, to be the taxpayer's income from the particular source; and

 (c) C is the trust's income for that year from the particular source.

1995, c. 63, s. 48.

671.2. For the purposes of sections 772.2 to 772.13, there shall be deducted in computing a trust's income from a particular source for a taxation year the aggregate of all amounts each of which is an amount deemed, because of a designation under section 671 by the trust for the year, to be income of beneficiaries under the trust from that source.

1995, c. 63, s. 48.

671.3. For the purposes of sections 146.1 and 772.2 to 772.13, there shall be deducted in computing the business-income tax or non-business-income tax, as the case may be, paid by a trust to the government of a foreign country or political subdivision of a foreign country in respect of a particular source situated in that country for a taxation year the aggregate of all amounts each of which is an amount deemed, because of a designation under section 671 by the trust for the year, to be paid by beneficiaries under the trust as business-income tax or non-business-income tax, as the case may be, in respect of that source.

1995, c. 63, s. 48.

671.4. In sections 671 to 671.3, business-income tax and non-business-income tax have the meanings assigned by section 772.2.

1995, c. 63, s. 48.

CHAPTER V.1 
BENEFICIARY UNDER A DESIGNATED TRUST
2004, c. 21, s. 96.

671.5. In this chapter,

designated beneficiary under a designated trust for a taxation year of the designated trust means a tax-liable beneficiary under the designated trust for the year or, if a beneficiary under the designated trust is a partnership, a tax-liable member of the partnership for the partnership's fiscal period in which the designated trust's taxation year ends, who has for the year, with any person or partnership with whom the beneficiary or the member is not dealing at arm's length, a share of the aggregate of the income interests in the designated trust that is an amount of $5,000 or more, or a share of the aggregate of the income interests in the designated trust or of the aggregate of the capital interests in the designated trust that corresponds to at least 10% of the aggregate of the income interests or of the aggregate of the capital interests in the designated trust;

designated trust means a trust that is resident in Canada but outside Québec on the last day of a taxation year, but does not include a unit trust or a trust described in any of paragraphs a to e.1 of the definition of trust in subsection 1 of section 108 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.));

tax-liable beneficiary under a designated trust for a particular taxation year of the designated trust means a beneficiary under the designated trust who is

 (a) an individual who is resident in Québec on the last day of the individual's taxation year in which the particular taxation year ends; or

 (b) a corporation that has an establishment in Québec at any time in the corporation's taxation year in which the particular taxation year ends;

tax-liable member of a partnership for a fiscal period of the partnership in which ends a taxation year of a designated trust of which the partnership is a beneficiary, means a member of the partnership who is

 (a) an individual who is resident in Québec on the last day of the individual's taxation year in which the fiscal period ends; or

 (b) a corporation that has an establishment in Québec at any time in the corporation's taxation year in which the fiscal period ends.

For the purposes of the definitions of tax-liable beneficiary and tax-liable member in the first paragraph, the following rules apply:

 (a) if an individual dies or ceases to be resident in Canada in a taxation year, the last day of the individual's taxation year is the day of the individual's death or the last day on which the individual was resident in Canada; and

 (b) if an individual to whom the first paragraph of section 25 applies is a beneficiary under a designated trust or a member of a partnership that is a beneficiary under a designated trust, the individual is not a tax-liable beneficiary under the designated trust or a tax-liable member of the partnership, as the case may be, even though the individual is deemed to be resident in Québec on the last day of a taxation year for the purposes of the second paragraph of section 25.

2004, c. 21, s. 96; 2011, c. 6, s. 141.

671.6. For the purposes of this chapter, the Minister may determine that a beneficiary under a designated trust for a taxation year of the designated trust, or a member of a partnership that is a beneficiary under a designated trust for a taxation year of the designated trust, is a designated beneficiary under the designated trust for the year, if the Minister is of the opinion that the share, for the year, of the aggregate of the income interests or of the aggregate of the capital interests in the designated trust of the beneficiary or member, or of the aggregate of the income interests or of the aggregate of the capital interests in the designated trust of any person or partnership with whom or with which the beneficiary or member is not dealing at arm’s length, has been reduced by reason of a transaction or event or a series of transactions or events.

2004, c. 21, s. 96.

671.7. Where a designated trust, in its fiscal return for a taxation year under Part I of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement), in accordance with subsection 13.1 or 13.2 of section 104 of that Act, designates an amount in respect of a beneficiary under the designated trust who is a designated beneficiary for the year or a partnership at least one member of which is a designated beneficiary for the year, the presumption in the first paragraph of section 663.1 or 663.2 does not apply in respect of the amount so designated in respect of that designated beneficiary or does not apply in respect of the amount that may reasonably be considered to relate to the share of the designated beneficiary who is a member of the partnership in the amount so designated in respect of that partnership.

2004, c. 21, s. 96.

671.8. Every tax-liable beneficiary under a designated trust for a particular taxation year of the designated trust and, if the beneficiary under the designated trust for the particular year is a partnership, every tax-liable member of the partnership for a fiscal period of the partnership in which the particular year ends shall enclose with the fiscal return the beneficiary or the member is required to file under section 1000 or would be required to file under that section if tax were payable by the beneficiary or the member under this Part for the tax-liable beneficiary's taxation year in which the particular year ends or for the tax-liable member's taxation year in which the fiscal period ends, as the case may be, an information return, in the prescribed form, containing

 (a) the name of the designated trust;

 (b) the name and address of the trustee under the designated trust for the particular year; and

 (c) the date from which the beneficiary is such a beneficiary under the designated trust.

Where the beneficiary referred to in the first paragraph has, for the particular year, with any person or partnership with whom or with which the beneficiary is not dealing at arm's length, a share of the aggregate of the income interests in the designated trust that is an amount of $5,000 or more, or a share of the aggregate of the income interests in the designated trust or of the aggregate of the capital interests in the designated trust that corresponds to at least 10% of the aggregate of the income interests in the designated trust or of the aggregate of the capital interests in the designated trust, the information return referred to in that paragraph shall also contain the following information, for the particular year and for the four taxation years preceding the particular year:

 (a) any former address of the trustee under the designated trust for the particular year; and

 (b) the name and address of any trustee preceding the trustee under the designated trust for the particular year.

2004, c. 21, s. 96; 2011, c. 6, s. 142.

671.9. Every designated beneficiary under a designated trust for a particular taxation year of the designated trust shall enclose with the fiscal return the designated beneficiary is required to file under section 1000 for the designated beneficiary’s taxation year in which the particular year ends, or would be required to so file if tax were payable by the designated beneficiary under this Part for the designated beneficiary’s taxation year in which the particular year ends, an information return, in prescribed form, in which the designated beneficiary indicates the amounts that are paid to the designated beneficiary or became payable in the particular year by the designated trust, or that are paid for the benefit of the designated beneficiary, and that were designated by the designated trust in its fiscal return filed for the particular year under Part I of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement), in accordance with subsection 13.1 or 13.2 of section 104 of that Act.

Every designated beneficiary who is a member of a partnership that is a beneficiary under the designated trust for a particular taxation year of the designated trust, shall enclose with the fiscal return the designated beneficiary is required to file under section 1000 for the designated beneficiary’s taxation year in which ends the fiscal period of the partnership in which the particular year ends, or would be required to so file if tax were payable by the designated beneficiary under this Part for the designated beneficiary’s taxation year in which ends the partnership’s fiscal period in which the particular year ends, an information return, in prescribed form, in which the designated beneficiary indicates the designated beneficiary’s share of the amounts that are paid or became payable in the particular year by the designated trust to the partnership of which the designated beneficiary is a member, or that are paid for the benefit of the designated beneficiary, and that were designated by the designated trust in its fiscal return filed for the particular year under Part I of the Income Tax Act, in accordance with subsection 13.1 or 13.2 of section 104 of that Act.

2004, c. 21, s. 96.

671.10. Every designated beneficiary under a designated trust for a taxation year of the designated trust who omits to include an amount, under section 662 or 663, in computing the designated beneficiary’s income for a particular taxation year, in relation to an amount designated by the designated trust in its fiscal return filed for the year under Part I of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement), in accordance with subsection 13.1 or 13.2 of section 104 of that Act, incurs a penalty equal to the greater of $100 and 25% of the amount by which

 (a) the tax that would have been payable by the designated beneficiary for the particular year under this Act if

(i)  the designated beneficiary’s taxable income for the particular year, determined on the basis of the information provided in the fiscal return filed by the designated beneficiary for the purposes of this Act in respect of the particular year, were computed by adding that portion of the amount determined in the second paragraph that may reasonably be attributed to that omission, and

(ii)  the designated beneficiary’s tax payable for the particular year were computed by subtracting from the aggregate of all deductions from the tax otherwise payable by the designated beneficiary for the particular year the portion of any such deduction as may reasonably be attributed to that omission, and by adding to that aggregate any amount not deducted from the tax otherwise payable by the designated beneficiary for the particular year and that is deductible under Book V, if the amount that entitles the designated beneficiary to that deduction is wholly applicable to an amount that was not reported by the designated beneficiary in the fiscal return filed by the designated beneficiary for the purposes of this Act in respect of the particular year and that were required to be included in computing the designated beneficiary’s income for the particular year, under section 662 or 663, in relation to an amount designated by a designated trust in accordance with subsection 13.1 or 13.2 of section 104 of the Income Tax Act; exceeds

 (b) the tax that would have been payable by the designated beneficiary for the particular year under this Act had it been determined on the basis of the information provided in the designated beneficiary’s fiscal return filed for the purposes of this Act in respect of the particular year.

The amount to which subparagraph i of subparagraph a of the first paragraph refers in respect of a designated beneficiary under a designated trust for a taxation year of the designated trust is the aggregate of

 (a) the amount by which the aggregate of the amounts that were not indicated by the designated beneficiary in the fiscal return filed by the designated beneficiary for the purposes of this Act in respect of the particular year and that were required to be included in computing the designated beneficiary’s income for the particular year, under section 662 or 663, in relation to an amount designated by the designated trust in accordance with subsection 13.1 or 13.2 of section 104 of the Income Tax Act, exceeds the aggregate of the amounts that were not deducted by the designated beneficiary in computing the designated beneficiary’s taxable income for the particular year indicated by the designated beneficiary in the fiscal return, were deductible in computing the designated beneficiary’s taxable income under this Act and were wholly applicable to the amounts that were required to be so included therein; and

 (b) the amount by which the aggregate of amounts, other than those provided for in sections 727 to 737, deducted by the designated beneficiary in computing the designated beneficiary’s taxable income for the particular year indicated by the designated beneficiary in the fiscal return for the purposes of this Act in respect of the particular year exceeds the aggregate of amounts, other than those provided for in sections 727 to 737, deductible in computing the designated beneficiary’s taxable income for the particular year under this Act.

For the purposes of the first paragraph, the taxable income of a designated beneficiary under a designated trust for a taxation year of the designated trust, determined on the basis of information provided in the designated beneficiary’s fiscal return for the purposes of this Act in respect of the particular year, is deemed not to be less than zero.

However, the penalty provided for in the first paragraph does not apply where the designated beneficiary under a designated trust for a taxation year of the designated trust incurs in respect of the omission the penalty provided for in section 1049.

2004, c. 21, s. 96; 2005, c. 1, s. 131.

CHAPTER VI 
Repealed, 1990, c. 59, s. 239.
1990, c. 59, s. 239.

672. (Repealed).

1975, c. 22, s. 188; 1984, c. 15, s. 149; 1985, c. 25, s. 108; 1990, c. 59, s. 239.

673. (Repealed).

1975, c. 22, s. 188; 1977, c. 26, s. 73; 1978, c. 26, s. 115; 1985, c. 25, s. 109; 1990, c. 59, s. 239.

674. (Repealed).

1975, c. 22, s. 188; 1977, c. 26, s. 74; 1978, c. 26, s. 116; 1984, c. 15, s. 150; 1985, c. 25, s. 110; 1990, c. 59, s. 239.

675. (Repealed).

1975, c. 22, s. 188; 1978, c. 26, s. 117; 1990, c. 59, s. 239.

676. (Repealed).

1975, c. 22, s. 188; 1977, c. 26, s. 75; 1984, c. 15, s. 151; 1985, c. 25, s. 111; 1990, c. 59, s. 239.

676.1. (Repealed).

1984, c. 15, s. 151; 1985, c. 25, s. 111; 1990, c. 59, s. 239.

CHAPTER VII 
TESTAMENTARY TRUST
1972, c. 23.

677. Notwithstanding any inconsistent provision of this Part, the rules provided in this chapter apply to a testamentary trust.

For the purposes of this chapter, “testamentary trust”, in a taxation year, means a trust that arose upon and as a consequence of the death of an individual, including a trust referred to in section 7.4.1, but does not include

 (a) a trust created by a person other than the individual;

 (b) a trust created after 12 November 1981 if, before the end of the taxation year, property was contributed to the trust otherwise than by an individual on or after his death, and as a consequence thereof;

 (c) a trust created before 13 November 1981 if after 28 June 1982 property has been contributed to the trust otherwise than by an individual on or after his death and as a consequence thereof, or if before the end of the taxation year, the fair market value of the property owned by the trust that was contributed to the trust otherwise than by an individual on or after his death and as a consequence thereof and the property owned by the trust that was substituted for such property exceeds the fair market value of the property owned by the trust that was contributed by an individual on or after his 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 paragraph, 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 20 December 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 subparagraph as the “specified party”, with whom a beneficiary under 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

(1)  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

(2)  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, 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

(1)  the debt or other obligation arose because of a payment made by the specified party for or on behalf of the trust,

(2)  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

(3)  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, unless the trust is the individual's succession 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 succession within that 12-month period, within any longer period that the Minister considers reasonable in the circumstances, or

(iv)  incurred by the trust before 24 October 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 26 June 2013 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.

1972, c. 23, s. 509; 1984, c. 15, s. 152; 1986, c. 19, s. 136; 1995, c. 49, s. 154; 2009, c. 5, s. 211; 2015, c. 21, s. 220.

677.1. For the purposes of section 677, a contribution to a trust does not include a qualifying expenditure (within the meaning of section 118.04 of the Income Tax Act (R.S.C. 1985, c. 1, (5th Suppl.)) of a beneficiary under the trust.

2010, c. 25, s. 51.

678. (Repealed).

1972, c. 23, s. 510; 1997, c. 31, s. 68; 2009, c. 5, s. 212.

679. (Repealed).

1972, c. 23, s. 511; 2009, c. 5, s. 212.

680. The income of a person, for a taxation year, from a testamentary trust is deemed to be the aggregate of the benefits received by him for any taxation year of the trust that has ended during such year, determined under the provisions of this Title except for sections 683 to 692.

1972, c. 23, s. 512; 1973, c. 17, s. 77.

681. Where an individual with an income from a testamentary trust died after the end of a taxation year of the trust and before the end of the calendar year during which that taxation year ended, his income from the trust for the period commencing immediately after the end of the taxation year of the trust and ending at the time of death shall be included in computing the individual's income for the year in which he died unless his legal representative has elected otherwise, in which case the legal representative shall file a separate fiscal return under this Part for the period comprised between the end of the taxation year of the trust and the date of the death and pay the tax for the period under this Part as if

 (a) the individual were another person;

 (b) the period were a taxation year;

 (c) that other person's only income for the period were the individual's income from the trust for that period; and

 (d) subject to sections 693.1, 752.0.26 and 776.1.5.0.19, that other person were entitled to the deductions to which the individual was entitled under sections 725 to 725.7, 752.0.0.1 to 752.0.13.3, 752.0.14 to 752.0.18.15, 776.1.5.0.17 and 776.1.5.0.18 for the period in computing the individual's taxable income or the individual's tax payable under this Part, as the case may be, for the period.

1972, c. 23, s. 513; 1973, c. 17, s. 78; 1986, c. 19, s. 137; 1989, c. 5, s. 82; 1993, c. 64, s. 40; 1994, c. 22, s. 238; 1997, c. 14, s. 290; 1999, c. 83, s. 273; 2001, c. 53, s. 90; 2005, c. 1, s. 132; 2006, c. 36, s. 45.

682. Instead of making the payments required by sections 1025, 1026 and 1026.0.1, the testamentary trust shall pay to the Minister, within 90 days after the end of each taxation year, the tax payable under this Part by it for the year.

1972, c. 23, s. 514; 1995, c. 49, s. 155.

CHAPTER VIII 
DISPOSITION OF AN INTEREST
1972, c. 23.

683. In this chapter,

capital interest of a taxpayer in a trust means all rights of the taxpayer as a beneficiary under the trust, and after 31 December 1999 includes a right, other than a right acquired before 1 January 2000 and disposed of before 1 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;

eligible offset at 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 as consideration for 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;

income interest of 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 31 December 1999, includes a right, other than a right acquired before 1 January 2000 and disposed of before 1 March 2000, to enforce payment of an amount by the trust that arises as a consequence of any such right.

1972, c. 23, s. 515; 1989, c. 77, s. 71; 1990, c. 59, s. 240; 2003, c. 2, s. 169.

684. A taxpayer who disposes in a taxation year of an income interest of the taxpayer in a trust shall, if section 685 does not apply, include in computing the taxpayer’s income for the year the amount by which the proceeds of disposition exceed, where that interest includes a right to enforce payment of an amount by the trust, the amount in respect of that right that has been included in computing the taxpayer’s income for a taxation year because of section 663.

The disposition referred to in the first paragraph is deemed not to give rise to any capital gain or capital loss, to the taxpayer, and the cost of any property received by the taxpayer as consideration is the fair market value of the property at the time of the disposition.

1972, c. 23, s. 516; 2003, c. 2, s. 169.

685. Any trust distributing, at a particular time, any property owned by it to a beneficiary in satisfaction of all or any part of his income interest in the trust, is deemed to dispose of such property at its fair market value at that time.

1972, c. 23, s. 517; 1973, c. 17, s. 79; 2001, c. 7, s. 71.

686. In computing a taxpayer’s taxable capital gain from the disposition of property that is all or any part of the taxpayer’s capital interest in a personal trust or a prescribed trust, the adjusted cost base to the taxpayer of the property immediately before the disposition is deemed to be equal to the greater of

 (a) the adjusted cost base, otherwise determined, to the taxpayer of the property immediately before that time; and

 (b) the amount by which the cost amount to the taxpayer of the property immediately before that time exceeds the aggregate of all amounts deducted under paragraph b.1 of section 257 in computing the adjusted cost base to the taxpayer of the property immediately before the disposition.

The presumption referred to in the first paragraph does not apply where any part of such interest has ever been acquired for consideration and, at the time of disposition, the trust is not resident in Canada.

Where a taxpayer other than a mutual fund trust disposes of all or any part of the capital interest in a trust, the taxpayer's loss from the disposition is deemed to be equal to the amount by which the amount of that loss otherwise determined exceeds the amount by which

 (a) the aggregate of all amounts each of which is an amount that was received or would, but for section 666, have been received by the trust on a share of the capital stock of a corporation before the disposition, and, where the trust is a unit trust, after 31 December 1987, and

(i)  where the taxpayer is a corporation,

(1)  was a taxable dividend that was designated under section 666 by the trust in respect of the taxpayer, to the extent that the amount of the dividend was deductible because of sections 738 to 745 or section 845 in computing the taxpayer’s taxable income for any taxation year, or

(2)  was an amount designated under section 667 by the trust in respect of the taxpayer,

(ii)  where the taxpayer is another trust, was an amount designated under section 666 or 667 by the trust in respect of the taxpayer, and

(iii)  where the taxpayer is not a corporation, trust or partnership, was an amount designated under section 667 by the trust in respect of the taxpayer; exceeds

 (b) the portion of the aggregate determined in accordance with subparagraph a that may reasonably be considered to have resulted in a reduction, under this paragraph, of the taxpayer's loss otherwise determined from a previous disposition of an interest in the trust.

Where a partnership disposes of all or any part of the capital interest in a trust, the share of a person, other than another partnership or a mutual fund trust, of any loss of the partnership from the disposition is deemed to be equal to the amount by which the amount of that loss otherwise determined exceeds the amount by which

 (a) the aggregate of all amounts each of which is an amount that was received or would, but for section 666, have been received by the trust on a share of the capital stock of a corporation before the disposition, and, where the trust is a unit trust, after 31 December 1987, and

(i)  where the person is a corporation,

(1)  was a taxable dividend that was designated under section 666 by the trust in respect of the partnership, to the extent that the amount of the dividend was deductible because of sections 738 to 745 or section 845 in computing the person’s taxable income for any taxation year, or

(2)  was a dividend designated under section 667 by the trust in respect of the partnership and was an amount received by the person,

(ii)  where the person is an individual other than a trust, was a dividend designated under section 667 by the trust in respect of the partnership and was an amount received by the person, and

(iii)  where the person is another trust, was a dividend designated under section 666 or 667 by the trust in respect of the partnership and was an amount received by the person, or that would have been received by the person if this Part were read without reference to section 666; exceeds

 (b) the portion of the aggregate determined in accordance with subparagraph a that may reasonably be considered to have resulted in a reduction, under this paragraph, of the person's loss otherwise determined from a previous disposition of an interest in the trust.

Where all or part of a capital interest in a trust is disposed of by a taxpayer and the capital interest is not a capital property of the taxpayer, despite section 690, its cost amount is deemed to be the amount by which the amount that would, if this Part were read without reference to this paragraph and section 690, be its cost amount exceeds the aggregate of all amounts, each of which is an amount in respect of the capital interest that has become payable to the taxpayer before the disposition and that would be described in subparagraph i.1 of paragraph n of section 257 if its subparagraph 3 were read without reference to “, that is, subject to section 257.4, equal to the amount designated by the trust to be payable to the taxpayer under section 668”.

1972, c. 23, s. 518; 1973, c. 17, s. 80; 1984, c. 15, s. 153; 1990, c. 59, s. 241; 1993, c. 16, s. 245; 1995, c. 49, s. 156; 1996, c. 39, s. 176; 1997, c. 3, s. 71; 2000, c. 5, s. 147; 2001, c. 7, s. 72; 2003, c. 2, s. 170; 2015, c. 24, s. 91.

687. The cost to a taxpayer of a capital interest in a personal trust or a prescribed trust is deemed to be

 (a) where the taxpayer elects under section 726.9.2 in respect of the interest and the trust does not elect under that section in respect of any property of the trust, equal to the taxpayer's cost of the interest determined under subparagraph a of the first paragraph of section 726.9.2; and

 (b) in any other case, nil, unless

(i)  any part of the interest was acquired by the taxpayer from a person who was the beneficiary in respect of the interest immediately before its acquisition by the taxpayer, or

(ii)  the cost of any part of the interest would be determined not to be nil under sections 242 to 247.1, as they read before 1 January 1993, subparagraph c of the second paragraph of section 736 and the third paragraph of that section, paragraph c of section 785.1 or subparagraph c of the first paragraph of section 785.2.

1975, c. 22, s. 189; 1984, c. 15, s. 154; 2000, c. 5, s. 147; 2003, c. 2, s. 171; 2009, c. 5, s. 215.

687.1. For the purposes of sections 83 to 85.6, the fair market value at any time of a capital interest in a trust is deemed to be equal to the aggregate of

 (a) the amount that would, if this Part were read without reference to this section, be its fair market value at that time; and

 (b) the aggregate of all amounts, each of which is an amount in respect of the capital interest that became payable to the taxpayer before that time and that would be described in subparagraph i.1 of paragraph n of section 257 if its subparagraph 3 were read without reference to “, that is, subject to section 257.4, equal to the amount designated by the trust to be payable to the taxpayer under section 668”.

2015, c. 24, s. 92.

688. Subject to sections 688.0.0.1, 688.0.0.2 and 691 to 692, if at a particular time a property of a personal trust or a prescribed trust is distributed (otherwise than as a SIFT trust wind-up event) by the trust to a taxpayer who was a beneficiary under the trust and there is a resulting disposition of all or any part of the taxpayer's capital interest in the trust, the following rules apply:

 (a) the trust is deemed to dispose of the property for proceeds of disposition equal to its cost amount to the trust immediately before that time;

 (b) the taxpayer is, subject to section 688.2, deemed to acquire the property at a cost equal to the total of its cost amount to the trust immediately before that time and the specified percentage of the amount by which the adjusted cost base to the taxpayer of the capital interest or part thereof immediately before that time, determined without reference to the first paragraph of section 686, exceeds the cost amount to the taxpayer of the capital interest or part thereof immediately before that time;

 (c) the taxpayer's proceeds of disposition of all or part, as the case may be, of the capital interest in the trust disposed of by the taxpayer on the distribution are deemed to be equal to the amount by which the cost at which the taxpayer would be deemed under paragraph b to acquire the property if the specified percentage referred to in that paragraph were 100% exceeds the aggregate of all amounts each of which is an eligible offset at that time of the taxpayer in respect of the capital interest or part thereof;

 (d) for the purposes of sections 93 to 104, Chapter III of Title III and any regulations made under paragraph a of section 130 or under section 130.1, where the property distributed was depreciable property of a prescribed class of the trust and the amount that was the capital cost to the trust of such property exceeds the cost at which, in accordance with sections 688, 689, 691 and 692, the taxpayer is deemed to acquire the property, the following rules apply:

(i)  the capital cost of the property to the taxpayer is deemed to be the capital cost of the property to the trust, and

(ii)  the excess is deemed to have been allowed to the taxpayer as depreciation in respect of the property for the taxation years preceding the acquisition by him of the property;

 (d.1) (subparagraph repealed);

 (e) where the property distributed was incorporeal capital property of the trust in respect of a business of the trust, the following rules apply:

(i)  (subparagraph repealed),

(ii)  for the purposes of Division III of Chapter II of Title III, Chapter III of Title III and sections 188 and 189, where the incorporeal capital amount of the trust in respect of the property exceeds the cost at which the taxpayer is deemed, under this section, to have acquired the property,

(1)  the incorporeal capital amount of the taxpayer in respect of the property is deemed to be the incorporeal capital amount of the trust in respect of the property, and

(2)  3/4 of the excess are deemed to have been deducted by the taxpayer in respect of the property under paragraph b of section 130 in computing income for taxation years ending before the acquisition by the taxpayer of the property and after the adjustment time, within the meaning of section 107.1, of the taxpayer in respect of the business, and

(iii)  for the purpose of determining after the particular time the amount required by paragraph b of section 105 to be included in computing the taxpayer's income in respect of any subsequent disposition of property of the business, there shall be added to the amount otherwise determined under subparagraph ii of subparagraph a of the second paragraph of section 107, the proportion of the amount determined under that subparagraph ii in respect of the business of the trust immediately before the particular time that the fair market value, immediately before the particular time, of the incorporeal capital property is of the fair market value, immediately before the particular time, of all the incorporeal capital property of the trust in respect of the business.

For the purposes of subparagraph b of the first paragraph, the specified percentage is

 (a) where the property is capital property other than depreciable property, 100%;

 (b) where the property is incorporeal capital property in respect of a business of the trust, 100%; and

 (c) in any other case, 50%.

1972, c. 23, s. 519; 1973, c. 17, s. 81; 1975, c. 22, s. 190; 1977, c. 26, s. 76; 1979, c. 18, s. 55; 1990, c. 59, s. 242; 1993, c. 16, s. 246; 1994, c. 22, s. 239; 1996, c. 39, s. 177; 2000, c. 5, s. 148; 2001, c. 7, s. 73; 2003, c. 2, s. 172; 2005, c. 1, s. 133; 2009, c. 5, s. 216; 2010, c. 25, s. 52; 2011, c. 6, s. 143; 2015, c. 21, s. 221.

688.0.0.1. If a trust makes a distribution of a property to a beneficiary under the trust in full or partial satisfaction of the beneficiary's capital interest in the trust and makes a valid election under subsection 2.001 of section 107 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) after 19 December 2006 in respect of the distribution of property, section 688 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, incorporeal capital property in respect of, or property included in the inventory of, a business carried on by the trust through an establishment in Canada immediately before the time of the distribution.

Chapter V.2 of Title II of Book I applies in relation to an election made under subsection 2.001 of section 107 of the Income Tax Act or in relation to an election made under this section before 20 December 2006.

2003, c. 2, s. 173; 2005, c. 1, s. 134; 2009, c. 5, s. 217.

688.0.0.2. If a trust that is not resident in Canada makes a distribution of a property, other than a property described in subparagraph b or c of the first paragraph of section 688.0.0.1, to a beneficiary under the trust in full or partial satisfaction of the beneficiary's capital interest in the trust, and the beneficiary makes a valid election under subsection 2.002 of section 107 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) after 19 December 2006 in respect of the distribution of property, the following rules apply:

 (a) section 688 does not apply to the distribution; and

 (b) for the purposes of subparagraph b of the first paragraph of section 686, the cost amount of the interest to the beneficiary is deemed to be nil.

Chapter V.2 of Title II of Book I applies in relation to an election made under subsection 2.002 of section 107 of the Income Tax Act or in relation to an election made under this section before 20 December 2006.

2003, c. 2, s. 173; 2009, c. 5, s. 218.

688.0.1. If, at any time, a property is distributed by a personal trust to a taxpayer in circumstances in which section 688 applies, the property would, if the trust had so designated the property under section 274.0.1, be a principal residence, within the meaning of that section, of the trust for a taxation year, and the trust makes a valid election under subsection 2.01 of section 107 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) after 19 December 2006 in respect of the distribution of property, the following rules apply:

 (a) the trust is 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 is deemed to have reacquired the property at the particular time-a-cost equal to that fair market value.

Chapter V.2 of Title II of Book I applies in relation to an election made under subsection 2.01 of section 107 of the Income Tax Act or in relation to an election made under this section before 20 December 2006.

1993, c. 16, s. 247; 1994, c. 22, s. 240; 2001, c. 7, s. 74; 2003, c. 2, s. 174; 2005, c. 23, s. 55; 2009, c. 5, s. 219.

688.1. Where at a particular time a property of a trust is distributed by the trust to a beneficiary under the trust, there would, if this Part were read without reference to subparagraphs d and e of the second paragraph of section 248, be a resulting disposition of all or any part of the beneficiary's capital interest in the trust, in this section referred to as the former interest, and the rules in Title I.2 of Book VI and in sections 569.0.2, 688 and 688.4 do not apply in respect of the distribution, the following rules apply:

 (a) the trust is deemed to dispose of the property for proceeds of disposition equal to its fair market value at that time;

 (b) the beneficiary is deemed to acquire the property at a cost equal to the proceeds referred to in subparagraph a;

 (c) subject to subparagraph e, 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 by which the proceeds referred to in subparagraph a, other than the portion of the proceeds that is a payment to which subparagraph d or e of the second paragraph of section 248 applies, exceed the amount determined under the second paragraph;

 (d) notwithstanding subparagraphs a to c, where the trust is not resident in Canada at that time, the property is not described in subparagraph b or c of the first paragraph of section 688.0.0.1 and, but for this subparagraph, there would be no income, loss, taxable capital gain or allowable capital loss of a taxpayer in respect of the property by reason of the application of section 467 to the disposition at that time of the property, the following rules apply:

(i)  the trust is deemed to dispose of the property for proceeds of disposition equal to the cost amount of the property,

(ii)  the beneficiary is deemed to acquire 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 by which the fair market value of the property exceeds the aggregate of

(1)  the portion of the amount of the distribution that is a payment to which subparagraph d or e of the second paragraph of section 248 applies, and

(2)  the aggregate of 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 taxation year 2003, the trust has elected under section 688.1.1 for the year and the trust so elects in respect of the distribution in prescribed form filed with the Minister with the trust's fiscal return for the year, the following rules apply:

(i)  this section shall be read without reference to subparagraph c and the second paragraph, 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 subparagraph a.

The amount to which subparagraph c of the first paragraph refers is equal to the aggregate of

 (a) where the property referred to in the first paragraph is not a Canadian resource property or foreign resource property, an amount equal to the amount by which the fair market value of the property at the time referred to in that first paragraph exceeds the aggregate of

(i)  the cost amount to the trust of the property immediately before that time, and

(ii)  the portion, if any, of the excess that would be determined under this subparagraph a if it were read without reference to this subparagraph that is a payment to which subparagraph d or e of the second paragraph of section 248 applies; and

 (b) the aggregate of all amounts each of which is an eligible offset at that time of the beneficiary in respect of the former interest.

1990, c. 59, s. 243; 2000, c. 5, s. 149; 2001, c. 7, s. 75; 2003, c. 2, s. 175; 2009, c. 5, s. 220; 2010, c. 25, s. 53.

688.1.1. If a trust that is resident in Canada for a taxation year makes in the taxation year one or more distributions of property in circumstances in which section 688.1 applies, the following rules apply:

 (a) the income of the trust for the year, determined without reference to paragraph a of section 657, is to be computed, for the purposes of that paragraph a and section 663, without regard to all of those distributions to persons not resident in Canada, including a partnership other than a Canadian partnership, except for distributions of cash denominated in Canadian currency, if the trust makes a valid election under subsection 2.11 of section 107 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) after 19 December 2006 to have paragraph a of that subsection 2.11 apply in relation to all of those distributions; and

 (b) the income of the trust for the year, determined without reference to paragraph a of section 657, is to be computed, for the purposes of that paragraph a and section 663, without regard to all of those distributions, except for distributions of cash denominated in Canadian currency, if the trust makes a valid election under subsection 2.11 of section 107 of the Income Tax Act after 19 December 2006 to have paragraph b of that subsection 2.11 apply in relation to all of those distributions.

Chapter V.2 of Title II of Book I applies in relation to an election made under paragraph a or b of subsection 2.11 of section 107 of the Income Tax Act or in relation to an election made under this section before 20 December 2006.

2003, c. 2, s. 176; 2009, c. 5, s. 221; 2015, c. 21, s. 222.

688.1.2. An election made under section 688.1.1 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 20 December 2000 and applies to any taxation year that ends before 1 January 2003; and

 (b) the proceeds of disposition of a beneficiary’s interest in the trust have been determined under subparagraph e of the first paragraph of section 688.1.

2003, c. 2, s. 176.

688.2. Where at any time before 1 January 2005 a trust referred to in paragraph c, d or e of the definition of flow-through entity in the first paragraph of section 251.1 distributes property to a beneficiary under the trust as consideration for all or a portion of the beneficiary's interests in the trust and the beneficiary files with the Minister an election in respect of the property on or before the beneficiary's filing-due date for the taxation year that includes that time, the beneficiary shall include 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 by which the beneficiary's exempt capital gains balance, within the meaning of section 251.1, in respect of the trust for the beneficiary's taxation year that includes that time exceeds the aggregate of all amounts each of which is

(i)  an amount by which a capital gain is reduced under Chapter II.1 of Title IV in the year because of the beneficiary's exempt capital gains balance in respect of the trust,

(ii)  subject to the second paragraph, twice an amount by which a taxable capital gain is reduced under Chapter II.1 of Title IV 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 section;

 (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.

Where the beneficiary’s taxation year includes 28 February 2000 or 17 October 2000 or begins after 28 February 2000 and ends before 17 October 2000, the reference to the word twice in subparagraph ii of subparagraph a of the first paragraph shall be read, with the necessary modifications, as a reference to the fraction that is the reciprocal of the fraction in paragraphs a to d of section 231.0.1 that applies to the beneficiary for the year.

2000, c. 5, s. 150; 2001, c. 7, s. 76; 2003, c. 2, s. 177; 2010, c. 25, s. 54.

688.3. The rules in section 688.4 apply in respect of a trust's distribution of property to a taxpayer if

 (a) the distribution is a SIFT trust wind-up event to which section 569.0.2 does not apply;

 (b) the property is a share and all the shares distributed on any SIFT trust wind-up event of the trust are of a single class of shares 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 first SIFT trust wind-up event of the trust or, if it is earlier, the first distribution to the trust that is a SIFT trust wind-up event of another trust.

2010, c. 25, s. 55.

688.4. The rules to which section 688.3 refers, in relation to a trust's distribution of property, are as follows:

 (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 Québec property or taxable Canadian property of the taxpayer, the property is deemed to be, at any time that is within 60 months after the distribution, taxable Québec property or taxable Canadian property of the taxpayer, as the case may be; and

 (e) if a liability of the trust becomes as a consequence of the distribution a liability of the corporation described in paragraph b of section 688.3 in respect of the distribution, and the amount payable by the corporation on the maturity of the liability is equal to 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 to have been issued by the corporation at the time at which, and under the same agreement as that under which, it was issued by the trust, and not to have been issued by the trust.

2010, c. 25, s. 55; 2011, c. 6, s. 144.

689. (Repealed).

1972, c. 23, s. 520; 1975, c. 22, s. 191; 1985, c. 25, s. 112; 1987, c. 67, s. 132; 2003, c. 2, s. 178.

690. In this Title, notwithstanding the definition of cost amount in section 1, the cost amount to a taxpayer at a particular time of a capital interest or part of a capital interest in a trust, other than a trust that is a foreign affiliate of the taxpayer, means, except for the purposes of section 688.4 and of Chapter X,

 (a) where the trust distributes to the taxpayer money or other property, in satisfaction of all or part of the taxpayer’s capital interest, the aggregate of

(i)  the money so distributed,

(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 the particular time is immediately before the time that is immediately before the time of the taxpayer's death and sections 653 to 656.1 deem the trust to dispose of property at the end of the day that includes the particular time, the amount that would be determined under subparagraph 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).


For the purposes of the formula set forth in subparagraph b of the first paragraph,

 (a) A is the aggregate of

(i)  all money of the trust on hand immediately before that time,

(ii)  all amounts each of which is the cost amount to the trust, immediately before that time, of each other property;

(iii)  (subparagraph repealed);

 (b) B is the aggregate of all amounts each of which is the amount of any debt owing by the trust immediately before that time;

 (c) C is the fair market value, at that time, of the capital interest or any part thereof in the trust;

 (d) D is the fair market value, at that time, of all capital interests in the trust.

1972, c. 23, s. 521; 1973, c. 17, s. 82; 1975, c. 22, s. 192; 1986, c. 15, s. 95; 1990, c. 59, s. 244; 1993, c. 16, s. 248; 1995, c. 49, s. 157; 2001, c. 7, s. 77; 2003, c. 2, s. 179; 2010, c. 25, s. 56; 2015, c. 21, s. 223.

690.0.1. Notwithstanding any other provision of this Part, where a person or partnership, in this section referred to as the vendor, has disposed of property and would, but for this section, have had a loss from the disposition, the vendor's loss otherwise determined in respect of the disposition shall be reduced by such portion thereof as may reasonably be considered to have accrued during a period in which the following conditions are met:

 (a) the property or property for which it was substituted was held by a trust; and

 (b) either

(i)  the trust was not resident in Canada 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, but for the definition of “controlled” in section 21.0.1, be affiliated with the vendor had a capital interest in the trust.

1989, c. 77, s. 72; 1997, c. 3, s. 71; 2000, c. 5, s. 151; 2015, c. 21, s. 224.

690.1. Where a trust governed by an employee benefit plan has distributed, at a particular time, property owned by it 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) the trust is deemed to have disposed of the property for proceeds of disposition equal to its cost amount to the trust immediately before that time;

 (b) the taxpayer is deemed to have acquired the property at a cost equal to the greater of its fair market value at that time and the adjusted cost base of his interest in the trust or part thereof, as the case may be, immediately before that time;

 (c) the taxpayer is deemed to have disposed of his interest in the trust or any part thereof, as the case may be, for proceeds of disposition equal to the adjusted cost base to him of that interest or part thereof, as the case may be, immediately before the particular time;

 (d) for the purposes of sections 93 to 104, 130 and 130.1 and the regulations made under paragraph a of section 130, where the property distributed 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 paragraph b to have acquired the property,

(i)  the capital cost of the property to the taxpayer is deemed to be the capital cost of the property to the trust;

(ii)  the excess is deemed to have been allowed to the taxpayer as depreciation in respect of the property for taxation years preceding the acquisition by him of the property.

1982, c. 5, s. 140; 1990, c. 59, s. 245; 2001, c. 7, s. 78.

690.2. If at a particular time any property of an employee trust, an employee life and health trust or a trust described in subparagraph a.1 of the third paragraph of section 647 is distributed by the trust to a taxpayer who is a beneficiary under the trust as consideration for all or any part of the taxpayer's interest in the trust, the following rules apply:

 (a) the trust is deemed to have disposed of the property for proceeds of disposition equal to its fair market value at the particular time;

 (b) the taxpayer is deemed to have acquired the property at a cost equal to the proceeds determined in paragraph a in respect thereof;

 (c) the taxpayer is deemed to have disposed of his interest in the trust or part thereof, as the case may be, for proceeds of disposition equal to the adjusted cost base to him of the interest or part thereof, as the case may be, immediately before the particular time;

 (d) for the purposes of sections 93 to 104, 130 and 130.1 and the regulations made under paragraph a of section 130, where the property distributed was depreciable property of a prescribed class of the trust and the amount that was the capital cost of that property to the trust exceeds the cost at which, in accordance with paragraph b, the taxpayer is deemed to acquire the property, the following rules apply:

(i)  the capital cost of the property to the taxpayer is deemed to be the capital cost of the property to the trust;

(ii)  the excess is deemed to have been allowed to the taxpayer as depreciation in respect of the property for taxation years preceding the acquisition by him of the property.

1982, c. 5, s. 140; 1990, c. 59, s. 245; 2001, c. 7, s. 79; 2003, c. 2, s. 180; 2011, c. 6, s. 145.

690.3. Where a trust governed by a retirement compensation arrangement has distributed, at a particular time, property owned by it 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) the trust is deemed to have disposed of the property for proceeds of disposition equal to its fair market value at the particular time;

 (b) the trust is deemed to have paid to the taxpayer as a distribution an amount equal to the proceeds determined in respect of the property under paragraph a;

 (c) the taxpayer is deemed to have acquired the property at a cost equal to the proceeds determined in respect of the property under paragraph a;

 (d) the taxpayer is deemed to have disposed of his interest in the trust or part thereof, as the case may be, for proceeds of disposition equal to the adjusted cost base to him of that interest or part thereof, as the case may be, immediately before the particular time;

 (e) for the purposes of sections 93 to 104, 130 and 130.1 and the regulations made under paragraph a of section 130, where the property distributed 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 paragraph c to have acquired the property

(i)  the capital cost of the property to the taxpayer is deemed to be the capital cost of the property to the trust;

(ii)  the excess is deemed to have been allowed to the taxpayer as depreciation in respect of the property for taxation years preceding the acquisition by him of the property.

1989, c. 77, s. 73; 1990, c. 59, s. 246; 2001, c. 7, s. 80.

691. Notwithstanding section 688, the rules set out in section 688.1 apply at any time to property distributed to a beneficiary by a trust described in subparagraph a of the first paragraph and the second paragraph of section 653 where

 (a) the beneficiary is not

(i)  in the case of a post-1971 spousal trust, the spouse referred to in subparagraph a of the first paragraph of section 653,

(ii)  in the case of an alter ego trust, the taxpayer referred to in subparagraph a of the first paragraph of section 653, and

(iii)  in the case of a joint spousal trust, the taxpayer or spouse referred to in subparagraph a of the first paragraph of section 653; and

 (b) the property is distributed on or before the earlier of

(i)  a reacquisition, in respect of any property of the trust, that occurs immediately after the day described in subparagraph a of the first paragraph of section 653, and

(ii)  the cessation of the trust's existence.

1972, c. 23, s. 522; 1977, c. 26, s. 77; 1984, c. 15, s. 155; 1986, c. 19, s. 138; 1994, c. 22, s. 241; 2001, c. 7, s. 81; 2003, c. 2, s. 181; 2015, c. 21, s. 225.

691.1. Notwithstanding section 688, the rules set out in section 688.1 apply where any particular property of a particular personal trust or a particular prescribed trust is distributed by the particular trust to a taxpayer who is a beneficiary under the particular trust and where

 (a) the distribution was made as consideration for all or any part of the taxpayer’s capital interest in the particular trust;

 (b) section 467 was applicable, or would have been applicable if it were read without reference to “while the transferor is resident in Canada” and if section 467.1, as it read in its application before 21 March 2013, were read without reference to its paragraph c.2, or section 597.0.6 was applicable, or would have been applicable if the first paragraph of that section were read without reference to its subparagraph 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 section 692.8 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 is neither

(i)  the person, other than a trust described in subparagraph ii of paragraph b, who directly or indirectly transferred the particular property, or a property for which the particular property was substituted, to the particular trust, nor

(ii)  an individual in respect of whom section 454 would be applicable on the transfer of capital property by the person described in subparagraph i; and

 (d) the person described in subparagraph i of paragraph c was in existence at the time the particular property was distributed.

1990, c. 59, s. 247; 2001, c. 7, s. 82; 2003, c. 2, s. 182; 2015, c. 21, s. 226; 2015, c. 36, s. 38.

691.2. Despite section 688, the rules set out in section 688.1 apply at any time to property distributed after 20 December 2002 to a beneficiary by a personal trust or a trust prescribed for the purposes of section 688, if

 (a) at a particular time before 21 December 2002 there was a qualifying disposition, within the meaning assigned by section 692.5, of the property, or of other property for which the property is substituted, by a particular partnership or a particular corporation to a trust; and

 (b) the beneficiary is neither the particular partnership nor the particular corporation.

2009, c. 5, s. 229.

692. Despite section 688, the rules set out in section 688.1 apply if a property, other than a property referred to in the second paragraph, is distributed by a trust to a taxpayer not resident in Canada, including a partnership other than a Canadian partnership, as consideration for all or part of the taxpayer's capital interest in the trust.

The property to which the first paragraph refers is

 (a) a share of the capital stock of a non-resident-owned investment corporation; or

 (b) a property referred to in any of subparagraphs i to iii of subparagraph b of the first paragraph of section 785.2;

 (c) (subparagraph repealed);

 (d) (subparagraph repealed);

 (e) (subparagraph repealed);

 (f) (subparagraph repealed);

 (g) (subparagraph repealed);

 (h) (subparagraph repealed).

1972, c. 23, s. 523; 1977, c. 26, s. 78; 1990, c. 59, s. 248; 1994, c. 22, s. 242; 1997, c. 3, s. 71; 2001, c. 7, s. 83; 2003, c. 2, s. 183; 2004, c. 8, s. 134; 2009, c. 5, s. 230.

692.0.1. Where, solely by reason of the application of section 692, subparagraphs a to c of the first paragraph of section 688 do not apply to a distribution in a taxation year of taxable Canadian property by a trust, for the purposes of sections 1025, 1026 and 1026.0.2 to 1026.2, the first, second and third paragraphs of section 1038 and any regulations made under those provisions, the aggregate of the taxes payable by the trust under this Part for the year is deemed to be the lesser of

 (a) the aggregate of the taxes payable by the trust under this Part for the year, determined without reference to the specified tax consequences for the year; and

 (b) the amount that would be determined under paragraph a if section 692 did not apply to each distribution in the year of taxable Canadian property to which the rules set out in section 688 do not apply solely by reason of the application of section 692.

2003, c. 2, s. 184; 2015, c. 21, s. 227.

CHAPTER IX 
ENVIRONMENTAL TRUSTS
1996, c. 39, s. 178; 2000, c. 5, s. 293.

692.1. Where a taxpayer is a beneficiary under an environmental trust in a taxation year of the trust, in this section referred to as the trust's year, that ends in a particular taxation year of the taxpayer, the following rules apply:

 (a) subject to paragraph 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 in Canada or from sources in another place were the income or loss of the taxpayer from that source in Canada or from sources in that other 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 not resident in Canada at any time in the particular year and an income or loss described in paragraph a or an amount to which paragraph z or z.1 of section 87 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.

1996, c. 39, s. 178; 2000, c. 5, s. 152.

692.2. Where property of an 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 is deemed to have disposed of the property at that time and to have received proceeds of disposition equal to its fair market value at that time; and

 (b) the beneficiary is deemed to have acquired the property at that time at a cost equal to its fair market value at that time.

1996, c. 39, s. 178; 2000, c. 5, s. 293; 2001, c. 7, s. 84.

692.3. Where a trust ceases at a particular time to be an environmental trust,

 (a) the taxation year of the trust that otherwise would include the particular time is deemed to end immediately before that time and a new taxation year of the trust is deemed to begin at the particular time;

 (b) the trust is deemed to dispose immediately before the time immediately preceding the particular time of each property it holds immediately before the particular time and to receive proceeds of disposition equal to its fair market value at the particular time, and to reacquire at the particular time each such property at a cost equal to that fair market value;

 (c) each beneficiary under the trust immediately before the particular time is deemed to receive at that time from the trust, as a beneficiary under an environmental trust, an amount equal to the portion of the fair market value of the properties of the trust at the particular time that can reasonably be considered to be the beneficiary's interest in the trust; and

 (d) each beneficiary under the trust is deemed to acquire at the particular time an interest in the trust at a cost equal to the amount deemed by paragraph c to be received by the beneficiary from the trust.

1996, c. 39, s. 178; 2000, c. 5, s. 293.

692.4. Sections 661 to 663, 665, 665.1, 684 to 689, 690.0.1 and 691 to 692 do not apply to a trust with respect to a taxation year during which it is an environmental trust.

1996, c. 39, s. 178; 2000, c. 5, s. 293.

CHAPTER X 
QUALIFYING DISPOSITION
2003, c. 2, s. 185.

692.5. In this chapter, “qualifying disposition” means a disposition of property made by a person or partnership before 21 December 2002 and a disposition of property made by an individual after 20 December 2002, the person, partnership or individual being in this section referred to as the “contributor”, as a result of a transfer of the property to a particular trust if

 (a) the disposition does not result in a change in the beneficial ownership of the property;

 (b) the proceeds of disposition would, but for sections 422 to 424, 427.4, 454 to 462.0.2 and this chapter, not be determined under any provisions of this Part;

 (c) the particular trust is resident in Canada at the time of the transfer;

 (d) (paragraph repealed);

 (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 is co-owned, each of the joint contributors, as a beneficiary, determined with reference to section 646.1, under the particular trust;

 (f) the contributor is not an individual, other than a trust described in any of subparagraphs a to d of the third paragraph of section 647, if the particular trust is described in any of those subparagraphs;

 (g) the disposition is not part of a series of transactions or events

(i)  that begins after 17 December 1999 and that includes the subsequent acquisition, for a particular consideration given to a personal trust, of a capital interest or an income interest in the trust,

(ii)  that begins after 17 December 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 as consideration for all or part of that interest, or

(iii)  that begins after 5 June 2000 and that includes the transfer to the particular trust of property as consideration for the acquisition of a capital interest in the particular trust, if the 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 that occurs after 17 December 1999 and 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) section 454 does not apply to the disposition and would not apply to the disposition if no election had been made under that section and if sections 454 to 462.0.2 were read without reference to section 454.2; and

 (j) if the contributor is an amateur athlete trust, a cemetery care trust, an employee trust, an employee life and health trust, an inter vivos trust deemed by section 851.25 to exist in respect of a congregation that is a constituent part of a religious organization, a segregated fund trust within the meaning of section 851.2, a trust described in paragraph c.4 of section 998 or a trust governed by an eligible funeral arrangement, a profit sharing plan, a registered education savings plan, a registered disability savings plan, a registered supplementary unemployment benefit plan or a tax-free savings account, the particular trust is the same type of trust.

2003, c. 2, s. 185; 2004, c. 21, s. 97; 2009, c. 5, s. 232; 2009, c. 15, s. 100; 2011, c. 6, s. 146.

692.6. For the purposes of paragraph a of section 692.5, the following rules apply:

 (a) except where paragraph b applies, where a trust, in this paragraph and in section 692.7 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 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 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.

2003, c. 2, s. 185.

692.7. For the purpose of applying paragraph a of section 692.6 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 section 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.

2003, c. 2, s. 185.

692.8. Where at a particular time there is a qualifying disposition of property by a person or partnership, in this section referred to as the “transferor”, to a trust, in this section referred to as the “transferee trust”, the following rules apply:

 (a) the transferor's proceeds of disposition of the property are deemed to be

(i)  where the transferor makes a valid election under subparagraph i of paragraph a of subsection 3 of section 107.4 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) after 19 December 2006 in relation to the disposition, the greater of the cost amount to the transferor of the property immediately before the particular time and the amount specified in respect of the property in the election in accordance with that subparagraph i, 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 by which the amount determined under subparagraph a in respect of the qualifying disposition exceeds the amount by which the transferor's loss otherwise determined from the qualifying disposition would be reduced by reason of section 638.1, the third and fourth paragraphs of section 686 or sections 741 to 744.2, if the amount determined under subparagraph a were equal to the fair market value of the property at the particular time;

 (c) for the purposes of sections 93 to 104, Chapter III of Title III and any regulations made under paragraph a of section 130 or under section 130.1, 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 section to have acquired the property, the following rules apply:

(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 as depreciation to the transferee trust in respect of the property for taxation years that ended before the particular time;

 (d) if the property was incorporeal capital property of the transferor in respect of a business of the transferor, the following rules apply:

(i)  for the purposes of Division III of Chapter II of Title III, Chapter III of Title III and sections 188 and 189, where the incorporeal capital amount of the transferor in respect of the property exceeds the cost at which the transferee trust is deemed by this section to have acquired the property, the following rules apply:

(1)  the incorporeal capital amount of the transferee trust in respect of the property is deemed to be the amount that was the incorporeal capital amount of the transferor in respect of the property, and

(2)  3/4 of the excess is deemed to have been deducted under paragraph b of section 130 by the transferee trust in respect of the property in computing its income for taxation years that ended before the particular time and after the adjustment time, within the meaning of section 107.1, of the transferee trust in respect of the business, and

(ii)  for the purpose of determining after the particular time the amount required by paragraph b of section 105 to be included in computing the transferee trust's income in respect of any subsequent disposition of the property of the business, there shall be added to the amount otherwise determined under subparagraph ii of subparagraph a of the second paragraph of section 107, the proportion of the amount determined under that subparagraph ii in respect of the business of the transferor immediately before the particular time that the fair market value of the incorporeal capital property immediately before the particular time is of the fair market value immediately before the particular time of all incorporeal capital property of the transferor in respect of the business;

 (e) if, as a result of a transaction or event, the property was deemed to be taxable Québec property or taxable Canadian property of the transferor under this subparagraph, subparagraph c of the first paragraph of section 280.6, subparagraph d of the first paragraph of section 301, any of sections 521, 538 and 540.4, paragraph b of section 540.6, section 554, subparagraph c of the second paragraph of section 614 or paragraph d of section 688.4, the property is also deemed to be, at any time that is within 60 months after the transaction or event, taxable Québec property or taxable Canadian property of the transferee trust;

 (f) where the transferor is a segregated fund trust, within the meaning of section 851.2, the following rules apply:

(i)  section 851.14 does not apply in respect of a disposition of interest in the transferor that occurs in connection with the qualifying disposition, and

(ii)  for the purpose of computing the amount referred to in section 851.14 in respect of a subsequent disposition of an interest in the transferee trust where the interest is deemed to exist in connection with a life insurance policy, the acquisition fee, within the meaning of section 851.17, in respect of the policy shall be determined as if each amount referred to in sections 851.17 and 851.18 in respect of the policyholder's interest in the transferor had been determined in respect of the policyholder's interest in the transferee trust;

 (g) if the transferor is a trust to which property was transferred by an individual, other than a trust, the following rules apply:

(i)  where section 454 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 application of subparagraph a.3 of the first paragraph of section 653 and this subparagraph 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 be resident in Canada and in circumstances to which section 454 applied, and

(ii)  for the purposes of paragraph j of the definition of excluded right or interest in section 785.0.1 and the application of this subparagraph to a disposition by the transferee trust after the particular time, where the property so transferred was transferred in circumstances to which this section would apply if section 692.5 were read without reference to paragraphs h and i thereof, 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;

 (h) if the transferor is a trust, other than a personal trust or a trust prescribed for the purposes of section 688, the transferee trust is deemed to be neither a personal trust nor a trust prescribed for the purposes of section 688;

 (i) 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, the following rules apply:

(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 by which the cost amount referred to in subparagraph i exceeds the amount by which the taxpayer's loss otherwise determined from the disposition referred to in subparagraph i would be reduced by reason of the third and fourth paragraphs of section 686, 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;

 (j) 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;


 (k) where subparagraph j applies to the qualifying disposition in respect of a taxpayer, the amount that would be determined under that subparagraph in respect of the qualifying disposition if the amount determined under subparagraph d of the second 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;

 (l) where subparagraphs i and j 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 referred to in subparagraph b in respect of the qualifying disposition; and

 (m) for the purposes of section 684, where 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, the taxpayer is deemed not to dispose of any part of the income interest in the transferor at the particular time.

In the formula provided for in subparagraph j of the first paragraph,

 (a) A is the cost amount to the taxpayer of the taxpayer's capital interest in the transferor immediately before the particular time;

 (b) B is the fair market value immediately before the particular time of the taxpayer's capital interest in the transferor;

 (c) C is the fair market value at the particular time of the taxpayer's capital interest in the transferor, determined as if the only property disposed of at the particular time were the particular property; and

 (d) D is the lesser of

(i)  the amount 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 would be reduced by reason of the third and fourth paragraphs of section 686 if the taxpayer's capital interest in the transferor had been disposed of immediately before the particular time.

Chapter V.2 of Title II of Book I applies in relation to an election made under subparagraph i of paragraph a of subsection 3 of section 107.4 of the Income Tax Act or in relation to an election made under this section before 20 December 2006.

2003, c. 2, s. 185; 2004, c. 8, s. 135; 2005, c. 1, s. 135; 2009, c. 5, s. 233; 2009, c. 15, s. 101; 2010, c. 25, s. 57; 2011, c. 6, s. 147.

692.9. Where a capital interest in a trust is held by a beneficiary at any time, the interest is vested indefeasibly at that time, the trust is not described in any of subparagraphs a to d of the third paragraph of section 647 and 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 interest at that time is deemed to be not less than the amount determined by the formula


(A − B) × (C / D).


In the formula provided for in the first paragraph,

 (a) A is the total fair market value of all properties of the trust at the time referred to in the first paragraph;

 (b) B is the aggregate of all amounts each of which is the amount of a debt owing by the trust at the time referred to in the first paragraph or the amount of any other obligation of the trust to pay any amount that is outstanding at that time;

 (c) C is the fair market value at the time referred to in the first paragraph of the interest referred to in the first paragraph, determined without reference to this section; and

 (d) D is the total fair market value at the time referred to in the first paragraph of all interests as beneficiaries under the trust, determined without reference to this section.

2003, c. 2, s. 185.

BOOK IV 
COMPUTATION OF TAXABLE INCOME
1972, c. 23.

TITLE I 
RULE OF APPLICATION
1972, c. 23.

693. A taxpayer may, for purposes of computing his taxable income for a taxation year, deduct the amounts provided for by this Book.

However, the taxpayer shall apply the provisions of this Book in the following order: Title I.0.0.1, sections 694.0.1, 694.0.2, 737.17, 737.18.12, 726.29 and 726.35, Titles V, VI.8, V.1, VI.1, VI.2, VI.3, VI.3.1, VI.3.2, VI.3.2.1, VI.3.2.2, VI.3.2.3, VII, VII.0.1, VI.5 and VI.5.1 and sections 725.1.2, 737.14 to 737.16.1, 737.18.10, 737.18.11, 737.18.17, 737.18.17.5, 737.18.26, 737.18.34, 737.21, 737.22.0.0.3, 737.22.0.0.7, 737.22.0.3, 737.22.0.4.7, 737.22.0.7, 737.22.0.10, 737.22.0.13, 737.25, 737.28, 726.28, 726.33 and 726.34.

1972, c. 23, s. 524; 1975, c. 22, s. 193; 1976, c. 18, s. 7; 1979, c. 14, s. 2; 1985, c. 25, s. 113; 1986, c. 15, s. 96; 1987, c. 67, s. 133; 1988, c. 4, s. 41; 1989, c. 5, s. 83; 1990, c. 7, s. 20; 1993, c. 16, s. 249; 1993, c. 19, s. 23; 1993, c. 64, s. 41; 1995, c. 1, s. 48; 1995, c. 63, s. 49; 1997, c. 14, s. 96; 1997, c. 85, s. 103; 1999, c. 83, s. 61; 2000, c. 39, s. 38; 2002, c. 9, s. 10; 2002, c. 40, s. 44; 2003, c. 9, s. 41; 2004, c. 21, s. 98; 2005, c. 23, s. 56; 2005, c. 38, s. 82; 2006, c. 36, s. 46; 2010, c. 25, s. 58; 2012, c. 8, s. 58; 2013, c. 10, s. 38; 2015, c. 21, s. 228.

693.1. Where a separate fiscal return with respect to an individual is filed under any of sections 429, 681 and 1003 for a particular period and another fiscal return under this Part with respect to the same individual is filed for a period ending in the calendar year in which the particular period ends, for the purpose of computing the taxable income under this Part of the individual in such fiscal returns, the aggregate of all deductions claimed in all such returns under sections 725 to 725.7 shall not exceed the aggregate of the deductions that could be claimed thereunder for the year with respect to the individual if no separate fiscal returns were filed under sections 429, 681 and 1003.

1986, c. 19, s. 139; 1987, c. 67, s. 134; 1989, c. 5, s. 84; 1993, c 64, s. 42.

693.2. In this Book, except Title VI.10, the following rules apply in respect of a taxpayer if one or more partnerships (each of which is in this section referred to as an “interposed partnership”) are interposed between the taxpayer and a given partnership, for a given fiscal period of the given partnership:

 (a) the taxpayer is deemed to be a member of a particular partnership at the end of a particular fiscal period of the particular partnership and that particular fiscal period is deemed to end in the taxpayer's taxation year in which ends the fiscal period of the interposed partnership of which the taxpayer is directly a member, if

(i)  the particular fiscal period is that which ends in the fiscal period (in this section referred to as the “interposed fiscal period”) of the interposed partnership that is a member of the particular partnership at the end of that particular fiscal period, and

(ii)  the taxpayer is a member, or deemed to be a member under this subparagraph a, of the interposed partnership described in subparagraph i at the end of the interposed partnership's interposed fiscal period; and

 (b) the taxpayer's share in an amount in respect of the given partnership for the given fiscal period is deemed to be equal to the proportion of that amount represented by the proportion obtained by multiplying the agreed proportion in respect of the taxpayer for the interposed fiscal period of the interposed partnership of which the taxpayer is directly a member, by

(i)  if there is only one interposed partnership, the agreed proportion in respect of the interposed partnership for the given partnership's given fiscal period, or

(ii)  if there is more than one interposed partnership, the result obtained by multiplying together all proportions each of which is the agreed proportion in respect of an interposed partnership for the particular fiscal period of the particular partnership referred to in subparagraph a of which the interposed partnership is a member at the end of that particular fiscal period.

If the first paragraph applies for the purpose of determining an amount that a corporation may deduct under Title V because of section 714, subparagraph b of that paragraph is to be read as follows:

“(b) the proportion of the taxpayer's share in the given partnership for the given fiscal period is deemed to be equal to the product obtained by multiplying the proportion of the taxpayer's share in the interposed partnership of which the taxpayer is directly a member for the interposed partnership's interposed fiscal period, by

i. if there is only one interposed partnership, the proportion of the interposed partnership's share in the given partnership for the given fiscal period, or

ii. if there is more than one interposed partnership, the result obtained by multiplying together all proportions each of which is the proportion of an interposed partnership's share in the particular partnership referred to in subparagraph a of which the interposed partnership is a member at the end of the particular partnership's particular fiscal period for that particular fiscal period.”

2009, c. 15, s. 102.

693.3. Section 693.2 does not apply in respect of a taxpayer, in relation to a given partnership, if the Minister is of the opinion that the interposition, between the taxpayer and the given partnership, of one or more other partnerships is part of an operation or transaction or of a series of operations or transactions, one of the purposes of which is to cause the taxpayer to be able to deduct, in computing the taxpayer's taxable income for a taxation year under a provision of this Book, an amount greater than the amount that the taxpayer could have so deducted for that taxation year, but for that interposition.

2009, c. 15, s. 102.

693.4. In this Book, except Titles V, VI.3 and VI.9, where a Minister other than the Minister of Revenue or a body replaces or revokes a certificate, qualification certificate or other similar document that has been issued to a person or a partnership, the following rules apply in respect of the document, unless a more specific similar rule applies to it:

 (a) the replaced document is null as of the date of its coming into force or of its deemed coming into force and the new document is deemed, unless it provides otherwise, to come into force as of that date and to have been issued at the time the replaced document was issued or is deemed to have been issued; and

 (b) the revoked document is null as of the effective date of the revocation and is deemed not to have been issued, obtained or held as of that date.

Where a document is, without being replaced, amended by the revocation or replacement of any of its parts or in any other manner, the document before the amendment and the document as amended are deemed, for the purposes of this section, to be separate documents the first of which (referred to as the replaced document) has been replaced by the second (referred to as the new document).

Where, in the circumstances described in the second paragraph, a document is amended only for a part of its period of validity, the new document is deemed to describe both the situation prevailing before the amendment, as proven by the content of the replaced document, and the new situation, as proven by the content of the new document.

2012, c. 8, s. 59.

693.5. Where the amount of $400,000 referred to in subparagraph a of the first paragraph of section 726.7.1 is to be used for a taxation year subsequent to the taxation year 2014, it must be adjusted annually in such a manner that the amount used for that taxation year is equal to the total of the amount used for the preceding taxation year and the product obtained by multiplying that amount so used by the factor determined by the formula


(A/B) - 1.


In the formula in the first paragraph,

 (a) A is the Consumer Price Index for the 12-month period that ended on 30 September of the taxation year preceding that for which an amount is to be adjusted; and

 (b) B is the Consumer Price Index for the 12-month period preceding the period described in subparagraph a.

For the purposes of the second paragraph, the Consumer Price Index for a 12-month period is equal to the quotient obtained by dividing the aggregate of each monthly Consumer Price Index for that period for Canada established by Statistics Canada under the Statistics Act (R.S.C.1985, c. S-19) by 12.

If the factor determined by the formula in the first paragraph has more than three decimal places, only the first three decimal digits are retained and the third is increased by one unit if the fourth is greater than 4.

If the amount that results from the adjustment provided for in the first paragraph is not a multiple of $1, it must be rounded to the nearest multiple of $1 or, if it is equidistant from two such multiples, to the higher of the two.

2015, c. 24, s. 93.

694. For the purpose of computing the taxable income of a taxpayer for a taxation year, any deduction granted to the taxpayer under a provision of the Income Tax Act (R.S.C. 1985, c. 1, (5th Suppl.)) in computing the taxpayer's taxable income for a preceding taxation year in respect of which the taxpayer was not subject to tax under this Part, is deemed to have been also granted to the taxpayer under the corresponding provision of this Part in computing the taxpayer's taxable income for that preceding year.

1977, c. 26, s. 79; 1984, c. 15, s. 156; 2001, c. 53, s. 91; 2010, c. 25, s. 59.

TITLE I.0.0.1 
INCLUSION OF CERTAIN AMOUNTS
2006, c. 36, s. 47; 2009, c. 15, s. 103.

694.0.0.1. An individual shall include, in computing the individual's taxable income for a taxation year, the aggregate of all amounts each of which is

 (a) an amount received in the year by the individual as a benefit under section 4 of the Universal Child Care Benefit Act, enacted by section 168 of the Budget Implementation Act, 2006 (S.C. 2006, c. 4), if the individual does not have a spouse at the end of 31 December of the year or if the income for the year of the individual's spouse at the end of 31 December of the year is equal to or greater than the individual's income for the year; or

 (b) an amount received in the year by the individual's spouse at the end of 31 December of the year as a benefit under section 4 of the Universal Child Care Benefit Act, if the spouse's income for the year is greater than the individual's income for the year.

Despite the first paragraph, the individual is not required to include, in computing taxable income for the year, if the individual so elects, the portion of the amount referred to in the first paragraph that relates to one or more preceding taxation years that are eligible taxation years of the individual (in this paragraph referred to as the “particular portion“), if the total of the particular portion and of the particular portion described in the first paragraph of section 725.1.2 that the individual elects to deduct in computing taxable income for the year, if applicable, is not less than $300.

For the purposes of the second paragraph, “eligible taxation year” of an individual means a taxation year throughout which the individual was resident in Canada, other than a taxation year that ends in a calendar year in which the individual became a bankrupt.

2006, c. 36, s. 47; 2009, c. 5, s. 234; 2010, c. 25, s. 60.

694.0.0.2. For the purposes of the first paragraph of section 694.0.0.1, if an individual has a spouse at the end of 31 December of a taxation year and the individual or the spouse became a bankrupt in the year, section 779 does not apply for the purpose of determining the individual's or the spouse's income for the year.

2009, c. 5, s. 235.

694.0.0.3. An individual shall, in computing the individual's taxable income for a taxation year, include an amount received by the individual in the year as a payment under a registered disability savings plan, to the extent provided for in section 905.0.14.

2009, c. 15, s. 104.

TITLE I.0.1 
DEDUCTED AMOUNTS TO BE INCLUDED IN COMPUTING INCOME
1997, c. 85, s. 104.

694.0.1. An individual shall, in computing the individual’s taxable income for a taxation year, include the portion, relating to one or more preceding taxation years that are eligible taxation years of the individual, of the aggregate of all amounts deducted by the individual in computing the individual’s income for the year under section 336.0.3 or 336.0.4, if the total of that portion is at least $300.

For the purposes of the first paragraph, eligible taxation year of an individual means a taxation year throughout which the individual was resident in Canada, other than a taxation year that ends in a calendar year in which the individual became a bankrupt or a taxation year included, in whole or in part, in an averaging period determined in respect of the individual for the purposes of Division II of Chapter II of Title I of Book V, as it read before being repealed.

1997, c. 85, s. 104; 1998, c. 16, s. 177; 2005, c. 38, s. 83.

694.0.2. Despite section 7.19, a taxpayer shall, in computing the taxpayer’s taxable income for a taxation year, include any amount deducted in computing the taxpayer’s income for the year as a repayment of a particular amount the taxpayer included in computing the taxpayer’s income for a preceding taxation year, to the extent that the particular amount has been deducted in computing the taxpayer’s taxable income for that preceding taxation year.

1997, c. 85, s. 104; 1998, c. 16, s. 251; 2001, c. 51, s. 39; 2001, c. 53, s. 92; 2005, c. 38, s. 84.

694.0.3. (Repealed).

2002, c. 40, s. 45; 2005, c. 38, s. 85.

TITLE I.1 
Repealed, 1989, c. 5, s. 85.
1979, c. 38, s. 21; 1989, c. 5, s. 85.

694.1. (Repealed).

1979, c. 38, s. 21; 1984, c. 15, s. 157; 1986, c. 15, s. 97; 1989, c. 5, s. 85.

694.2. (Repealed).

1979, c. 38, s. 21; 1986, c. 15, s. 98.

694.3. (Repealed).

1979, c. 38, s. 21; 1986, c. 15, s. 99; 1989, c. 5, s. 85.

TITLE II 
Repealed, 1989, c. 5, s. 85.
1989, c. 5, s. 85.

695. (Repealed).

1972, c. 23, s. 525; 1972, c. 26, s. 53; 1973, c. 17, s. 83; 1974, c. 18, s. 25; 1975, c. 22, s. 194; 1976, c. 18, s. 8; 1978, c. 26, s. 118; 1984, c. 15, s. 158; 1986, c. 15, s. 100; 1987, c. 21, s. 16; 1987, c. 67, s. 135; 1988, c. 4, s. 42; 1988, c. 18, s. 61; 1989, c. 5, s. 85.

695.1. (Repealed).

1986, c. 15, s. 100; 1989, c. 5, s. 85.

695.2. (Repealed).

1986, c. 15, s. 100; 1989, c. 5, s. 85.

696. (Repealed).

1972, c. 23, s. 526; 1986, c. 15, s. 100; 1987, c. 21, s. 17; 1989, c. 5, s. 85.

697. (Repealed).

1972, c. 23, s. 527; 1986, c. 15, s. 100; 1988, c. 18, s. 62; 1989, c. 5, s. 85.

698. (Repealed).

1972, c. 23, s. 528; 1986, c. 15, s. 100; 1989, c. 5, s. 85.

699. (Repealed).

1972, c. 23, s. 529; 1982, c. 17, s. 53; 1986, c. 15, s. 100; 1989, c. 5, s. 85.

700. (Repealed).

1972, c. 23, s. 530; 1986, c. 15, s. 100; 1987, c. 21, s. 18; 1989, c. 5, s. 85.

701. (Repealed).

1972, c. 23, s. 531; 1986, c. 15, s. 100; 1989, c. 5, s. 85.

TITLE III 
Repealed, 1989, c. 5, s. 85.
1989, c. 5, s. 85.

702. (Repealed).

1975, c. 21, s. 18; 1975, c. 22, s. 195; 1977, c. 26, s. 80; 1979, c. 38, s. 22; 1987, c. 21, s. 19; 1988, c. 4, s. 43; 1989, c. 5, s. 85.

702.1. (Repealed).

1987, c. 21, s. 19; 1988, c. 4, s. 44.

703. (Repealed).

1975, c. 21, s. 18; 1975, c. 22, s. 196; 1977, c. 26, s. 81; 1978, c. 26, s. 119; 1979, c. 18, s. 56; 1980, c. 13, s. 62; 1984, c. 15, s. 159; 1986, c. 15, s. 101; 1989, c. 5, s. 85.

704. (Repealed).

1975, c. 21, s. 18; 1978, c. 26, s. 120; 1980, c. 13, s. 63; 1984, c. 15, s. 160; 1989, c. 5, s. 85.

705. (Repealed).

1975, c. 22, s. 197; 1980, c. 13, s. 64; 1984, c. 15, s. 161; 1985, c. 25, s. 114; 1986, c. 15, s. 102; 1987, c. 67, s. 136; 1989, c. 5, s. 85.

706. (Repealed).

1975, c. 22, s. 197; 1987, c. 67, s. 136; 1989, c. 5, s. 85.

TITLE IV 
Repealed, 1989, c. 5, s. 85.
1989, c. 5, s. 85.

707. (Repealed).

1975, c. 22, s. 198; 1978, c. 26, s. 121; 1979, c. 18, s. 57; 1984, c. 15, s. 162; 1987, c. 21, s. 20; 1988, c. 4, s. 45; 1989, c. 5, s. 85.

707.1. (Repealed).

1987, c. 21, s. 21; 1988, c. 4, s. 46.

708. (Repealed).

1975, c. 22, s. 198; 1984, c. 15, s. 162; 1987, c. 21, s. 22; 1988, c. 4, s. 47; 1989, c. 5, s. 85.

708.1. (Repealed).

1987, c. 21, s. 23; 1988, c. 4, s. 48.

709. (Repealed).

1975, c. 22, s. 198; 1982, c. 5, s. 141; 1986, c. 15, s. 103; 1988, c. 18, s. 63; 1989, c. 5, s. 85.

TITLE IV.1 
Repealed, 1989, c. 5, s. 85.
1988, c. 4, s. 49; 1989, c. 5, s. 85.

709.1. (Repealed).

1988, c. 4, s. 49; 1989, c. 5, s. 85.

709.2. (Repealed).

1988, c. 4, s. 49; 1989, c. 5, s. 85.

TITLE V 
CHARITABLE GIFTS AND OTHER DEDUCTIONS
1972, c. 23; 1993, c. 16, s. 250; 1995, c. 49, s. 236; 2015, c. 21, s. 229.

710. Subject to section 711.1, a corporation may deduct in computing its taxable income for a taxation year such of the following amounts as the corporation claims:

 (a) subject to section 711, the aggregate of all amounts each of which is the eligible amount of a gift, other than a gift the eligible amount of which is included in the aggregate described in any of paragraphs b to e, made by the corporation in the year, in any of the five preceding taxation years, if the gift was made in a taxation year that ended before 24 March 2006, or in any of the 20 preceding taxation years, if the gift is made in a taxation year that ends after 23 March 2006, to a qualified donee;

 (a.1) the aggregate of all amounts each of which is an amount determined under section 710.0.0.2 in respect of property that is the subject of an eligible medical gift made by the corporation in the year or in any of the five preceding taxation years;

 (b) the aggregate of all amounts each of which is the eligible amount of a gift, other than a gift the eligible amount of which is included in the aggregate described in paragraph c or d, made by the corporation to the State or to Her Majesty in right of Canada or a province, other than Québec before 1 April 1998 or pursuant to an obligation in writing entered into on or before 31 March 1998, and in the year or in any of the five preceding taxation years;

 (c) the aggregate of all amounts each of which is the eligible amount of a gift the fair market value of which is certified by the Minister of Sustainable Development, Environment and Parks and the object of which is any of the properties described in section 710.0.1, other than a gift the eligible amount of which is included in the aggregate described in paragraph d or e, made by the corporation in the year, in any of the five preceding taxation years, if the gift was made in a taxation year that ended before 24 March 2006, or in any of the 20 preceding taxation years, if the gift is made in a taxation year that ends after 23 March 2006,

(i)  in the case of a property described in paragraph a or b of section 710.0.1, to

(1)  a registered charity whose mission in Québec, at the time of the gift, consists mainly, in the opinion of the Minister of Sustainable Development, Environment and Parks, in the conservation of the ecological heritage,

(2)  a municipality in Québec,

(2.1)  a municipal or public body performing a function of government in Québec, or

(3)  the State or Her Majesty in right of Canada, and

(ii)  in the case of a property described in paragraph c or d of section 710.0.1, to

(1)  a registered charity one of the main missions of which, at the time of the gift, consists mainly, in the opinion of the Minister of the Environment of Canada, in the conservation and protection of Canada's environmental heritage and that is, in the opinion of the Minister of Sustainable Development, Environment and Parks, an appropriate donee in the circumstances, or

(2)  the State, Her Majesty in right of Canada or a province, other than Québec, the United States or any State of that country, a municipality or a municipal or public body performing a function of government;

 (d) the aggregate of all amounts each of which is the eligible amount of a gift, other than a gift the eligible amount of which is included in the aggregate described in paragraph e, made by the corporation in the year, in any of the five preceding taxation years, if the gift was made in a taxation year that ended before 24 March 2006, or in any of the 20 preceding taxation years, if the gift is made in a taxation year that ends after 23 March 2006, to

(i)  an institution or a public authority referred to in subparagraph a of the third paragraph of section 232, where the object of the gift is a cultural property described in that paragraph, or

(ii)  a museum established under the Act respecting the Montréal Museum of Fine Arts (chapter M-42) or the National Museums Act (chapter M-44), a certified archival centre or a recognized museum, if the object of the gift is a cultural property described in subparagraph c of the third paragraph of section 232, unless it is also described in subparagraph a of that third paragraph; and

 (e) the aggregate of all amounts each of which is the eligible amount of a gift the object of which is a musical instrument, made by the corporation in the year or in any of the 20 preceding taxation years to any of the following entities, if it is situated in Québec:

(i)   an elementary or secondary educational institution to which the Education Act (chapter I-13.3) or the Education Act for Cree, Inuit and Naskapi Native Persons (chapter I-14) applies,

(ii)  a college governed by the General and Vocational Colleges Act (chapter C-29),

(iii)  a private educational institution accredited for purposes of subsidies under the Act respecting private education (chapter E-9.1),

(iv)  an educational institution at the university level within the meaning of the Act respecting educational institutions at the university level (chapter E-14.1), and

(v)  an institution providing instruction in music and forming part of the network of the Conservatoire de musique et d'art dramatique du Québec.

1972, c. 23, s. 532; 1972, c. 26, s. 54; 1975, c. 22, s. 199; 1978, c. 26, s. 122; 1984, c. 15, s. 163; 1986, c. 19, s. 140; 1988, c. 4, s. 50; 1992, c. 65, s. 43; 1993, c. 16, s. 251; 1993, c. 19, s. 24; 1993, c. 64, s. 43; 1994, c. 14, s. 34; 1994, c. 22, s. 243; 1995, c. 1, s. 49; 1995, c. 49, s. 236; 1997, c. 3, s. 71; 1997, c. 14, s. 97; 1998, c. 16, s. 251; 1999, c. 36, s. 160; 1999, c. 83, s. 62; 2001, c. 7, s. 169; 2003, c. 2, s. 186; 2003, c. 9, s. 42; 2004, c. 21, s. 99; 2005, c. 23, s. 57; 2006, c. 3, s. 35; 2006, c. 36, s. 48; 2009, c. 5, s. 236; 2009, c. 15, s. 105; 2012, c. 8, s. 60.

710.0.0.1. For the purposes of paragraph a.1 of section 710, an eligible medical gift of a corporation means a gift the eligible amount of which is included in the aggregate described in paragraph a of section 710, if

 (a) the corporation has directed the donee to apply the gift to charitable activities outside Canada;

 (b) the property that is the subject of the gift is a medicine that is available for the donee's use at least six months prior to its expiration date, within the meaning of the Food and Drug Regulations (C.R.C., c. 870) made under the Food and Drugs Act (R.S.C. 1985, c. F-27);

 (c) the property qualifies as a drug, within the meaning of the Food and Drugs Act, and the drug

(i)  meets the requirements of the Food and Drugs Act, or would meet those requirements if that Act were read without reference to subsection 1 of its section 37,

(ii)  is not a food, cosmetic or device (as those terms are defined in the Food and Drugs Act), a natural health product (as defined in the Natural Health Products Regulations (SOR/2003-196) made under the Food and Drugs Act) or a veterinary drug;

 (d) the property that is the subject of the gift was, immediately before the making of the gift, described in an inventory in respect of a business of the corporation; and

 (e) the donee is a registered charity described in paragraph e of subsection 8 of section 110.1 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)).

2009, c. 15, s. 106.

710.0.0.2. The amount to which paragraph a.1 of section 710 refers, in respect of property, is the amount determined by the formula


A × B/C.


In the formula in the first paragraph,

 (a) A is the lesser of the cost to the corporation of the property and 50% of the amount by which the corporation's proceeds of disposition of the property in respect of the gift exceeds the cost to the corporation of the property;

 (b) B is the eligible amount of the gift; and

 (c) C is the corporation's proceeds of disposition of the property in respect of the gift.

2009, c. 15, s. 106.

710.0.1. The property to which paragraph c of section 710 refers is

 (a) land situated in Québec which, in the opinion of the Minister of Sustainable Development, Environment and Parks, has undeniable ecological value;

 (b) a real servitude granted for the benefit of land belonging to an entity referred to in any of subparagraphs 1 to 3 of subparagraph i of paragraph c of section 710 and encumbering the whole or part of land situated in Québec which, in the opinion of the Minister of Sustainable Development, Environment and Parks, has undeniable ecological value;

 (c) land situated in a region bordering on Québec which, in the opinion of the Minister of Sustainable Development, Environment and Parks, has undeniable ecological value, the preservation and conservation of which is important to the protection and development of Québec’s ecological heritage; and

 (d) a real servitude granted for the benefit of land belonging to an entity referred to in subparagraph 1 or 2 of subparagraph ii of paragraph c of section 710 and encumbering the whole or part of land situated in a region bordering on Québec which, in the opinion of the Minister of Sustainable Development, Environment and Parks, has undeniable ecological value, the preservation and conservation of which is important to the protection and development of Québec’s ecological heritage.

1995, c. 1, s. 50; 1999, c. 36, s. 158; 1999, c. 83, s. 63; 2003, c. 9, s. 43; 2006, c. 3, s. 35.

710.0.1.1. For the purposes of paragraphs c and d of section 710.0.1, a region bordering on Québec is a province or a state of the United States sharing a common border with Québec.

2003, c. 9, s. 44.

710.0.2. For the purpose of applying subparagraph ii of paragraph c of section 422 and sections 710 to 716.0.11 in respect of a gift made by a taxpayer and referred to in paragraph c of section 710, the fair market value of the gift at the time the gift was made or, for the purposes of section 716, the fair market value otherwise determined of the gift at that time and, subject to section 716, the taxpayer's proceeds of disposition of the property that is the subject of the gift, are deemed to be the amount determined by the Minister of Sustainable Development, Environment and Parks to be

 (a) where the subject of the gift is land, the fair market value of the gift; or

 (b) where the subject of the gift is a servitude referred to in paragraph b or d of section 710.0.1, the greater of its fair market value otherwise determined and the amount by which the fair market value of the land encumbered by the servitude has been reduced as a result of the making of the gift of the servitude.

1999, c. 83, s. 64; 2003, c. 2, s. 187; 2003, c. 9, s. 45; 2006, c. 3, s. 35; 2012, c. 8, s. 61.

710.1. For the purposes of subparagraph i of paragraph d of section 710, the fair market value of a cultural property described in subparagraph a of the third paragraph of section 232 is deemed to be the fair market value determined by the Canadian Cultural Property Export Review Board or, where an appeal has been instituted under subsection 1 of section 33.1 of the Cultural Property Export and Import Act (Revised Statutes of Canada, 1985, chapter C-51), the fair market value deemed to have been determined by the Board, for the purposes of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement), under subsection 2 of that section 33.1.

1993, c. 16, s. 252; 1997, c. 85, s. 105; 1999, c. 83, s. 65; 2003, c. 9, s. 46.

710.2. For the purposes of subparagraph ii of paragraph d of section 710, the fair market value of a cultural property referred to therein is deemed to be the fair market value determined by the Conseil du patrimoine culturel du Québec.

1993, c. 19, s. 25; 1997, c. 85, s. 105; 1999, c. 83, s. 273; 2011, c. 21, s. 232.

710.2.1. For the purposes of subparagraph ii of paragraph c of section 422 and sections 710 to 716.0.11, where at any time the Canadian Cultural Export Review Board or the Minister of Sustainable Development, Environment and Parks, as the case may be, determines or redetermines an amount to be the fair market value of a property that is the subject of a gift described in paragraph a of section 710 made by a taxpayer within the two-year period that begins at that time, the last amount so determined or redetermined within the period is deemed to be the fair market value of the property at the time the gift was made and, subject to section 716, to be the taxpayer's proceeds of disposition of the property.

2001, c. 53, s. 93; 2003, c. 2, s. 188; 2006, c. 3, s. 35; 2012, c. 8, s. 62; 2011, c. 21, s. 232; 2015, c. 21, s. 230.

710.2.1.1. Despite section 710.2.1, for the purposes of paragraph a of section 422, subparagraph ii of paragraph c of that section and sections 710 to 716.0.11, where the Minister of Culture and Communications determines an amount to be the fair market value of a property that is the subject of a gift made by a taxpayer on or before the day that is two years after the time that amount is determined and referred to in paragraph a of section 710, the following rules apply:

 (a) the amount so determined is deemed to be the fair market value of the property at the time of the gift or, for the purposes of section 716, its fair market value otherwise determined at that time; and

 (b) subject to section 716, the amount so determined is deemed to be the taxpayer's proceeds of disposition of the property.

2015, c. 21, s. 231.

710.2.2. A corporation may request, by notice in writing to the Minister of Sustainable Development, Environment and Parks, a determination of the fair market value of a property it disposes of or proposes to dispose of and that would, if the disposition were made and the certificates described in section 712.0.2 were issued by the Minister of Sustainable Development, Environment and Parks in respect of the property, be a gift described in paragraph c of section 710.

2003, c. 2, s. 189; 2006, c. 3, s. 35.

710.2.3. The Minister of Sustainable Development, Environment and Parks shall with all due dispatch make a determination in accordance with section 710.0.2 of the fair market value of the property that is the subject of the request referred to in section 710.2.2 and give notice of the determination in writing to the corporation that has disposed of, or that proposes to dispose of, the property.

However, no such determination shall be made if the request is received by the Minister of Sustainable Development, Environment and Parks after three years after the end of the corporation’s taxation year in which the disposition occurred.

2003, c. 2, s. 189; 2006, c. 3, s. 35.

710.2.4. Where the Minister of Sustainable Development, Environment and Parks has, in accordance with section 710.2.3, notified a corporation of the amount determined to be the fair market value of a property it has disposed of or proposes to dispose of, the following rules apply:

 (a) on receipt of a written request made by the corporation on or before the day that is 90 days after the day that the corporation was so notified, the Minister of Sustainable Development, Environment and Parks shall with all due dispatch confirm or redetermine the fair market value;

 (b) the Minister of Sustainable Development, Environment and Parks may, on that Minister’s own initiative, at any time redetermine the fair market value;

 (c) in the cases referred to in paragraphs a and b, the Minister of Sustainable Development, Environment and Parks shall notify the corporation in writing of that Minister’s confirmation or redetermination; and

 (d) any such redetermination is deemed to replace all preceding determinations and redeterminations of the fair market value of the property from the time at which the first such determination was made.

2003, c. 2, s. 189; 2006, c. 3, s. 35.

710.2.5. Where the Minister of Sustainable Development, Environment and Parks determines in accordance with section 710.2.3 the fair market value of a property, or redetermines that fair market value in accordance with section 710.2.4, and the property has been disposed of to a qualified donee described in paragraph c of section 710, the Minister shall issue to the person who made the disposition a certificate that states the fair market value of the property so determined or redetermined.

Where the Minister of Sustainable Development, Environment and Parks has issued more than one certificate in respect of the same property, the last certificate is deemed to replace all preceding certificates from the time at which the first certificate was issued.

2003, c. 2, s. 189; 2006, c. 3, s. 35.

710.2.6. A corporation may request, by notice in writing to the Minister of Culture and Communications, a determination of the fair market value of a property (other than a cultural property described in the third paragraph of section 232) it disposes of or proposes to dispose of and that would, if the disposition were made and the documents referred to in section 716.0.1.3 were issued by the Minister of Culture and Communications in respect of the property, be a gift described in subparagraph b of the second paragraph of section 716.0.1.1 or in section 716.0.1.2.

2015, c. 21, s. 232.