Technical Tax Amendments Act, 2012 (S.C. 2013, c. 34)
Full Document:
Assented to 2013-06-26
184. (1) Section 42 of the Act is replaced by the following:
Marginal note:Dispositions subject to warranty
42. (1) For the purposes of this subdivision,
(a) an amount received or receivable by a person or partnership (referred to in this subsection as the “vendor”), as the case may be, as consideration for a warranty, covenant or other conditional or contingent obligation given or incurred by the vendor in respect of a property (referred to in this section as the “subject property”) disposed of by the vendor,
(i) if it is received or receivable on or before the specified date, is deemed to be received as consideration for the disposition by the vendor of the subject property (and not to be an amount received or receivable by the vendor as consideration for the obligation) and is to be included in computing the vendor’s proceeds of disposition of the subject property for the taxation year or fiscal period in which the disposition occurred, and
(ii) in any other case, is deemed to be a capital gain of the vendor from the disposition of a property by the vendor that occurs at the earlier of the time when the amount is received or becomes receivable; and
(b) an outlay or expense paid or payable by the vendor under a warranty, covenant or other conditional or contingent obligation given or incurred by the vendor in respect of the subject property disposed of by the vendor,
(i) if it is paid or payable on or before the specified date, is deemed to reduce the consideration for the disposition by the vendor of the subject property (and not to be an outlay or expense paid or payable by the vendor under the obligation) and is to be deducted in computing the vendor’s proceeds of disposition of the subject property for the taxation year or fiscal period in which the disposition occurred, and
(ii) in any other case, is deemed to be a capital loss of the vendor from the disposition of a property by the vendor that occurs at the earlier of the time when the outlay or expense is paid or becomes payable.
Meaning of “specified date”
(2) In subsection (1), “specified date” means,
(a) if the vendor is a partnership, the last day of the vendor’s fiscal period in which the vendor disposed of the subject property; and
(b) in any other case, the vendor’s filing-due date for the vendor’s taxation year in which the vendor disposed of the subject property.
(2) Subsection (1) applies to taxation years and fiscal periods that end after February 27, 2004 except that, in its application to taxation years and fiscal periods that end before November 5, 2010, section 42 of the Act, as enacted by subsection (1), is to be read as follows:
42. For the purposes of this subdivision,
(a) an amount received or receivable by a taxpayer in a taxation year as consideration for a warranty, a covenant or another conditional or contingent obligation given or incurred by the taxpayer in respect of a property disposed of, at any time, by the taxpayer
(i) is, if the amount is received or becomes receivable on or before the taxpayer’s filing-due date for the taxpayer’s taxation year in which the taxpayer disposed of the property, to be included in computing the taxpayer’s proceeds of disposition of the property, and
(ii) is, if the amount is received or becomes receivable after that filing-due date, deemed to be a capital gain of the taxpayer from the disposition, by the taxpayer of the property, that occurs at the time when the amount is received or becomes receivable; and
(b) an outlay or expense paid or payable by the taxpayer in a taxation year under a warranty, covenant or another conditional or contingent obligation given or incurred by the taxpayer in respect of property disposed of, at any time, by the taxpayer
(i) is, if the amount is paid or becomes payable on or before the taxpayer’s filing-due date for the taxpayer’s taxation year in which the taxpayer disposed of the property, to be deducted in computing the taxpayer’s proceeds of disposition of the property, and
(ii) is, if the amount is paid or becomes payable after that filing-due date, deemed to be a capital loss of the taxpayer from the disposition, by the taxpayer of the property, that occurs at the time when the amount is paid or becomes payable.
185. (1) The portion of subsection 43(2) of the Act before the formula in paragraph (a) is replaced by the following:
Marginal note:Ecological gifts
(2) For the purposes of subsection (1) and section 53, if at any time a taxpayer disposes of a covenant or an easement to which land is subject or, in the case of land in the Province of Quebec, a real servitude, in circumstances where subsection 110.1(5) or 118.1(12) applies,
(a) the portion of the adjusted cost base to the taxpayer of the land immediately before the disposition that can reasonably be regarded as attributable to the covenant, easement or real servitude, as the case may be, is deemed to be equal to the amount determined by the formula
(2) Subsection (1) applies to gifts made after December 20, 2002.
186. (1) Paragraphs 44(1)(c) and (d) of the Act are replaced by the following:
(c) if the former property is described in paragraph (a), before the later of the end of the second taxation year following the initial year and 24 months after the end of the initial year, and
(d) in any other case, before the later of the end of the first taxation year following the initial year and 12 months after the end of the initial year,
(2) Subsection 44(7) of the Act is amended by striking out “or” at the end of paragraph (a), by adding “or” at the end of paragraph (b) and by adding the following after paragraph (b):
(c) the former property of the taxpayer was disposed of to a partnership in which the taxpayer was, immediately after the disposition, a majority interest partner.
(3) Paragraph 44(1)(c) of the Act, as enacted by subsection (1), applies in respect of dispositions that occur in taxation years that end on or after December 20, 2000.
(4) Paragraph 44(1)(d) of the Act, as enacted by subsection (1), applies in respect of dispositions that occur in taxation years that end on or after December 20, 2001.
(5) Subsection (2) applies to dispositions of property by a taxpayer that occur after December 20, 2002. However, if a property so disposed of pursuant to an agreement in writing made before December 21, 2002 is transferred to the purchaser before 2004
(a) subsection 44(7) of the Act, as it read immediately before the enactment of subsection (2), applies in respect of the disposition of property; and
(b) for the purpose of applying subparagraph 44(1)(e)(iii) of the Act to the taxpayer for a taxation year in respect of the property, a reasonable amount as a reserve in respect of the proceeds of disposition may not exceed the amount that would be reasonable if the proceeds from any subsequent disposition of the property that the purchaser receives before the end of the taxation year were received by the taxpayer.
187. (1) The portion of subsection 44.1(6) of the Act before paragraph (b) is replaced by the following:
Marginal note:Special rule — re eligible small business corporation share exchanges
(6) For the purpose of this section, where an individual receives shares of the capital stock of a particular corporation that are eligible small business corporation shares of the individual (in this subsection referred to as the “new shares”) as the sole consideration for the disposition by the individual of shares issued by the particular corporation or by another corporation that were eligible small business corporation shares of the individual (in this subsection referred to as the “exchanged shares”), the new shares are deemed to have been owned by the individual throughout the period that the exchanged shares were owned by the individual if
(a) section 51, paragraph 85(1)(h), subsection 85.1(1), section 86 or subsection 87(4) applied to the individual in respect of the new shares; and
(2) The portion of subsection 44.1(7) of the Act before paragraph (b) is replaced by the following:
Marginal note:Special rule — re active business corporation share exchanges
(7) For the purpose of this section, where an individual receives common shares of the capital stock of a particular corporation (in this subsection referred to as the “new shares”) as the sole consideration for the disposition by the individual of common shares of the particular corporation or of another corporation (in this subsection referred to as the “exchanged shares”), the new shares are deemed to be eligible small business corporation shares of the individual and shares of the capital stock of an active business corporation that were owned by the individual throughout the period that the exchanged shares were owned by the individual, if
(a) section 51, paragraph 85(1)(h), subsection 85.1(1), section 86 or subsection 87(4) applied to the individual in respect of the new shares;
(3) Paragraph 44.1(12)(b) of the Act is replaced by the following:
(b) the new shares (or shares for which the new shares are substituted property) were
(i) issued by the corporation that issued the old shares,
(ii) issued by a corporation that, at or immediately after the time of issue of the new shares, was a corporation that was not dealing at arm’s length with
(A) the corporation that issued the old shares, or
(B) the individual, or
(iii) issued, by a corporation that acquired the old shares (or by another corporation related to that corporation), as part of the transaction or event or series of transactions or events that included that acquisition of the old shares; and
(4) Section 44.1 of the Act is amended by adding the following after subsection (12):
Marginal note:Order of disposition of shares
(13) For the purpose of this section, an individual is deemed to dispose of shares that are identical properties in the order in which the individual acquired them.
(5) Subsections (1) and (2) apply to dispositions that occur after February 27, 2000.
(6) Subsection (3) applies in respect of dispositions that occur after February 27, 2004.
(7) Subsection (4) applies in respect of dispositions that occur after December 20, 2002. However, if an individual so elects in writing and files the election with the Minister of National Revenue on or before the individual’s filing-due date for the individual’s taxation year in which this Act receives royal assent, subsection (4) applies, in respect of the individual, to dispositions that occur after February 27, 2000.
188. (1) Subsections 49(2) and (2.1) of the Act are replaced by the following:
Marginal note:Expired option — shares
(2) If at any time an option described in paragraph (1)(b) expires, the corporation that granted the option is deemed to have disposed of capital property at that time for proceeds equal to the proceeds received by it for the granting of the option, and the adjusted cost base to the corporation of that capital property immediately before that time is deemed to be nil, unless
(a) the option is held, at that time, by a person who deals at arm’s length with the corporation and the option was granted by the corporation to a person who was dealing at arm’s length with the corporation at the time that the option was granted, or
(b) the option is an option to acquire shares of the capital stock of the corporation in consideration for the incurring, pursuant to an agreement described in paragraph (e) of the definition “Canadian exploration and development expenses” in subsection 66(15), paragraph (i) of the definition “Canadian exploration expense” in subsection 66.1(6), paragraph (g) of the definition “Canadian development expense” in subsection 66.2(5) or paragraph (c) of the definition “Canadian oil and gas property expense” in subsection 66.4(5), of any expense described in whichever of those paragraphs is applicable.
Marginal note:Expired option — trust units
(2.1) If, at a particular time, an option referred to in paragraph (1)(c) expires, and the option is held at that time by a person who does not deal at arm’s length with the trust or was granted to a person who did not deal at arm’s length with the trust at the time that the option was granted,
(a) the trust is deemed to have disposed of capital property at the particular time for proceeds equal to the proceeds received by it for the granting of the option; and
(b) the adjusted cost base to the trust of that capital property immediately before the particular time is deemed to be nil.
(2) Subsection (1) applies to options issued after October 24, 2012.
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