11. The schedule to the Act is renumbered as Schedule 1 and is amended by adding the following in alphabetical order:

12. The Act is amended by adding, after Schedule 1, the Schedule 2 set out in the schedule to this Act.

PART 3AMENDMENTS TO THE INCOME TAX ACT AND CERTAIN OTHER ACTS AS A CONSEQUENCE AND A COORDINATING AMENDMENT

R.S., c. 1 (5th Supp.)Income Tax Act

• 13. (1) Section 40 of the Income Tax Act is amended by adding the following after subsection (3.6):

  • Marginal note:Exception — estate loss carried back

    (3.61) If, in the course of administering the estate of a deceased taxpayer, the taxpayer’s legal representative elects in accordance with subsection 164(6) to treat all or any portion of the estate’s capital loss (determined without reference to subsections (3.4) and (3.6)) from the disposition of a share of the capital stock of a corporation as a capital loss of the deceased taxpayer from the disposition of the share, subsections (3.4) and (3.6) apply to the estate in respect of the loss only to the extent that the amount of the loss exceeds the portion of the loss to which the election applies.

• (2) Subsection (1) applies to losses from dispositions that occur or occurred after March 22, 2004.

• 14. (1) Clause 53(2)(h)(i.1)(B) of the Act is amended by striking out the word “or” at the end of subclause (I), by adding the word “or” at the end of subclause (II) and by adding the following after subclause (II):

  • (III) that is an assessable distribution (as defined in subsection 218.3(1)) to the taxpayer,

• (2) Subsection (1) applies after 2004.

• 15. (1) Section 64 of the Act is replaced by the following:

  Marginal note:Disability supports deduction

  64. If a taxpayer files with the taxpayer’s return of income (other than a return of income filed under subsection 70(2), paragraph 104(23)(d) or 128(2)(e) or subsection 150(4)) for the taxation year a prescribed form containing prescribed information, there may be deducted in computing the taxpayer’s income for the year the lesser of

  • (a) the amount determined by the formula

    A - B

    where

    A

    is the total of all amounts each of which is an amount paid by the taxpayer in the year and that

    • (i) was paid to enable the taxpayer

      • (A) to perform the duties of an office or employment,

      • (B) to carry on a business either alone or as a partner actively engaged in the business,

      • (C) to attend a designated educational institution or a secondary school at which the taxpayer is enrolled in an educational program, or

      • (D) to carry on research or any similar work in respect of which the taxpayer received a grant,

    • (ii) was paid

      • (A) where the taxpayer has a speech or hearing impairment, for the cost of sign-language interpretation services or real time captioning services and to a person engaged in the business of providing such services,

      • (B) where the taxpayer is deaf or mute, for the cost of a teletypewriter or similar device, including a telephone ringing indicator, prescribed by a medical practitioner, to enable the taxpayer to make and receive telephone calls,

      • (C) where the taxpayer is blind, for the cost of a device or equipment, including synthetic speech systems, Braille printers, and large-print on-screen devices, prescribed by a medical practitioner, and designed to be used by blind individuals in the operation of a computer,

      • (D) where the taxpayer is blind, for the cost of an optical scanner or similar device, prescribed by a medical practitioner, and designed to be used by blind individuals to enable them to read print,

      • (E) where the taxpayer is mute, for the cost of an electronic speech synthesizer, prescribed by a medical practitioner, and designed to be used by mute individuals to enable them to communicate by use of a portable keyboard,

      • (F) where the taxpayer has a mental or physical impairment, for the cost of note-taking services and to a person engaged in the business of providing such services, if the taxpayer has been certified in writing by a medical practitioner to be a person who, because of that impairment, requires such services,

      • (G) where the taxpayer has a physical impairment, for the cost of voice recognition software, if the taxpayer has been certified in writing by a medical practitioner to be a person who, because of that impairment, requires that software,

      • (H) where the taxpayer has a learning disability or a mental impairment, for the cost of tutoring services that are rendered to, and supplementary to the primary education of, the taxpayer and to a person ordinarily engaged in the business of providing such services to individ­uals who are not related to the person, if the taxpayer has been certified in writing by a medical practitioner to be a person who, because of that disability or impairment, requires those services,

      • (I) where the taxpayer has a perceptual disability, for the cost of talking textbooks used by the taxpayer in connection with the taxpayer’s enrolment at a secondary school in Canada or at a designated educational institution, if the taxpayer has been certified in writing by a medical practitioner to be a person who, because of that disability, requires those textbooks, and

      • (J) where the taxpayer has a mental or physical infirmity, for the cost of attendant care services provided in Canada and to a person who is neither the taxpayer’s spouse or common-law partner nor under 18 years of age, if the taxpayer is a taxpayer in respect of whom an amount may be deducted because of section 118.3, or if the taxpayer has been certified in writing by a medical practitioner to be a person who, because of that infirmity is, and is likely to be indefinitely, dependent on others for their personal needs and care and who as a result requires a full-time attendant,

    • (iii) is evidenced by one or more receipts filed with the Minister each of which was issued by the payee and contains, where the payee is an individual who is a person referred to in clause (ii)(J), that individual’s Social Insurance Number, and

    • (iv) is not included in computing a deduction under section 118.2 for any taxpayer for any taxation year, and

    B

    is the total of all amounts each of which is the amount of a reimbursement or any other form of assistance (other than prescribed assistance or an amount that is included in computing a taxpayer’s income and that is not deductible in computing the taxpayer’s taxable income) that any taxpayer is or was entitled to receive in respect of an amount included in computing the value of A, and

  • (b) the total of

    • (i) the total of all amounts each of which is

      • (A) an amount included under section 5, 6 or 7 or paragraph 56(1)(n), (o) or (r) in computing the taxpayer’s income for the year, or

      • (B) the taxpayer’s income for the year from a business carried on either alone or as a partner actively engaged in the business, and

    • (ii) where the taxpayer is in attendance at a designated educational institution or a secondary school at which the taxpayer is enrolled in an educational program, the least of

      • (A) $15,000,

      • (B) $375 times the number of weeks in the year during which the taxpayer is in attendance at the institution or school, and

      • (C) the amount, if any, by which the amount that would, if this Act were read without reference to this section, be the taxpayer’s income for the year exceeds the total determined under subparagraph (i) in respect of the taxpayer for the year.

• (2) Subsection (1) applies to the 2004 and subsequent taxation years.

• 16. (1) The Act is amended by adding the following after section 67.5:

  Marginal note:Non-deductibility of fines and penalties

  67.6 In computing income, no deduction shall be made in respect of any amount that is a fine or penalty (other than a prescribed fine or penalty) imposed under a law of a country or of a political subdivision of a country (including a state, province or territory) by any person or public body that has authority to impose the fine or penalty.

• (2) Subsection (1) applies to fines and penalties imposed after March 22, 2004.

• 17. (1) The portion of subsection 104(21) of the French version of the Act before paragraph (a) is replaced by the following:

  • Marginal note:Gain en capital réputé réalisé par le bénéficiaire

    (21) Pour l’application des articles 3 et 111, sauf dans la mesure où ils s’appliquent dans le cadre de l’article 110.6, et sous réserve de l’alinéa 132(5.1)b), la fraction des gains en capital imposables nets d’une fiducie, pour une année d’imposition tout au long de laquelle elle a résidé au Canada, que la fiducie attribue à un bénéficiaire donné dans sa déclaration de revenu produite pour l’année en vertu de la présente partie est réputée être un gain en capital imposable, pour l’année, du bénéficiaire donné réalisé à la disposition par celui-ci d’une immobilisation, à condition :

• (2) The portion of subsection 104(21) of the English version of the Act after paragraph (b) is replaced by the following:

  shall, if so designated by the trust in respect of the particular beneficiary in the return of its income for the year under this Part, be deemed, for the purposes of sections 3 and 111, except as they apply for the purpose of section 110.6, and subject to paragraph 132(5.1)(b), to be a taxable capital gain for the year of the particular beneficiary from the disposition by that beneficiary of capital property.

• (3) Subsections (1) and (2) apply after March 22, 2004.

• 18. (1) Paragraph 110(1)(f) of the Act is amended by striking out the word “or” at the end of subparagraph (iii), by adding the word “or” at the end of subparagraph (iv) and by adding the following after subparagraph (iv):

  • (v) the lesser of

    • (A) the employment income earned by the taxpayer as a member of the Canadian Forces, or as a police officer, while serving on

      • (I) a deployed operational mission (as determined by the Department of National Defence) that is assessed for risk allowance at level 3 or higher (as determined by the Department of National Defence),

      • (II) a prescribed mission that is assessed for risk allowance at level 2 (as determined by the Department of National Defence), or

      • (III) any other mission that is prescribed, and

    • (B) the employment income that would have been so earned by the taxpayer if the taxpayer had been paid at the maximum rate of pay that applied, from time to time during the mission, to a non-commissioned member of the Canadian Forces;

• (2) Subsection (1) applies to the 2004 and subsequent taxation years.

• 19. (1) Section 110.1 of the Act is amended by adding the following after subsection (1.1):

  • Marginal note:Where control acquired

    (1.2) Notwithstanding paragraph 88(1)(e.6), if control of a particular corporation is acquired at any time by a person or group of persons,

    • (a) no amount is deductible under any of paragraphs (1)(a) to (d) in computing any corporation’s taxable income for a taxation year that ends on or after that time in respect of a gift made by the particular corporation before that time; and

    • (b) no amount is deductible under any of paragraphs (1)(a) to (d) in computing any corporation’s taxable income for a taxation year that ends on or after that time in respect of a gift made by any corporation on or after that time if the property that is the subject of the gift was acquired by the particular corporation under an arrangement under which it was expected that control of the particular corporation would be so acquired by a person or group of persons, other than a qualified donee that received the gift, and the gift would be so made.

• (2) Subsection (1) applies in respect of gifts made after March 22, 2004.

• 20. (1) Paragraph 111(1)(a) of the Act is replaced by the following:

  • Marginal note:Non-capital losses

    (a) non-capital losses for the 10 taxation years immediately preceding and the 3 taxation years immediately following the year;

• (2) The description of C in the definition “net capital loss” in subsection 111(8) of the Act is replaced by the following:

  C

  is the least of

  • (a) the amount of the allowable business investment losses of the taxpayer for the taxpayer’s tenth preceding taxation year,

  • (b) the amount, if any, by which the amount of the non-capital loss of the taxpayer for the taxpayer’s tenth preceding taxation year exceeds the total of all amounts in respect of that non-capital loss deducted in computing the taxpayer’s taxable income or claimed by the taxpayer under paragraph 186(1)(c) or (d) for the year or for any preceding taxation year, and

  • (c) if the taxpayer is a corporation the control of which was acquired by a person or group of persons before the end of the year and after the end of the taxpayer’s tenth preceding taxation year, nil, and

• (3) Subsections (1) and (2) apply in respect of losses that arise in taxation years that end after March 22, 2004, except that, for a taxation year of a taxpayer before the taxpayer’s eighth taxation year that ends after that date, paragraph (c) of the description of C in the definition “net capital loss” in subsection 111(8) of the Act, as enacted by subsection (2), is to be read as follows:

  • (c) where the taxpayer is a corporation the control of which was acquired by a person or group of persons before the end of the year and after the end of the taxpayer’s seventh preceding taxation year, nil, and

• 21. (1) Paragraph 115(1)(b) of the Act is replaced by the following:

  • (b) the only taxable capital gains and allowable capital losses referred to in paragraph 3(b) were taxable capital gains and allowable capital losses from dispositions, other than dispositions deemed under subsection 218.3(2), of taxable Canadian properties (other than treaty-protected properties), and

• (2) Subsection (1) applies after 2004.

• 22. (1) The portion of subsection 117.1(1) of the Act before paragraph (a) is replaced by the following:

  Marginal note:Annual adjustment

  • 117.1 (1) Each of the amounts expressed in dollars in subsection 117(2), the description of B in subsection 118(1), subsection 118(2), the descriptions of C and F in subsection 118.2(1), subsections 118.3(1), 122.5(3) and 122.51(1) and (2) and Part I.2 in relation to tax payable under this Part or Part I.2 for a taxation year shall be adjusted so that the amount to be used under those provisions for the year is the total of

• (2) Subsection (1) applies to the 2004 and subsequent taxation years.

• 23. (1) Paragraph 118.1(5.2)(a) of the Act is replaced by the following:

  • (a) for the purpose of this section (other than subsection (5.1) and this paragraph) and section 149.1, the transfer described in subsection (5.1) is deemed to be a gift made, immediately before the individual’s death, by the individual to the qualified donee referred to in subsection (5.1); and

• (2) Paragraph 118.1(5.3)(a) of the Act is replaced by the following:

  • (a) for the purposes of this section (other than this paragraph) and section 149.1, the transfer is deemed to be a gift made, immediately before the individual’s death, by the individual to the donee; and

• (3) Subsections (1) and (2) apply in respect of deaths that occur after 1998.

• 24. (1) Subsection 118.2(1) of the Act is replaced by the following:

  Marginal note:Medical expense credit

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

    A x [(B - C) + D]

    where

    A

    is the appropriate percentage for the taxation year;

    B

    is the total of the individual’s medical expenses in respect of the individual, the individual’s spouse, the individual’s common-law partner or a child of the individual who has not attained the age of 18 years before the end of the taxation year

    • (a) that are evidenced by receipts filed with the Minister,

    • (b) that were not included in determining an amount under this subsection, section 64 or subsection 122.51(2), for a preceding taxation year,

    • (c) that are not included in determining an amount under this subsection, section 64 or subsection 122.51(2), by any other taxpayer for any taxation year, and

    • (d) that were paid by the individual or the individual’s legal representative within any period of 12 months that ends in the taxation year or, if those expenses were in respect of a person (including the individual) who died in the taxation year, within any period of 24 months that includes the day of the person’s death;

    C

    is the lesser of $1,813 and 3% of the individual’s income for the taxation year; and

    D

    is the total of all amounts each of which is, in respect of a dependant of the individual (within the meaning assigned by subsection 118(6), other than a child of the individual who has not attained the age of 18 years before the end of the taxation year), the lesser of $5,000 and the amount determined by the formula

    E - F

    where

    E

    is the total of the individual’s medical expenses in respect of the dependant

    • (a) that are evidenced by receipts filed with the Minister,

    • (b) that were not included in determining an amount under this subsection, or subsection 122.51(2), in respect of the individual for a preceding taxation year,

    • (c) that are not included in determining an amount under this subsection, or subsection 122.51(2), by any other taxpayer for any taxation year, and

    • (d) that were paid by the individual or the individual’s legal representative within the period referred to in paragraph (d) of the description of B; and

    F

    is the lesser of $1,813 and 3% of the dependant’s income for the taxation year.

• (2) Subsection (1) applies to the 2004 and subsequent taxation years.

• (3) For the 2001 to 2003 taxation years, the description of B in subsection 118.2(1) of the Act is to be read as follows:

  B

  is the total of the individual’s medical expenses

  • (a) that are evidenced by receipts filed with the Minister,

  • (b) that were not included in determining an amount under this subsection or subsection 122.51(2) for a preceding taxation year, and

  • (c) that were paid by the individual or the individual’s legal representative within any period of 12 months that ends in the taxation year or, if those expenses were in respect of a person (including the individ­ual) who died in the taxation year, within any period of 24 months that includes the day of the person’s death;