Legislative Proposals Relating to the Income Tax Act and the Income Tax Regulations

Legislative Proposals Relating to the Income Tax Act and the Income Tax Regulations

Capital Gains Inclusion Rate

Income Tax Act

• 1 (1) Paragraph 3(c) of the Act is replaced by the following:

  • (b.1) determine the amount, if any, by which the total determined under paragraph (a) plus the amount determined under paragraph (b) exceeds the amount determined for the taxpayer for the year under section 38.01,

  • (c) determine the amount, if any, by which the amount determined under paragraph (b.1) exceeds the total of the deductions permitted by Subdivision E in computing the taxpayer’s income for the year (except to the extent that those deductions, if any, have been taken into account in determining the total referred to in paragraph (a)), and

• (2) Subsection (1) applies to taxation years that end after June 24, 2024.

• 2 (1) Clause 13(7)(b)(ii)(B) of the Act is replaced by the following:

  • (B) the amount determined by the formula

    A + B − C − D

    where

    A

    is 1/2 of the elected amount in respect of the property under subsection (7.7),

    B

    is 2/3 of the amount, if any, by which the fair market value of the property at that later time exceeds the elected amount in respect of the property under subsection (7.7),

    C

    is the cost to the taxpayer of the property as determined under clause (A), and

    D

    is 1.5 times the amount deducted by the taxpayer under section 110.6 in respect of the amount, if any, by which the fair market value of the property at that later time exceeds the cost to the taxpayer of the property as determined under clause (A);

• (2) Clause 13(7)(d)(i)(B) of the Act is replaced by the following:

  • (B) the amount determined by the formula

    A + B − C − D

    where

    A

    is 1/2 of the elected amount in respect of the property under subsection (7.7),

    B

    is 2/3 of the amount, if any, by which the amount deemed under subparagraph 45(1)(c)(ii) to be the taxpayer’s proceeds of disposition of the property in respect of the change exceeds the elected amount in respect of the property under subsection (7.7),

    C

    is that proportion of the cost to the taxpayer of the property as determined under subclause (A)(II) that the amount of the increase in the use regularly made by the taxpayer of the property for that purpose is of the whole of the use regularly made of the property, and

    D

    is 1.5 times the amount deducted by the taxpayer under section 110.6 in respect of the amount, if any, by which the amount deemed under subparagraph 45(1)(c)(ii) to be the taxpayer’s proceeds of disposition of the property exceeds the amount determined for C, and

• (3) Clause 13(7)(e)(i)(B) of the Act is replaced by the following:

  • (B) the amount determined by the formula

    A + B − C − D

    where

    A

    is 1/2 of the elected amount in respect of the property under subsection (7.7),

    B

    is 2/3 of the amount, if any, by which the transferor’s proceeds of disposition of the property exceeds the elected amount in respect of the property under subsection (7.7),

    C

    is the cost or capital cost, as the case may be, to the transferor immediately before the particular time, and

    D

    is 1.5 times the amount deducted by any person under section 110.6 in respect of the amount, if any, by which the transferor’s proceeds of disposition of the property exceeds the amount determined for C,

• (4) Clause 13(7)(e)(ii)(B) of the Act is replaced by the following:

  • (B) the amount determined by the formula

    A + B − C

    where

    A

    is 1/2 of the elected amount in respect of the property under subsection (7.7),

    B

    is 2/3 of the amount, if any, by which the transferor’s proceeds of disposition of the property, exceeds the elected amount in respect of the property under subsection (7.7), and

    C

    is the cost or capital cost, as the case may be, to the transferor immediately before the particular time

• (5) Subparagraph 13(7)(f)(ii) of the Act is replaced by the following:

  • (ii) 2/3 of the amount, if any, by which the taxpayer’s proceeds of disposition of the property exceed the capital cost to the taxpayer of the property at the time of the disposition;

• (6) Section 13 of the Act is amended by adding the following after subsection (7.6):

  • Marginal note:Change in use election

    (7.7) If an individual has, in a taxation year, disposed of any of the individual’s property and paragraph (7)(b), (d) or (e) applies in respect of the disposition, and the individual elects — or if paragraph (7)(e) applies, the individual and the taxpayer who acquired the property directly or indirectly from the individual jointly elect — in prescribed form and prescribed manner, the following rules apply:

    • (a) the individual, or if paragraph (7)(e) applies the individual and the taxpayer who acquired the property directly or indirectly from the individual, may elect an amount for the purpose of applying paragraph (7)(b), (d) or (e);

    • (b) the elected amount may not exceed the lesser of

      • (i) the amount of the individual’s capital gain for the taxation year in respect of the disposition, other than a capital gain in respect of which an amount was deducted under section 110.6, and

      • (ii) the amount determined by the formula

        A − B

        where

        A

        is the amount determined under paragraph 38.01(a) for the individual for the taxation year, and

        B

        is the amount determined under paragraph 38.01(b) for the individual for the taxation year, without reference to this subsection; and

    • (c) if two or more properties described under this subsection are disposed of in a taxation year of a taxpayer, an election may be made in respect of each such property provided that the total of all amounts elected in respect of all such properties does not exceed the amount determined in subparagraph (b)(ii).

• (7) The portion of subparagraph 13(21.1)(b)(ii) of the Act before clause (A) is replaced by the following:

  • (ii) 1/3 of the amount by which the greater of

• (8) Subsections (1) and (2) apply to changes in use of property that occur in taxation years that end after June 24, 2024 except that, for changes in use of property that occur in a taxpayer’s taxation year that begins before June 25, 2024 and ends after June 24, 2024, the references in clauses 13(7)(b)(ii)(B) and (d)(i)(B) of the Act, as enacted by subsections (1) and (2), respectively, to the fraction ‘‘2/3’’ are to be read as references to the fraction in paragraph 38(a) of the Act, as enacted by subsection 4(1), that applies to the taxpayer for the year and the references to ‘‘1.5’’ in clauses 13(7)(b)(ii)(B) and (d)(i)(B) of the Act, as enacted by subsections (1) and (2), respectively, are to be read as references to “twice” in respect of dispositions of property before June 25, 2024.

• (9) Subsections (3) and (4) apply to acquisitions of property that occur in taxation years that end after June 24, 2024 except that, for acquisitions of property in a taxation year that begins before June 25, 2024 and ends after June 24, 2024, of a person or partnership from whom the property was acquired, the references in clauses 13(7)(e)(i)(B) and (e)(ii)(B) of the Act, as enacted by subsections (3) and (4), to the fraction ‘‘2/3’’ are to be read as references to the fraction in paragraph 38(a) of the Act, as enacted by subsection 4(1), that applies to the person or partnership from whom the taxpayer acquired the property for the year in which the person or partnership disposed of the property, and the reference to ‘‘1.5’’ in clause 13(7)(e)(i)(B) of the Act, as enacted by subsection (3), is to be read as a reference to “twice” in respect of dispositions of property before June 25, 2024.

• (10) Subsection (5) applies to acquisitions of property that occur in taxation years that end after June 24, 2024 except that, for acquisitions of property that occur in a taxpayer’s taxation year that begins before June 25, 2024 and ends after June 24, 2024, the reference in subparagraph 13(7)(f)(ii) of the Act, as enacted by subsection (5), to the fraction ‘‘2/3’’ is to be read as a reference to the fraction in paragraph 38(a) of the Act, as enacted by subsection 4(1), that applies to the taxpayer for the year.

• (11) Subsection (6) applies to acquisitions of property that occur after June 24, 2024.

• (12) Subsection (7) applies to taxation years that end after June 24, 2024 except that, for a taxpayer’s taxation year that begins before June 25, 2024 and ends after June 24, 2024, the reference in subparagraph 13(21.1)(b)(ii) of the Act, as enacted by subsection (7), to the fraction ‘‘1/3’’ is to be read as a reference to the fraction determined when the fraction in paragraph 38(a) of the Act, as enacted by subsection 4(1), that applies to the taxpayer for the year is subtracted from 1.

• 3 (1) Subparagraph 20(1)(f)(ii) of the Act is replaced by the following:

  • (ii) in any other case, 2/3 of the lesser of the amount so paid and the amount by which the lesser of the principal amount of the obligation and all amounts paid in the year or in any preceding taxation year in satisfaction of its principal amount exceeds the amount for which the obligation was issued;

• (2) The portion of paragraph 20(1)(z.1) of the Act after subparagraph (ii) is replaced by the following:

  to the extent of the amount thereof (or in the case of capital property, 2/3 of the amount thereof) that was not deductible by the taxpayer under paragraph (z) in computing the taxpayer’s income for any preceding taxation year;

• (3) Subsections (1) and (2) apply in respect of amounts that become payable after June 24, 2024.

• 4 (1) Paragraph 38(a) of the Act is replaced by the following:

  • (a) subject to paragraphs (a.1) to (a.3), a taxpayer’s taxable capital gain for a taxation year from the disposition of any property is 2/3 of the taxpayer’s capital gain for the year from the disposition of the property;

• (2) The portion of subparagraph 38(a.3)(ii) of the Act before clause (A) is replaced by the following:

  • (ii) 2/3 of the amount, if any, by which

• (3) Paragraphs 38(b) and (c) of the Act are replaced by the following:

  • (b) a taxpayer’s allowable capital loss for a taxation year from the disposition of any property is 2/3 of the taxpayer’s capital loss for the year from the disposition of that property; and

  • (c) a taxpayer’s allowable business investment loss for a taxation year from the disposition of any property is 2/3 of the taxpayer’s business investment loss for the year from the disposition of that property.

• (4) Subsections (1) to (3) apply to taxation years that end after June 24, 2024, except that

  • (a) for a taxation year of a taxpayer that includes June 25, 2024, the references to the fraction ‘‘2/3’’ in paragraph 38(a) of the Act, as enacted by subsection (1), in subparagraph 38(a.3)(ii) of the Act, as enacted by subsection (2) and in paragraphs 38(b) and (c) of the Act, as enacted by subsection (3), are to be read as references to the fraction that applies to the taxpayer for that year, and for this purpose,

    • (i) if the taxpayer has only net capital gains, or only net capital losses, from dispositions of property in the period that begins at the beginning of the year and ends at the end of June 24, 2024 (in this paragraph referred to as the ‘‘first period’’) and in the period that begins at the beginning of June 25, 2024 and ends at the end of the year (in this paragraph referred to as the ‘‘second period’’), the fraction that applies to the taxpayer for the year is the fraction determined by the formula

      (1/2 × A + 2/3 × B) ÷ (A + B)

      where

      A

      is the net capital gains or the net capital losses, as the case may be, of the taxpayer from dispositions of property in the first period, and

      B

      is the net capital gains or the net capital losses, as the case may be, of the taxpayer from dispositions of property in the second period,

    • (ii) if the net capital gains and net capital losses of the taxpayer for the year are nil, the fraction that applies to the taxpayer for the year is 2/3,

    • (iii) if the amount of the taxpayer’s net capital gains from dispositions of property in the first period exceeds the amount of the taxpayer’s net capital losses from dispositions of property in the second period, the fraction that applies to the taxpayer for the year is 1/2,

    • (iv) if the amount of the taxpayer’s net capital losses from dispositions of property in the first period exceeds the amount of the taxpayer’s net capital gains from dispositions of property in the second period, the fraction that applies to the taxpayer for the year is 1/2,

    • (v) if the amount of the taxpayer’s net capital gains from dispositions of property in the first period is less than the amount of the taxpayer’s net capital losses from dispositions of property in the second period, the fraction that applies to the taxpayer for the year is 2/3, and

    • (vi) if the amount of the taxpayer’s net capital losses from dispositions of property in the first period is less than the amount of the taxpayer’s net capital gains from dispositions of property in the second period, the fraction that applies to the taxpayer for the year is 2/3;

  • (b) in determining the fraction that applies to a taxpayer under paragraph (a) for the year, the following rules apply:

    • (i) the net capital gains of the taxpayer from dispositions of property in a period is the amount, if any, by which the taxpayer’s capital gains from dispositions of property (other than the portion of any capital gain in respect of which the taxpayer deducted an amount under section 110.6) in the period exceed the taxpayer’s capital losses from dispositions of property in the period,

    • (ii) the net capital losses of the taxpayer from dispositions of property in a period is the amount, if any, by which the taxpayer’s capital losses from dispositions of property in the period exceed the taxpayer’s capital gains from dispositions of property (other than the portion of any capital gain in respect of which the taxpayer deducted an amount under section 110.6) in the period,

    • (iii) the net amount included as a capital gain of the taxpayer for a taxation year from a disposition of property before the year because of subparagraphs 40(1)(a)(ii) and (iii) of the Act is deemed to be a capital gain of the taxpayer from a disposition of property on the first day of the year,

    • (iv) each capital loss that is a business investment loss is to be determined without reference to subsections 39(9) and (10) of the Act,

    • (v) if an amount is included in computing the income of the taxpayer for the year because of subsection 80(13) of the Act in respect of a commercial obligation that is settled, the amount that would be determined under that subsection in respect of the obligation, if the value of E in the formula in that subsection were 1, is deemed to be a capital gain of the taxpayer from a disposition of property on the day on which the settlement occurs,

    • (vi) the taxpayer’s capital gains and losses from dispositions of property (other than taxable Canadian property) while the taxpayer is a non-resident are deemed to be nil,

    • (vii) if in the course of administering the estate of a deceased taxpayer, a capital loss from a disposition of property by the legal representative of a deceased taxpayer is deemed under paragraph 164(6)(c) of the Act to be a capital loss of the deceased taxpayer from the disposition of property by the taxpayer in the taxpayer’s last taxation year and not to be a capital loss of the estate, the capital loss is deemed to be from the disposition of a property by the taxpayer immediately before the taxpayer’s death,

    • (viii) if no capital gains or losses are realized in a period, the amount of net capital gains or losses for that period is deemed to be nil,

    • (ix) if a net amount is included as a capital gain of a taxpayer for a taxation year because of the granting of an option under subsection 49(1) of the Act, the net amount is deemed to be a capital gain of the taxpayer from a disposition of property on the day on which the option was granted,

    • (x) if a net amount is included as a capital gain of a corporation for its taxation year under subsection 49(2) of the Act because of the expiration of an option that was granted by the corporation, the net amount is deemed to be a capital gain of the corporation from a disposition of property on the day on which the option expired,

    • (xi) if a net amount is included as a capital gain of a trust for its taxation year under subsection 49(2.1) of the Act because of the expiration of an option that was granted by the trust, the net amount is deemed to be a capital gain of the trust from a disposition of property on the day on which the option expired,

    • (xii) if a net amount is included as a capital gain of a taxpayer for a taxation year because of subsection 49(3), (3.01) or (3.1) of the Act, the net amount is deemed to be a capital gain of the taxpayer from a disposition of property on the day on which the option was exercised,

    • (xiii) if an election is made by a taxpayer under paragraph 104(21.4)(d) or subsection 104(21.5) of the Act, as enacted by subsection 19(1), subsection 130.1(4.4) or (4.5) of the Act, as enacted by subsection 33(4), or subsection 131(1.7) or (1.9) of the Act, as enacted by subsection 34(3), for a year, the portion of the taxpayer’s net capital gains for the year that are to be treated as being in respect of capital gains realized on dispositions of property that occurred in a particular period in the year is that proportion of those net capital gains that the number of days in the particular period is of the number of days in the year, and

    • (xiv) if an amount is designated under subsection 104(21) of the Act in respect of a beneficiary by a trust in respect of the net taxable capital gains of the trust for a taxation year of the trust and the trust does not elect under paragraph 104(21.4)(d) of the Act, as enacted by subsection 19(1), for the year, the deemed gains of the beneficiary referred to in subsection 104(21.4) of the Act, as enacted by subsection 19(1), are deemed to have been realized in each period in the year in a proportion that is equal to the same proportion that the net capital gains of the trust realized by the trust in that period is of all the net capital gains realized by the trust in the year; and

  • (c) despite subparagraph (a)(i), if a taxation year begins before June 25, 2024, the references to the fraction ‘‘2/3’’ in paragraph 38(a) of the Act, as enacted by subsection (1), for the portion of any capital gain from the disposition of property in that year in respect of which an amount is deducted in that year under section 110.6 of the Act, is to be read as a reference to

    • (i) “1/2” for dispositions of property before June 25, 2024, and

    • (ii) “2/3” for dispositions of property after June 24, 2024.

• 5 (1) The Act is amended by adding the following after section 38:

  Marginal note:Capital gains reduction

  38.01 For the purposes of paragraph 3(b.1), the amount determined for the taxation year for an individual (other than a trust), a graduated rate estate or a qualified disability trust (as defined in subsection 122(3)) is 1/6 multiplied by the lesser of

  • (a) the amount determined by the formula

    $250,000 − A

    where

    A

    is 6 times the amount deducted for the year under paragraph 110(1)(d.4), and

  • (b) the amount determined by the formula

    A − B − C − D + E

    where

    A

    is 1.5 times the amount determined for the taxation year under paragraph 3(b),

    B

    is, in the case of a graduated rate estate or a qualified disability trust (as defined in subsection 122(3)), 1.5 times the total of all amounts designated by the trust for the taxation year under subsection 104(21),

    C

    is the total of all amounts, each of which is deemed to be a capital gain of the taxpayer under paragraph 96(1.72)(f) or 104(21.7)(b), clause 130.1(4)(b)(ii)(A) or 131(1)(b)(ii)(A) or paragraph 138.1(3.1)(b),

    D

    is the total of all amounts, each of which is a capital gain of the individual for the taxation year from the disposition or deemed disposition of property described in any of paragraphs 13(7)(b), (d) or (e), and

    E

    is the total of all amounts, each of which is an amount elected under subsection 13(7.7) for the taxation year.

• (2) Subsection (1) applies to taxation years that end after June 24, 2024, except that, for the purpose of applying paragraph 38.01(b) of the Act, as enacted by subsection (1), for a taxation year that includes June 24, 2024, the amounts determined under paragraphs 3(b) and 38.01(b) of the Act are to be calculated as if

  • (a) the individual’s only taxable capital gains for the year were the individual’s taxable capital gains for the year from the disposition of property other than listed personal property after June 24, 2024;

  • (b) the individual’s only allowable capital loss for the year was equal to the amount, if any, by which the individual’s allowable capital losses for the year from the disposition of property other than listed personal property exceed the individual’s taxable capital gains for the year from the disposition of property other than listed personal property before June 25, 2024;

  • (c) the individual’s taxable net gain for the year from the disposition of listed personal property was computed as if

    • (i) the individual’s only gains for the year from the disposition of listed personal property were gains from the disposition of listed personal property after June 24, 2024, and

    • (ii) the individual’s only loss for the year from the disposition of listed personal property was equal to the amount, if any, by which the individual’s losses for the year from the disposition of listed personal property exceed the individual’s gains for the year from the disposition of listed personal property before June 25, 2024; and

  • (d) the only amounts designated under subsection 104(21) by a trust described in the description of B in section 38.01 as enacted by subsection (1) were from the dispositions of property that occurred after June 24, 2024.

• 6 (1) Clause 39(9)(b)(i)(B) of the Act is replaced by the following:

  • (B) begins after October 17, 2000 and ends before June 25, 2024,

• (2) Clause 39(9)(b)(i.1)(A) of the Act is amended by striking out “or” at the end of subclause (I) and by adding the following after subclause (II):

  • (III) begins after June 24, 2024, or

• (3) Paragraph 39(9)(b) of the Act is amended by striking out “and” at the end of subparagraph (i.1), by adding “and” at the end of subparagraph (i.2) and by adding the following after subparagraph (i.2):

  • (i.3) for a preceding taxation year that begins before June 24, 2024 and ends after June 25, 2024, the amount determined by the formula

    A + B

    where

    A

    is twice the amount deducted under section 110.6 in respect of dispositions of property that are after 2023 and before June 25, 2024, and

    B

    is 1.5 times the amount deducted under section 110.6 in respect of dispositions of property that are after June 24, 2024 and before 2025

• (4) Clause 39(10)(b)(i)(B) of the Act is replaced by the following:

  • (B) begins after October 17, 2000 and ends before June 25, 2024,

• (5) Clause 39(10)(b)(i.1)(A) of the Act is amended by striking out “or” at the end of subclause (I) and by adding the following after subclause (II):

  • (III) begins after June 24, 2024, or

• (6) Paragraph 39(10)(b) of the Act is amended by striking out “and” at the end of subparagraph (i.1), by adding “and” at the end of subparagraph (i.2) and by adding the following after subparagraph (i.2):

  • (i.3) for a preceding taxation year that begins before June 25, 2024 and ends after June 24, 2024, the amount determined by the formula

    A + B

    where

    A

    is twice the amount designated by the trust under subsection 104(21.2) in respect of a beneficiary in its return of income in respect of dispositions of property that are after 2023 and before June 25, 2024, and

    B

    is 1.5 times the amount designated by the trust under subsection 104(21.2) in respect of a beneficiary in its return of income in respect of dispositions of property that are after June 24, 2024 and before 2025

• (7) Subsection 39(11) of the Act is replaced by the following:

  • Marginal note:Recovery of bad debts

    (11) Where an amount is received in a taxation year on account of a debt (in this subsection referred to as the “recovered amount”) in respect of which a deduction for bad debts had been made under subsection 20(4.2) in computing a taxpayer’s income for a preceding taxation year, the amount, if any, by which 2/3 of the recovered amount exceeds the amount determined under paragraph 12(1)(i.1) in respect of the recovered amount is deemed to be a taxable capital gain of the taxpayer from a disposition of capital property in the year.

• (8) Subsections (1) to (7) apply to taxation years that end after June 24, 2024.

• 7 (1) Subsection 41(1) of the Act is replaced by the following:

  Marginal note:Taxable net gain — dispositions of listed personal property

  • 41 (1) For the purposes of this Part, a taxpayer’s taxable net gain for a taxation year from dispositions of listed personal property is 2/3 of the amount determined under subsection (2) to be the taxpayer’s net gain for the year from dispositions of such property.

• (2) Subsection (1) applies to taxation years that end after June 24, 2024 except that, for a taxation year that begins before June 25, 2024 and ends after June 24, 2024, the reference to the fraction ‘‘2/3’’ in subsection 41(1) of the Act, as enacted by subsection (1), is to be read as a reference to the fraction in paragraph 38(a) of the Act, as enacted by subsection 4(1), that applies to the taxpayer for the year.

• 8 (1) Subclause 53(2)(h)(i.1)(B)(I) of the Act is replaced by the following:

  • (I) that is equal to 1/2 of the amount designated by the trust under subsection 104(21) in respect of the taxpayer,

• (2) Subsection (1) applies to taxation years that end after June 24, 2024 except that, in applying subclause 53(2)(h)(i.1)(B)(I) of the Act, as enacted by subsection (1), to those years in respect of a taxpayer’s interest in a trust, where a taxation year of the trust that includes June 25, 2024, ends in the taxpayer’s taxation year, the reference to ‘‘1/2’’ in that subclause is to be read as a reference to the fraction obtained when 1 is subtracted from the reciprocal of the fraction in paragraph 38(a) of the Act, as enacted by subsection 4(1), that applies to the trust for its taxation year.

• 9 (1) Clause 80(12)(a)(ii)(B) of the Act is replaced by the following:

  • (B) 1.5 times the amount that would, because of subsection 88(1.2), be deductible under paragraph 111(1)(b) in computing the debtor’s taxable income for the year, if the debtor had sufficient income and taxable capital gains for the year,

• (2) Subparagraph (a)(ii) of the description of D in subsection 80(13) of the Act is replaced by the following:

  • (ii) 1.5 times the total of all amounts each of which is an amount by which the amount determined before that time under this subsection in respect of a settlement of an obligation issued by the debtor has been reduced because of an amount determined under this paragraph, and

• (3) Subparagraph (b) of the description of E in subsection 80(13) of the Act is replaced by the following:

  • (b) in any other case, 2/3.

• (4) Subsections (1) to (3) apply to taxation years that end after June 24, 2024 except that, for a taxation year of a debtor that includes June 25, 2024

  • (a) the references to ‘‘1.5’’ in clause 80(12)(a)(ii)(B) of the Act, as enacted by subsection (1), and in subparagraph (a)(ii) of the description of D in subsection 80(13) of the Act, as enacted by subsection (2), are to be read as references to the fraction that is the reciprocal of the fraction in paragraph 38(a) of the Act, as enacted by subsection 4(1), that applies to the debtor for the year; and

  • (b) the reference to the fraction ‘‘2/3’’ in paragraph (b) of the description of E in subsection 80(13) of the Act, as enacted by subsection (3), is to be read as a reference to the fraction in paragraph 38(a) of the Act, as enacted by subsection 4(1), that applies to the debtor for the year.

• 10 (1) The formula in subsection 80.01(10) of the Act is replaced by the following:

  2/3 × (A – B) – C

• (2) Subsection (1) applies to taxation years that end after June 24, 2024 except that, for a taxation year of a debtor that includes June 25, 2024, the reference to the fraction ‘‘2/3’’ in subsection 80.01(10) of the Act, as enacted by subsection (1), is to be read as a reference to the fraction in paragraph 38(a) of the Act, as enacted by subsection 4(1), that applies to the debtor for the year in which the commercial debt obligation was deemed to have been settled.

• 11 (1) Subparagraph 84.1(2.1)(a)(ii) of the Act is replaced by the following:

  • (ii) the reciprocal of the specified multiplier multiplied by the amount deducted under section 110.6 in computing the taxable income of the transferor for the year in respect of the taxable capital gain from the disposition, and

• (2) The portion of paragraph 84.1(2.1)(b) of the Act before subparagraph (i) is replaced by the following:

  • (b) the reciprocal of the specified multiplier multiplied by the maximum amount that could have been deducted under section 110.6 in computing the taxable income of the transferor for the year in respect of the taxable capital gain from the disposition if

• (3) The portion of paragraph 84.1(2.1)(b) of the Act after subparagraph (ii) is replaced by the following:

  and for the purposes of subparagraph (ii), the specified multiplier multiplied by the total of all amounts determined under this subsection for the year in respect of other property disposed of before the disposition of the share shall be deemed to have been deducted under section 110.6 in computing the taxable income of the transferor for the year in respect of the taxable capital gain from the disposition of property to which this subsection does not apply,

• (4) Section 84.1 of the Act is amended by adding the following after subsection (2.1):

  • Marginal note:Specified multiplier

    (2.11) For the purpose of subsection (2.1), the specified multiplier for a taxation year is,

    • (a) if the share is disposed of before June 25, 2024, 1/2; and

    • (b) in any other case, 2/3.

• (5) Subsections (1) to (4) apply to taxation years of transferors that end after June 24, 2024.

• 12 (1) Clause (a)(i)(A) of the definition capital dividend account in subsection 89(1) of the Act is replaced by the following:

  • (A) the amount of the corporation’s capital gain — computed without reference to subclause 52(3)(a)(ii)(A)(II), subparagraph 53(1)(b)(ii), paragraph 104(21.4)(a), subsection 104(21.7) and paragraph 104(21.8)(b) — from the disposition (other than a disposition under paragraph 40(3.1)(a) or subsection 40(12) or a disposition that is the making of a gift after December 8, 1997 that is not a gift described in subsection 110.1(1)) of a property in the period beginning at the beginning of its first taxation year that began after the corporation last became a private corporation and that ended after 1971 and ending immediately before the particular time (in this definition referred to as the period)

• (2) Paragraph (a) of the definition capital dividend account in subsection 89(1) of the Act is amended by striking out “and” at the end of subparagraph (i), by adding “and” at the end of subparagraph (i.1) and by replacing the portion of paragraph (a) after subparagraph (i.1) and before subparagraph (ii) by the following:

  • (i.2) 1/3 of the total of all amounts, each of which is deemed to be a capital gain of the taxpayer under paragraph 96(1.72)(f), clause 130.1(4)(b)(ii)(A) or 131(1)(b)(ii)(A) or paragraph 138.1(3.1)(b), and

  exceeds the total of

• (3) Paragraph (a) of the definition capital dividend account in subsection 89(1) of the Act is amended by adding “and” at the end of subclause (ii)(C)(III) and by adding the following after subparagraph (ii):

  • (iii) 1/3 of the total of all amounts, each of which is deemed to be a capital loss of the taxpayer under paragraph 96(1.72)(f) or 138.1(3.1)(b),

• (4) The portion of paragraph (a) of the definition compte de dividendes en capital in subsection 89(1) of the French version of the Act before subparagraph (i) is replaced by the following:

  • a) l’excédent éventuel de la somme des totaux visés aux sous-alinéas (i), (i.1) et (i.2) sur la somme des totaux visés aux sous-alinéas (ii) et (iii) :

• (5) Section 89 of the Act is amended by adding the following after subsection (1.2):

  • Marginal note:Capital dividend account — net capital loss carryover

    (1.3) Despite section 38, for the purposes of determining the amount of the capital dividend account of a corporation at any time,

    • (a) if an amount of the corporation’s net capital loss for a taxation year (in this paragraph referred to as the “loss year”) is claimed under paragraph 111(1)(b) in a particular taxation year preceding the loss year, the corporation is deemed to have realized, at the end of the loss year, a capital loss from the disposition of a property equal to the amount determined by the formula

      1 ÷ (1 − A) × (B − C)

      where

      A

      is the fraction required to be used under section 38 in respect of the corporation for the loss year,

      B

      is the amount claimed by the corporation under paragraph 111(1)(b) for the particular taxation year in respect of the net capital loss for the loss year, and

      C

      is the amount deducted by the corporation under paragraph 111(1)(b) for the particular taxation year in respect of the net capital loss for the loss year; and

    • (b) if, for a particular taxation year, an amount is claimed under paragraph 111(1)(b) in respect of the corporation’s net capital loss for a taxation year (in this paragraph referred to as the “loss year”) preceding the particular taxation year, the corporation is deemed to have realized, at the end of the particular taxation year, a capital gain from the disposition of a property equal to the amount determined by the formula

      1 ÷ (1 − D) × (E − F)

      where

      D

      is the fraction required to be used under section 38 in respect of the corporation for the particular taxation year,

      E

      is the amount deducted by the corporation under paragraph 111(1)(b) for the particular taxation year in respect of the net capital loss for the loss year, and

      F

      is the amount claimed by the corporation under paragraph 111(1)(b) for the particular taxation year in respect of the net capital loss for the loss year.

  • Marginal note:Capital dividend account — 2024 transition year

    (1.4) Despite section 38, for the purposes of determining the amount of the capital dividend account of a corporation at any time,

    • (a) for its taxation year that begins before June 25, 2024 and ends after June 24, 2024 (in this subsection referred to as its “transition year”), the corporation’s taxable capital gain or allowable capital loss from the disposition of any property is deemed to be,

      • (i) if the disposition occurred before June 25, 2024, 1/2 of the corporation’s capital gain or capital loss (as the case may be) for the year from the disposition of that property, or

      • (ii) if the disposition occurred after June 24, 2024, 2/3 of the corporation’s capital gain or capital loss (as the case may be) for the year from the disposition of that property;

    • (b) the corporation is deemed to have realized a capital gain from the disposition of a property at the end of its transition year, equal to the amount determined by the formula

      3 × (A − B + C − D)

      where

      A

      is the corporation’s net taxable capital gains for the year, determined without reference to this paragraph and paragraph (c) (but with reference to paragraph (a)),

      B

      is the corporation’s net taxable capital gains for the year, determined without reference to this subsection,

      C

      is the corporation’s net allowable capital losses for the year, determined without reference to this subsection, and

      D

      is the corporation’s net allowable capital losses for the year, determined without reference to this paragraph and paragraph (c) (but with reference to paragraph (a));

    • (c) the corporation is deemed to have realized a capital loss from the disposition of a property at the end of its transition year, equal to the amount determined by the formula

      3 × (E − F + G − H)

      where

      E

      is the amount determined for D,

      F

      is the amount determined for C,

      G

      is the amount determined for B, and

      H

      is the amount determined for A; and

    • (d) for the purposes of this subsection,

      • (i) the net taxable capital gains of a corporation for its transition year is the amount, if any, by which the total of all the corporation’s taxable capital gains for the year from dispositions of property exceeds all the corporation’s allowable capital losses for the year from dispositions of property, and

      • (ii) the net allowable capital losses of a corporation for its transition year is the amount, if any, by which the total of all the corporation’s allowable capital losses for the year from dispositions of property exceeds all the corporation’s taxable capital gains for the year from dispositions of property.

• (6) Subsections (1) to (5) apply in respect of taxation years that end after June 24, 2024.

• 13 (1) Clause 90(9)(a)(i)(B) of the Act is replaced by the following:

  • (B) paragraph 113(1)(a.1), in respect of the legacy hybrid surplus — at the lending time, in respect of the corporation — of a foreign affiliate of the corporation, if the amount of that legacy hybrid surplus is less than or equal to the amount determined by the formula

    [A × (B – 0.5)] + (C × 0.5)

    where

    A

    is the affiliate’s legacy hybrid underlying tax in respect of the corporation at the lending time,

    B

    is the corporation’s relevant tax factor (within the meaning assigned by subsection 95(1)) for the corporation’s taxation year that includes the lending time, and

    C

    is the affiliate’s legacy hybrid surplus in respect of the corporation at the lending time,

  • (B.1) paragraph 113(1)(a.2), in respect of the successor hybrid surplus — at the lending time, in respect of the corporation — of a foreign affiliate of the corporation, if the amount of that successor hybrid surplus is less than or equal to the amount determined by the formula

    [A × (B − 2/3)] + (C × 1/3)

    where

    A

    is the affiliate’s successor hybrid underlying tax in respect of the corporation at the lending time,

    B

    is the corporation’s relevant tax factor (as defined in subsection 95(1)) for the corporation’s taxation year that includes the lending time, and

    C

    is the affiliate’s successor hybrid surplus in respect of the corporation at the lending time,

• (2) Paragraph 90(9)(b) of the Act is replaced by the following:

  • (b) that exempt surplus, legacy hybrid surplus, successor hybrid surplus, taxable surplus, or adjusted cost base is not relevant in applying this subsection in respect of any other loan made or indebtedness incurred, or in respect of any deduction claimed under subsection 91(5) or 113(1) in respect of a dividend paid, during the period in which the particular loan or indebtedness is outstanding; and

• (3) Paragraph 90(10)(d) of the Act is replaced by the following:

  • (d) paragraph (9)(b) is to be read as follows:

    • (b) that exempt surplus, legacy hybrid surplus, successor hybrid surplus, or taxable surplus is not relevant in applying this subsection in respect of any other loan made or indebtedness incurred, or in respect of any deduction claimed under subsection 91(5) or 113(1) in respect of a dividend paid, during the period in which the particular loan or indebtedness is outstanding; and

• (4) Subsection 90(11) of the Act is replaced by the following:

  • Marginal note:Downstream surplus

    (11) For the purposes of subparagraph (9)(a)(i), the amounts of exempt surplus or exempt deficit, legacy hybrid surplus or legacy hybrid deficit, legacy hybrid underlying tax, successor hybrid surplus or successor hybrid deficit, successor hybrid underlying tax, taxable surplus or taxable deficit, and underlying foreign tax of the creditor affiliate, or of each foreign affiliate of the corporation that is a member of the creditor partnership, as the case may be, in respect of the corporation, at the lending time are deemed to be the amounts that would be determined, at the lending time, under subparagraph 5902(1)(a)(i) of the Income Tax Regulations if that subparagraph were applicable at the lending time and the references in that subparagraph to “the dividend time” were references to the lending time.

• (5) Subsections (1) to (4) apply in respect of loans received and indebtedness incurred after June 24, 2024.

• 14 (1) The portion of paragraph 93(1.2)(a) of the Act before subparagraph (i) is replaced by the following:

  • (a) 1.5 times

• (2) Subparagraph (ii) of the description of C in paragraph 93(2.01)(a) of the Act is replaced by the following:

  • (ii) the total of all amounts each of which is 1.5 times the amount by which an allowable capital loss (determined without reference to this section), of a corporation or a foreign affiliate described in the description of B, from a previous disposition by a partnership of the affiliate share or a share for which the affiliate share was substituted, was reduced under paragraph (2.11)(a) in respect of the exempt dividends referred to in the description of B,

• (3) Subparagraph (iv) of the description of C in paragraph 93(2.01)(a) of the Act is replaced by the following:

  • (iv) the total of all amounts each of which is 1.5 times the amount by which an allowable capital loss (determined without reference to this section), of a corporation, or a foreign affiliate described in the description of B, from a previous disposition by a partnership of an interest in another partnership, was reduced under paragraph (2.31)(a) in respect of the exempt dividends referred to in the description of B, and

• (4) The portion of the description of B in paragraph 93(2.11)(a) of the Act before subparagraph (i) is replaced by the following:

  B

  is 2/3 of the total of all amounts each of which is an amount received before the disposition time, in respect of an exempt dividend on the affiliate share or on a share for which the affiliate share was substituted, by

• (5) Subparagraph (i) of the description of C in paragraph 93(2.11)(a) of the Act is replaced by the following:

  • (i) the total of all amounts each of which is 2/3 of the amount by which a loss (determined without reference to this section), from a previous disposition by a corporation, or a foreign affiliate described in the description of B, of the affiliate share or a share for which the affiliate share was substituted, was reduced under paragraph (2.01)(a) in respect of the exempt dividends referred to in the description of B,

• (6) Subparagraph (iii) of the description of C in paragraph 93(2.11)(a) of the Act is replaced by the following:

  • (iii) the total of all amounts each of which is 2/3 of the amount by which a loss (determined without reference to this section), from a previous disposition by a corporation, or a foreign affiliate described in the description of B, of an interest in a partnership, was reduced under paragraph (2.21)(a) in respect of the exempt dividends referred to in the description of B, and

• (7) The portion of subparagraph 93(2.11)(b)(ii) of the Act before clause (A) is replaced by the following:

  • (ii) 2/3 of the amount determined in respect of the particular corporation, or the foreign affiliate (that is referred to in paragraph (2.1)(b)) of the particular corporation, that is the amount of a gain (other than a specified gain) that

• (8) Subparagraph (ii) of the description of C in paragraph 93(2.21)(a) of the Act is replaced by the following:

  • (ii) the total of all amounts each of which is 1.5 times the amount by which an allowable capital loss (determined without reference to this section), of a corporation or a foreign affiliate described in the description of B, from a previous disposition by a partnership of the affiliate shares or shares for which the affiliate shares were substituted, was reduced under paragraph (2.11)(a) in respect of the exempt dividends referred to in the description of B,

• (9) Subparagraph (iv) of the description of C in paragraph 93(2.21)(a) of the Act is replaced by the following:

  • (iv) the total of all amounts each of which is 1.5 times the amount by which an allowable capital loss (determined without reference to this section), of a corporation, or a foreign affiliate described in the description of B, from a previous disposition by a partnership of an interest in another partnership, was reduced under paragraph (2.31)(a) in respect of the exempt dividends referred to in the description of B, and

• (10) The portion of the description of B in paragraph 93(2.31)(a) of the Act before subparagraph (i) is replaced by the following:

  B

  is 2/3 of the total of all amounts each of which is an amount received before the disposition time, in respect of an exempt dividend on the affiliate shares or on shares for which the affiliate shares were substituted, by

• (11) Subparagraph (i) of the description of C in paragraph 93(2.31)(a) of the Act is replaced by the following:

  • (i) the total of all amounts each of which is 2/3 of the amount by which a loss (determined without reference to this section), from a previous disposition by a corporation, or a foreign affiliate described in the description of B, of the affiliate shares or shares for which the affiliate shares were substituted, was reduced under paragraph (2.01)(a) in respect of the exempt dividends referred to in the description of B,

• (12) Subparagraph (iii) of the description of C in paragraph 93(2.31)(a) of the Act is replaced by the following:

  • (iii) the total of all amounts each of which is 2/3 of the amount by which a loss (determined without reference to this section), from a previous disposition by a corporation, or a foreign affiliate described in the description of B, of an interest in a partnership, was reduced under paragraph (2.21)(a) in respect of the exempt dividends referred to in the description of B, and

• (13) The portion of subparagraph 93(2.31)(b)(ii) of the Act before clause (A) is replaced by the following:

  • (ii) 2/3 of the amount determined in respect of the particular corporation, or the foreign affiliate (that is referred to in paragraph (2.3)(b)), of the particular corporation, that is the amount of a gain (other than a specified gain) that

• (14) Subsections (1) to (13) apply to taxation years that end after June 24, 2024 except that, for a taxation year of a taxpayer, or a foreign affiliate of a taxpayer, that includes June 25, 2024,

  • (a) the references to “1.5” in paragraph 93(1.2)(a) of the Act, as enacted by subsection (1), subparagraph (ii) of the description of C in paragraph 93(2.01)(a) of the Act, as enacted by subsection (2), subparagraph (iv) of the description of C in paragraph 93(2.01)(a) of the Act, as enacted by subsection (3), subparagraph (ii) of the description of C in paragraph 93(2.21)(a) of the Act, as enacted by subsection (8), and subparagraph (iv) of the description of C in paragraph 93(2.21)(a) of the Act, as enacted by subsection (9), are to be read as references to the fraction that is the reciprocal of the fraction in paragraph 38(a) of the Act, as enacted by subsection 4(1), that applies to the taxpayer, or the foreign affiliate of the taxpayer, as the case may be, for the year; and

  • (b) the references to the fraction “2/3” in the description of B in paragraph 93(2.11)(a) of the Act, as enacted by subsection (4), subparagraph (i) of the description of C in paragraph 93(2.11)(a) of the Act, as enacted by subsection (5), subparagraph (iii) of the description of C in paragraph 93(2.11)(a) of the Act, as enacted by subsection (6), subparagraph 93(2.11)(b)(ii) of the Act, as enacted by subsection (7), the description of B in paragraph 93(2.31)(a) of the Act, as enacted by subsection (10), subparagraph (i) of the description of C in paragraph 93(2.31)(a) of the Act, as enacted by subsection (11), subparagraph (iii) of the description of C in paragraph 93(2.31)(a) of the Act, as enacted by subsection (12) and in subparagraph 93(2.31)(b)(ii) of the Act, as enacted by subsection (13), are to be read as references to the fraction in paragraph 38(a) of the Act, as enacted by subsection 4(1), that applies to the taxpayer, or the foreign affiliate of the taxpayer, as the case may be, for the year.

• 15 (1) The description of A.1 of the definition foreign accrual property income in subsection 95(1) of the Act is replaced by the following:

  A.1

  is 1.5 times the total of all amounts included in computing the affiliate’s income from property or businesses (other than active businesses) for the year because of subsection 80(13),

• (2) Subsection (1) applies to taxation years of a foreign affiliate of a taxpayer that end after June 24, 2024 except that, where a taxation year of a foreign affiliate of a taxpayer includes June 25, 2024, the reference to “1.5” in the description of A.1 in the definition foreign accrual property income in subsection 95(1) of the Act, as enacted by subsection (1), is to be read as a reference to the fraction that is the reciprocal of the fraction in paragraph 38(a) of the Act, as enacted by subsection 4(1), that applies to the foreign affiliate for the year.

• 16 (1) Section 96 of the Act is amended by adding the following after subsection (1.71):

  • Marginal note:Application

    (1.72) For the purposes of this section, if a taxpayer is a member of a partnership during a fiscal period of the partnership that begins before June 25, 2024 and ends after June 24, 2024, the following rules apply:

    • (a) subsection (1.7) does not apply to the taxpayer's taxation year in which the fiscal period of the partnership ends;

    • (b) the taxpayer is deemed to have a capital gain, a capital loss or a business investment loss in respect of the partnership for the fiscal period equal to the amount of the taxable capital gain, the allowable capital loss or the allowable business investment loss of the taxpayer determined in respect of the partnership for the fiscal period, as the case may be, multiplied by the reciprocal of the fraction in section 38 that applies in respect of the gain or loss to the partnership for the fiscal period;

    • (c) except as provided by this subsection, no amount is to be included in computing the taxpayer's taxable capital gains, allowable capital losses and allowable business investment losses in respect of the taxable capital gains, allowable capital losses and allowable business investment losses of the partnership for the fiscal period;

    • (d) each deemed capital gain, deemed capital loss or deemed business investment loss described in paragraph (b) is deemed to be from a disposition of property in the taxation year and after June 24, 2024, if the taxable capital gain, allowable capital loss or allowable business investment loss described in paragraph (b) is attributable to a disposition of property after June 24, 2024;

    • (e) if the taxpayer’s taxation year begins before June 25, 2024, each deemed capital gain, deemed capital loss or deemed business investment loss described in paragraph (b) is deemed to be from a disposition of property in the taxpayer’s taxation year and before June 25, 2024, if the taxable capital gain, allowable capital loss or allowable business investment loss described in paragraph (b) is attributable to a disposition of property before June 25, 2024;

    • (f) despite paragraph (b), if the taxpayer’s taxation year begins after June 24, 2024, the taxpayer is deemed to have a capital gain, a capital loss or a business investment loss, as the case may be, equal to 3/4 of the deemed capital gain, deemed capital loss or deemed business investment loss described in paragraph (b) from a disposition of property in the taxpayer’s taxation year and after June 25, 2024, if the taxable capital gain, allowable capital loss or allowable business investment loss described in paragraph (b) is attributable to a disposition of property before June 25, 2024; and

    • (g) the partnership must disclose to the taxpayer in prescribed form and manner

      • (i) the total amount of all taxable capital gains, allowable capital losses or allowable business investment losses described in paragraph (b) that are attributable to dispositions of property that occurred before June 25, 2024, and

      • (ii) the total amount of all taxable capital gains, allowable capital losses or allowable business investment losses described in paragraph (b) that are attributable to dispositions of property that occurred after June 24, 2024.

• (2) Subsection (1) applies to fiscal periods that begin before June 25, 2024.

• 17 (1) Paragraph 100(1)(a) of the Act is replaced by the following:

  • (a) 2/3 of such portion of the taxpayer’s capital gain for the year from the disposition as may reasonably be regarded as attributable to increases in the value of any partnership property of the partnership that is capital property (other than depreciable property) held directly by the partnership or held indirectly by the partnership through one or more other partnerships, and

• (2) Subsection (1) applies to taxation years that end after June 24, 2024 except that, where a taxation year of a taxpayer includes June 25, 2024, the reference to the fraction ‘‘2/3’’ in paragraph 100(1)(a) of the Act, as enacted by subsection (1), is to be read as a reference to the fraction in paragraph 38(a) of the Act, as enacted by subsection 4(1), that applies to the taxpayer for the year.

• 18 (1) The portion of section 101 of the Act before paragraph (a) is replaced by the following:

  Marginal note:Disposition of farmland by partnership

  101 Where a taxpayer was a member of a partnership at the end of a taxation year of the partnership in which the partnership disposed of land used in a farming business of the partnership, there may be deducted in computing the taxpayer’s income for the taxpayer’s taxation year in which the taxation year of the partnership ended, 2/3 of the total of all amounts each of which is an amount in respect of that taxation year of the taxpayer or any preceding taxation year of the taxpayer ending after 1971, equal to the taxpayer’s loss, if any, for the year from the farming business, to the extent that the loss

• (2) Subparagraph 101(d)(ii) of the Act is replaced by the following:

  • (ii) 1.5 times the amount of the taxpayer’s taxable capital gain from the disposition of the land.

• (3) Subsections (1) and (2) apply to taxation years that end after June 24, 2024 except that, in applying section 101 of the Act, as enacted by subsections (1) and (2), to a taxpayer’s taxation year that includes June 25, 2024,

  • (a) the reference to the fraction ‘‘2/3’’ in section 101 of the Act, as enacted by subsection (1), is to be read as a reference to the fraction in paragraph 38(a) of the Act, as enacted by subsection 4(1), that applies to the taxpayer for the year; and

  • (b) the reference to ‘‘1.5’’ in subparagraph 101(d)(ii) of the Act, as enacted by subsection (2), is to be read as a reference to the fraction that is the reciprocal of the fraction in paragraph 38(a) of the Act, as enacted by subsection 4(1), that applies to the taxpayer for the year.

• 19 (1) Section 104 of the Act is amended by adding the following after subsection (21.3):

  • Marginal note:Deemed gains — subsection (21) designation

    (21.4) If an amount is designated under subsection (21) in respect of a beneficiary by a trust for a particular taxation year of the trust that begins before June 25, 2024 and ends after June 24, 2024, and that amount is, because of subsection (21), deemed to be a taxable capital gain of the beneficiary from the disposition of capital property for the taxation year of the beneficiary in which the particular taxation year of the trust ends (in this subsection referred to as the “allocated gain”),

    • (a) the beneficiary is deemed to have realized a capital gain (in this subsection and subsection (21.7) referred to as the “deemed gain”) from the disposition of capital property in the beneficiary's taxation year in which the particular taxation year ends equal to the amount, if any, determined when the amount of the allocated gain is divided by the fraction in paragraph 38(a) that applies to the trust for the particular taxation year;

    • (b) despite subsection (21) and except as a consequence of the application of paragraph (a), the amount of the allocated gain is not to be included in computing the beneficiary's income for the beneficiary's taxation year in which the particular taxation year ends;

    • (c) the trust must disclose to the beneficiary in prescribed form the portion of the deemed gain that is in respect of capital gains realized on dispositions of property that occurred before June 25, 2024 and the portion that is in respect of capital gains realized on dispositions of property that occurred after June 24, 2024 and, if it does not do so, the deemed gain is deemed to be in respect of capital gains realized on dispositions of property that occurred after June 24, 2024; and

    • (d) if a trust (other than a personal trust) so elects under this paragraph in its return of income for the particular taxation year,

      • (i) the portion of the deemed gain that is in respect of capital gains from dispositions of property that occurred before June 25, 2024 is deemed to be that proportion of the deemed gain that the number of days that are in the particular taxation year and before June 25, 2024 is of the number of days that are in the particular taxation year, and

      • (ii) the portion of the deemed gain that is in respect of capital gains from dispositions of property that occurred in the particular taxation year and in the period that begins on June 25, 2024 and ends at the end of the particular taxation year, is deemed to be that proportion of the deemed gain that the number of days that are in the particular taxation year and in that period is of the number of days that are in the particular taxation year.

  • Marginal note:Deemed gains — no subsection (21) designation

    (21.5) If no amount is designated by a trust (other than a personal trust) under subsection (21) in respect of its net taxable capital gains for a taxation year that begins before June 25, 2024 and ends after June 24, 2024, the trust has net capital gains or net capital losses from the disposition of property in the year and the trust so elects under this subsection in its return of income for the year

    • (a) the portion of the net capital gains or net capital losses that are in respect of capital gains and losses from dispositions of property that occurred before June 25, 2024 is deemed to be that proportion of the net capital gains or net capital losses, as the case may be, that the number of days that are in the year and before June 25, 2024 is of the number of days that are in the year; and

    • (b) the portion of the net capital gains or net capital losses that are in respect of capital gains and losses from dispositions of property that occurred in the year and in the period that began on June 25, 2024 and ended at the end of the year, is deemed to be that proportion of the net capital gains or net capital losses, as the case may be, that the number of days that are in the year and in that period is of the number of days that are in the year.

  • Marginal note:Capital gains — subsection (21.5) application

    (21.6) For the purposes of subsection (21.5),

    • (a) the net capital gains of a trust from dispositions of property in a year is the amount, if any, by which the trust’s capital gains from dispositions of property in the year exceeds the trust’s capital losses from dispositions of property in the year; and

    • (b) the net capital losses of a trust from dispositions of property in a year is the amount, if any, by which the trust’s capital losses from dispositions of property in the year exceeds the trust’s capital gains from dispositions of property in the year.

  • Marginal note:Deemed gains — subsection (21.4) applies

    (21.7) If a taxpayer is deemed by subsection (21.4) to have realized a capital gain from the disposition of capital property in a taxation year of the taxpayer in respect of dispositions of property by a trust of which the taxpayer is a beneficiary,

    • (a) if the deemed gain is in respect of capital gains of the trust from dispositions of property before June 25, 2024 and the taxation year of the taxpayer includes June 24, 2024, the deemed gain is deemed to be a capital gain of the taxpayer from the disposition by the taxpayer of capital property in the taxpayer’s taxation year and before June 25, 2024;

    • (b) if the deemed gain is in respect of capital gains of the trust from dispositions of property before June 25, 2024 and the taxation year of the taxpayer began after June 24, 2024, 3/4 of the deemed gain is deemed to be a capital gain of the taxpayer from the disposition by the taxpayer of capital property in the taxpayer’s taxation year; and

    • (c) in any other case, the deemed gain is deemed to be a capital gain of the taxpayer from the disposition of capital property by the taxpayer in the taxpayer’s taxation year and after June 24, 2024.

  • Marginal note:Deemed gains — subsection (21.4) does not apply

    (21.8) If an amount is designated under subsection (21) in respect of a beneficiary by a trust for a particular taxation year of the trust that ends in a taxation year of the beneficiary that begins before June 25, 2024 and ends after June 24, 2024, and subsection (21.4) does not apply because the particular taxation year of the trust either ends before June 25, 2024 or begins after June 24, 2024,

    • (a) despite subsection (21) and except as a consequence of the application of paragraph (b), the designated amount is not to be included in computing the beneficiary’s income; and

    • (b) the beneficiary is deemed to have a capital gain from the disposition by the beneficiary of capital property on the day on which the particular taxation year ends equal to the amount, if any, determined by dividing the designated amount by the fraction in paragraph 38(a) that applies to the trust for the particular taxation year.

• (2) Subsection (1) applies to taxation years that end after June 24, 2024.

• 20 (1) Subparagraph 107(2)(b.1)(iii) of the Act is replaced by the following:

  • (iii) in any other case, 66.67%;

• (2) Subsection (1) applies to property distributed by a trust after June 24, 2024.

• 21 (1) The portion of paragraph 110(1)(d) of the Act before subparagraph (i) is replaced by the following:

  • Marginal note:Employee stock options

    (d) an amount equal to 1/3 of the amount of the benefit deemed by subsection 7(1) to have been received by the taxpayer in the year in respect of a security (other than a security that is a non-qualified security) that a particular qualifying person has agreed after February 15, 1984 to sell or issue under an agreement, in respect of the transfer or other disposition of rights under the agreement or as a result of the death of the taxpayer because the taxpayer immediately before death owned a right to acquire the security under the agreement, if

• (2) The portion of paragraph 110(1)(d.01) of the Act before subparagraph (i) is replaced by the following:

  • Marginal note:Charitable donation of employee option securities

    (d.01) subject to subsection (2.1), if the taxpayer disposes of a security acquired in the year by the taxpayer under an agreement referred to in subsection 7(1) by making a gift of the security to a qualified donee, an amount in respect of the disposition of the security equal to 2/3 of the lesser of the benefit deemed by paragraph 7(1)(a) to have been received by the taxpayer in the year in respect of the acquisition of the security and the amount that would have been that benefit had the value of the security at the time of its acquisition by the taxpayer been equal to the value of the security at the time of the disposition, if

• (3) The portion of paragraph 110(1)(d.1) of the Act after subparagraph (iii) is replaced by the following:

  an amount equal to 1/3 of the amount of the benefit;

• (4) Paragraph 110(1)(d.2) of the Act is replaced by the following:

  • Marginal note:Prospector’s and grubstaker’s shares

    (d.2) where the taxpayer has, under paragraph 35(1)(d), included an amount in the taxpayer’s income for the year in respect of a share received after May 22, 1985, an amount equal to 1/3 of that amount unless that amount is exempt from income tax in Canada by reason of a provision contained in a tax convention or agreement with another country that has the force of law in Canada;

• (5) Paragraph 110(1)(d.3) of the Act is replaced by the following:

  • Marginal note:Employer’s shares

    (d.3) where the taxpayer has, under subsection 147(10.4), included an amount in computing the taxpayer’s income for the year, an amount equal to 1/3 of that amount;

• (6) Subsection 110(1) of the Act is amended by adding the following after paragraph (d.3):

  • Marginal note:Additional deduction

    (d.4) the amount determined by the formula

    1/6 × A

    where

    A

    is the lesser of $250,000 and the amount determined by the formula

    B − C

    where

    B

    is 3 times the total of all amounts, each of which is an amount deducted by the individual for the taxation year under paragraph (d), (d.1), (d.2) or (d.3), and

    C

    is 1.5 times the amount deducted by the individual for the taxation year under paragraph (d.01);

• (7) Subsections (1) to (6) apply to the 2024 and subsequent taxation years except that, for the 2024 taxation year,

  • (a) the reference to the fraction ‘‘1/3’’ in paragraph 110(1)(d) of the Act, as enacted by subsection (1), is to be read as a reference to the fraction “1/2” if the transaction, event or circumstance as a result of which a benefit is deemed by subsection 7(1) of the Act to have been received by a taxpayer occurred before June 25, 2024;

  • (b) the reference to the fraction ‘‘2/3’’ in paragraph 110(1)(d.01) of the Act, as enacted by subsection (2), is to be read as a reference to the fraction “1/2” if the transaction, event or circumstance as a result of which a benefit is deemed by subsection 7(1) of the Act to have been received by a taxpayer occurred before June 25, 2024;

  • (c) the reference to the fraction ‘‘1/3’’ in paragraph 110(1)(d.1) of the Act, as enacted by subsection (3), is to be read as a reference to the fraction “1/2” if the disposition or exchange of the securities as a result of which a benefit is deemed by subsection 7(1) of the Act, by virtue of subsection 7(1.1) of the Act, to have been received by a taxpayer occurred before June 25, 2024;

  • (d) the reference to the fraction ‘‘1/3’’ in paragraph 110(1)(d.2) of the Act, as enacted by subsection (4), is to be read as a reference to the fraction “1/2” if the transaction, event or circumstance as a result of which an amount is included in income under paragraph 35(1)(d) of the Act occurred before June 25, 2024;

  • (e) the reference to the fraction ‘‘1/3’’ in paragraph 110(1)(d.3) of the Act, as enacted by subsection (5), is to be read as a reference to the fraction “1/2” if the transaction, event or circumstance as a result of which an amount is included in computing income under subsection 147(10.4) of the Act occurred before June 25, 2024; and

  • (f) for the purpose of determining the amount for B and C in paragraph 110(1)(d.4) of the Act, as enacted by subsection (6), the amount determined for the individual for the taxation year under each of paragraphs (d) to (d.3) of the Act, as enacted by subsections (1) to (5), must exclude all amounts determined in respect of any transaction, event or circumstance, including a disposition or exchange of securities, that occurred before June 25, 2024.

• 22 (1) The portion of subsection 110.6(2) of the Act before paragraph (a) is replaced by the following:

  • Marginal note:Qualified farm or fishing property — pre-2024

    (2) In computing the taxable income for a taxation year that ends before 2024 of an individual (other than a trust) who was resident in Canada throughout the year and who disposed of qualified farm or fishing property in the year or a preceding taxation year (or who disposed of before 2014 property that was qualified farm property or qualified fishing property at the time of disposition), there may be deducted such amount as the individual may claim not exceeding the least of

• (2) Section 110.6 of the Act is amended by adding the following after subsection (2):

  • Marginal note:Qualified farm or fishing property — 2024

    (2.01) In computing the taxable income for the 2024 taxation year of an individual (other than a trust) who was resident in Canada throughout the year and who disposed of qualified farm or fishing property in the year or a preceding taxation year, there may be deducted such amount as the individual may claim not exceeding the least of

    • (a) the total of

      • (i) the amount designated in respect of taxable capital gains of the individual that are from dispositions of qualified farm or fishing property that are after 2023 and before June 25, 2024, not exceeding the amount determined by the formula

        $508,418 – ($508,418 – A)

        where

        A

        is the amount that would be determined for the individual under paragraph (2)(a) if subsection (2) applied to the 2024 taxation year, and

      • (ii) the amount designated in respect of taxable capital gains of the individual that are for dispositions of qualified farm or fishing property after June 24, 2024, not exceeding the amount determined by the formula

        $833,333 − B

        where

        B

        is the amount determined by the formula

        4/3 × ($508,418 – C + D)

        where

        C

        is the amount that would be the amount determined for the individual under paragraph (2)(a) if subsection (2) applied to the 2024 taxation year, and

        D

        is the amount designated under subparagraph (a)(i);

    • (b) the individual’s cumulative gains limit at the end of the year;

    • (c) the individual’s annual gains limit for the year; and

    • (d) the amount that would be determined in respect of the individual for the year under paragraph 3(b) in respect of capital gains and capital losses if the only properties referred to in that paragraph were properties that, at the time they were disposed of, were qualified farm properties, qualified fishing properties or qualified farm or fishing properties.

  • Marginal note:Qualified farm or fishing property — post-2024

    (2.02) In computing the taxable income for a taxation year that ends after 2024 of an individual (other than a trust) who was resident in Canada throughout the year and who disposed of qualified farm or fishing property in the year or a preceding taxation year, there may be deducted such amount as the individual may claim not exceeding the least of

    • (a) the amount determined by the formula

      $833,333 – (A + B + C + D)

      where

      A

      is the total of all amounts each of which is an amount deducted under this section in computing the individual’s taxable income for a preceding taxation year that ended after 2024,

      B

      is the amount determined by the formula

      4/3 × ($508,418 – E)

      where

      E

      is the amount that would be determined for the taxpayer’s 2024 taxation year under paragraph (2)(a) if subsection (2) applied to the 2024 taxation year,

      C

      is the total of all amounts each of which is an amount deducted under subsection (2.01) or (2.03) in computing the individual’s taxable income for the 2024 taxation year, and

      D

      is 1/3 times the total of all amounts each of which is an amount deducted under subsection (2.01) or (2.03) in computing the individual’s taxable income for the 2024 taxation year, in respect of taxable capital gains of the individual that are for dispositions of property that are after 2023 and before June 25, 2024;

    • (b) the individual’s cumulative gains limit at the end of the year;

    • (c) the individual’s annual gains limit for the year; and

    • (d) the amount that would be determined in respect of the individual for the year under paragraph 3(b) in respect of capital gains and capital losses if the only properties referred to in that paragraph were properties that, at the time they were disposed of, were qualified farm properties, qualified fishing properties or qualified farm or fishing properties.

  • Marginal note:Qualified small business corporation shares — 2024

    (2.03) In computing the taxable income for the 2024 taxation year of an individual (other than a trust) who was resident in Canada throughout the year and who disposed of a share of a corporation in the year or a preceding year and that, at the time of disposition, was a qualified small business corporation share of the individual, there may be deducted such amount as the individual may claim not exceeding the least of

    • (a) for the period

      • (i) before June 25, 2024, the amount determined by the formula in subparagraph (2.01)(a)(i) in respect of the individual for the year if the reference to “qualified farm or fishing property” in that subparagraph was read as a reference to “a qualified small business corporation share”, and

      • (ii) after June 24, 2024, the amount determined by formula in subparagraph (2.01)(a)(ii) in respect of the individual for the year if the reference to “qualified farm or fishing property” in that subparagraph was read as a reference to “a qualified small business corporation share”;

    • (b) the amount, if any, by which the individual’s cumulative gains limit at the end of the year exceeds the amount deducted under subsection (2.01) in computing the individual’s taxable income for the year;

    • (c) the amount, if any, by which the individual’s annual gains limit for the year exceeds the amount deducted under subsection (2.01) in computing the individual’s taxable income for the year; and

    • (d) the amount that would be determined in respect of the individual for the year under paragraph 3(b) (to the extent that the amount is not included in computing the amount determined under paragraph (2.01)(d) in respect of the individual) in respect of capital gains and capital losses if the only properties referred to in paragraph 3(b) were qualified small business corporation shares of the individual.

  • Marginal note:Qualified small business corporation shares — post-2024

    (2.04) In computing the taxable income for a taxation year that ends after 2024, of an individual (other than a trust) who was resident in Canada throughout the year and who disposed of a share of a corporation in the year or a preceding year and that, at the time of disposition, was a qualified small business corporation share of the individual, there may be deducted such amount as the individual may claim not exceeding the least of

    • (a) the amount determined under paragraph (2.02)(a) in respect of the individual for the year;

    • (b) the amount, if any, by which the individual’s cumulative gains limit at the end of the year exceeds the amount deducted under subsection (2.02) in computing the individual’s taxable income for the year;

    • (c) the amount, if any, by which the individual’s annual gains limit for the year exceeds the amount deducted under subsection (2.02) in computing the individual’s taxable income for the year; and

    • (d) the amount that would be determined in respect of the individual for the year under paragraph 3(b) (to the extent that the amount is not included in computing the amount determined under paragraph (2.02)(d) in respect of the individual) in respect of capital gains and capital losses if the only properties referred to in paragraph 3(b) were qualified small business corporation shares of the individual.

• (3) The portion of subsection 110.6(2.1) of the Act before paragraph (a) is replaced by the following:

  • Marginal note:Capital gains deduction — qualified small business corporation shares

    (2.1) In computing the taxable income for a taxation year that ends before 2024 of an individual (other than a trust) who was resident in Canada throughout the year and who disposed of a share of a corporation in the year or a preceding taxation year and after June 17, 1987 that, at the time of disposition, was a qualified small business corporation share of the individual, there may be deducted such amount as the individual may claim not exceeding the least of

• (4) Subsection 110.6(2.2) of the Act is repealed.

• (5) Subsection 110.6(4) of the Act is replaced by the following:

  • Marginal note:Maximum capital gains deduction

    (4) Despite subsections (2.01) to (2.04), the total amount that may be deducted under this section in computing an individual’s income for a taxation year must not exceed the amount determined under paragraph (2.01)(a), for the 2024 taxation year, or (2.02)(a), for a taxation year that is after 2024, in respect of the individual for the year.

• (6) Subsections (1) to (5) apply to the 2024 and subsequent taxation years.

• 23 (1) Section 111.1 of the Act is replaced by the following:

  Marginal note:Order of applying provisions

  • 111.1 (1) In computing an individual’s taxable income for a taxation year, the provisions of this Division shall be applied in the following order: sections 110, 110.2, 111, 110.61, 110.62, 110.6 and 110.7.

  • Marginal note:No double deduction

    (2) No amount may be deducted for a taxation year of an individual, under section 110.6, in respect of any portion of a taxable capital gain to the extent that the portion of the taxable capital gain has been deducted under section 110.61 or 110.62.

• (2) Section 111.1 of the Act, as enacted by subsection (1), is replaced by the following:

  Marginal note:Order of applying provisions

  • 111.1 (1) In computing an individual’s taxable income for a taxation year, the provisions of this Division shall be applied in the following order: sections 110, 110.2, 111, 110.61, 110.62, 110.6, 110.63 and 110.7

  • Marginal note:No double deduction

    (2) No amount may be deducted for a taxation year of an individual, under

    • (a) section 110.6, in respect of any portion of a taxable capital gain to the extent that the portion of the taxable capital gain has been deducted under section 110.61 or 110.62, or

    • (b) section 110.63, in respect of any portion of a taxable capital gain to the extent that the portion of the taxable capital gain has been deducted under section 110.6, 110.61 or 110.62.

• (4) Subsection (1) applies to taxation years that begin after 2023.

• (5) Subsection (2) applies to taxation years that begin after 2024.

• 24 (1) The Act is amended by adding the following after section 111.1, as enacted by subsection 23(1):

  Marginal note:Addition to taxable income

  111.2 There is to be added in computing an individual’s taxable income for the particular taxation year the amount, if any, determined by the formula

  1/6 × [A − (B − C − D − E)]

  where

  A

  is 6 times the amount determined for the individual for the taxation year under section 38.01;

  B

  is 1.5 times the amount determined for the individual for the taxation year under paragraph 3(b);

  C

  is, in the case of a graduated rate estate or a qualified disability trust (as defined in subsection 122(3)), 1.5 times the total of all amounts each of which is an amount designated by the trust for the taxation year under subsection 104(21);

  D

  is 1.5 times the total of all the amounts each of which is an amount deducted by the individual for the taxation year under paragraph 111(1)(b) and sections 110.6, 110.61 and 110.62; and

  E

  is the total of all amounts each of which is deemed to be a capital gain of the individual under paragraphs 96(1.72)(f) and 104(21.7)(b), clauses 130.1(4)(b)(ii)(A) and 131(1)(b)(ii)(A) and paragraph 138.1(3.1)(b).

• (2) The formula in section 111.2 of the Act, as enacted by subsection (1), is replaced by the following:

  1/6 × [A − (B − C − D − E − F)]

• (3) The formula in subsection 111.2 of the Act is amended by striking out “and” at the end of the description of D in the formula, by adding “and” at the end of the description of E in the formula and by adding the following after the description of E:

  F

  is 3 times the total of all the amounts each of which is an amount deducted by the individual for the taxation year under section 110.63.

• (4) Subsection (1) applies to the 2024 and subsequent taxation years, except that, for the purpose of applying section 111.2 of the Act, as enacted by subsection (1), for a taxation year that begins before June 25, 2024 and ends after June 24, 2024, the amounts determined under paragraph 3(b) and section 111.2 of the Act are to be calculated as if

  • (a) the individual’s only taxable capital gains for the year were the individual’s taxable capital gains for the year from the disposition of property other than listed personal property after June 24, 2024;

  • (b) the individual’s only allowable capital loss for the year was equal to the amount, if any, by which the individual’s allowable capital losses for the year from the disposition of property other than listed personal property exceed the individual’s taxable capital gains for the year from the disposition of property other than listed personal property before June 25, 2024;

  • (c) the individual’s taxable net gain for the year from the disposition of listed personal property was computed as if

    • (i) the individual’s only gains for the year from the disposition of listed personal property were gains from the disposition of listed personal property after June 24, 2024, and

    • (ii) the individual’s only loss for the year from the disposition of listed personal property was equal to the amount, if any, by which the individual’s losses for the year from the disposition of listed personal property exceed the individual’s gains for the year from the disposition of listed personal property before June 25, 2024; and

  • (d) the only amounts designated under subsection 104(21) by a trust described in the description of C of section 111.2 as enacted by subsection (1) were from the dispositions of property that occurred after June 24, 2024;

  • (e) the only amounts deducted by the individual in the year under sections 110.6, 110.61 and 110.62 were from dispositions of property that occurred after June 24, 2024; and

  • (f) in respect of amounts deducted under sections 110.61 and 110.62, the number “1.5” in the description of D in section 111.2, as enacted by subsection (1), is to be read as “1 divided by the fraction in paragraph 38(a) that applies to the individual for the particular taxation year”.

• (5) Subsections (2) and (3) apply to the 2025 and subsequent taxation years.

• 25 (1) The portion of subparagraph 112(3.2)(a)(iii) of the Act before clause (A) is replaced by the following:

  • (iii) if the trust is an individual’s graduated rate estate, the share was acquired as a consequence of the individual’s death and the disposition occurs during the trust’s first taxation year, 1/3 of the lesser of

• (2) The portion of subparagraph 112(3.3)(a)(iii) of the Act before clause (A) is replaced by the following:

  • (iii) 1/3 of the lesser of

• (3) Subsections (1) and (2) apply to dispositions that occur after June 24, 2024.

• 26 (1) Subparagraph 113(1)(a.1)(i) of the Act is replaced by the following:

  • (i) one-half of the portion of the dividend that is prescribed to have been paid out of the legacy hybrid surplus, as defined by regulation (in this Part referred to as “legacy hybrid surplus”), of the affiliate, and

• (2) Subsection 113(1) of the Act is amended by adding the following after paragraph (a.1):

  • (a.2) an amount equal to the total of

    • (i) one-third of the portion of the dividend that is prescribed to have been paid out of the successor hybrid surplus, as defined by regulation (in this Part referred to as “successor hybrid surplus”), of the affiliate, and

    • (ii) the lesser of

      • (A) the total of

        • (I) the product obtained when the foreign tax prescribed to be applicable to such portion of the dividend as is prescribed to have been paid out of successor hybrid surplus is multiplied by the amount by which

          1 the corporation’s relevant tax factor for the year

          exceeds

          2 two-thirds, and

        • (II) the product obtained when

          1 the non-business-income tax paid by the corporation applicable to such portion of the dividend as is prescribed to have been paid out of successor hybrid surplus of the affiliate

          is multiplied by

          2 the corporation’s relevant tax factor for the year, and

      • (B) the amount by which the portion of the dividend that is prescribed to have been paid out of successor hybrid surplus of the affiliate exceeds the amount determined under subparagraph (i),

• (3) Subsections (1) and (2) apply to dividends received by a corporation resident in Canada after June 24, 2024.

• 27 (1) Paragraph 115(1)(d) of the Act is replaced by the following:

  • (d) the deductions permitted by subsection 111(1) and, to the extent that they relate to amounts included in computing the amount determined under any of paragraphs (a) to (c), the deductions permitted by any of paragraphs 110(1)(d) to (d.2), (d.4), (e) and (f) and subsection 110.1(1),

• (2) Section 115 of the Act is amended by adding the following after subsection (1):

  • Marginal note:Addition to taxable income earned in Canada

    (1.1) There is to be added in computing a non-resident individual’s taxable income earned in Canada for a taxation year the amount, if any, determined under section 111.2 in respect of the individual for the year.

• (3) Subsections (1) and (2) apply to the 2024 and subsequent taxation years.

• 28 (1) Paragraph 116(2)(a) of the Act is replaced by the following:

  • (a) paid to the Receiver General, as or on account of tax under this Part payable by the non-resident person for the year, 35% of the amount, if any, by which the estimated amount set out in the notice in accordance with paragraph (1)(c) exceeds the amount set out in the notice in accordance with paragraph (1)(d), or

• (2) Paragraph 116(4)(a) of the Act is replaced by the following:

  • (a) paid to the Receiver General, as or on account of tax under this Part payable by the non-resident person for the year, 35% of the amount, if any, by which the proceeds of disposition of the property exceed the adjusted cost base to the non-resident person of the property immediately before the disposition, or

• (3) The portion of subsection 116(5) of the Act after paragraph (b) and before paragraph (c), is replaced by the following:

  is liable to pay, and shall remit to the Receiver General within 30 days after the end of the month in which the purchaser acquired the property, as tax under this Part for the year on behalf of the non-resident person, 35% of the amount, if any, by which

• (4) Subsections (1) to (3) apply to dispositions that occur after 2024.

• 29 (1) Paragraph 117.1(2)(c) of the Act is replaced by the following:

  • (c) the amount of $833,333 referred to in the formula in paragraph 110.6(2.02)(a);

• (2) Subsection (1) applies to taxation years that begin after 2025.

• 30 (1) Subsections 120.4(4) and (5) of the Act are replaced by the following:

  • Marginal note:Taxable capital gain

    (4) If a specified individual who has not attained the age of 17 years before a taxation year would have for the taxation year, if this Act were read without reference to this section, a taxable capital gain (other than an excluded amount) from a disposition of shares (other than shares of a class listed on a designated stock exchange or shares of a mutual fund corporation) that are transferred, either directly or indirectly, in any manner whatever, to a person with whom the specified individual does not deal at arm’s length, then the amount of that taxable capital gain is deemed not to be a taxable capital gain and 1.5 times the amount is deemed to be received by the specified individual in the year as a taxable dividend that is not an eligible dividend.

  • Marginal note:Taxable capital gain of trust

    (5) If a specified individual who has not attained the age of 17 years before a taxation year would be, if this Act were read without reference to this section, required under subsection 104(13) or 105(2) to include an amount in computing the specified individual’s income for the taxation year, then to the extent that the amount can reasonably be considered to be attributable to a taxable capital gain (other than an excluded amount) of a trust from a disposition of shares (other than shares of a class listed on a designated stock exchange or shares of a mutual fund corporation) that are transferred, either directly or indirectly, in any manner whatever, to a person with whom the specified individual does not deal at arm’s length, subsections 104(13) and 105(2) do not apply in respect of the amount and 1.5 times the amount is deemed to be received by the specified individual in the year as a taxable dividend that is not an eligible dividend.

• (2) Subsection (1) applies to the 2024 and subsequent taxation years, except that

  • (a) the reference to “1.5 times” in subsection 120.4(4) of the Act, as enacted by subsection (1), is to be read as “twice” in respect of dispositions that occur prior to June 25, 2024; and

  • (b) the reference to “1.5 times” in subsection 120.4(5) of the Act, as enacted by subsection (1), is to be read as “twice” in respect of income that is attributable to dispositions that occur prior to June 25, 2024.

• 31 (1) Clause (b)(i)(B) of the definition non-portfolio earnings in subsection 122.1(1) of the Act is replaced by the following:

  • (B) 2/3 of the total of all amounts each of which is deemed under subsection 131(1) to be a capital gain of the SIFT trust for the taxation year in respect of a non-portfolio property of the SIFT trust for the taxation year

• (2) Subsection (1) applies to taxation years of a SIFT trust that end after June 24, 2024, except that for a taxation year that ends after June 24, 2024 and begins before June 25, 2024, the reference to the fraction ‘‘2/3’’ in clause (b)(i)(B) of the definition non-portfolio earnings in subsection 122.1(1) of the Act, as enacted by subsection (1), is to be read as a reference to the fraction in paragraph 38(a) of the Act, as enacted by subsection 4(1), that applies to the SIFT trust for the year.

• 32 (1) The portion of subparagraph 127.52(1)(g)(ii) of the Act before clause (A) is replaced by the following:

  • (ii) the total of all amounts each of which is 1/2 of

• (2) Subparagraph 127.52(1)(h)(ii) of the Act is replaced by the following:

  • (ii) 1.05 times the amounts deducted under any of paragraph 110(1)‍(d.‍01) and subsections 110.‍6(2.01), (2.02), (2.03) and (2.‍04),

• (3) Subparagraph 127.52(1)(h)(vi) of the Act is replaced by the following:

  • (vi) 1.5 times the amount deducted under subsection 110.‍61(2) or 110.62(2);

• (4) Subsection 127.52(1) of the Act is amended by adding the following after paragraph (h.1):

  • (h.2) the amounts determined under section 38.01, paragraph 110(1)(d.4) and section 111.2 were deemed to be nil;

• (5) Subsections (1) to (4) apply to taxation years that begin after 2023, except that

  • (a) if the taxation year of a trust begins before June 25, 2024 and ends after June 24, 2024, the reference to “1/2” in the portion of subparagraph 127.52(1)(g)(ii) of the Act before clause (A), as enacted by subsection (1) is to be read as a reference to the amount determined by the fomula

    (1 − A)÷A

    where

    A

    is the fraction in paragraph 38(a) that applies to the trust for the particular taxation year;

  • (b) the reference to ‘‘1.05 times’’ in subparagraph 127.52(1)(h)(ii) of the Act, as enacted by subsection (2), is to be read as a reference to the fraction “7/5” if

    • (i) paragraph 110(1)(d.01) applies to a donation in respect of which the transaction, event or circumstance as a result of which a benefit is deemed by subsection 7(1) of the Act to have been received by a taxpayer occurred before June 25, 2024, or

    • (ii) subsections 110.6(2.01) or (2.03) apply in respect of capital gains of the individual that are from dispositions of qualified farm or fishing property or shares of a small business corporation that are after 2023 and before June 25, 2024; and

  • (c) the reference to ‘‘1.5 times’’ in subparagraph 127.52(1)(h)(vi) of the Act, as enacted by subsection (3), is to be read as a reference to “1 divided by the fraction in paragraph 38(a) that applies to the individual for the particular taxation year” in respect of capital gains to which subsection 110.61(2) or 110.62(2) applies that are from dispositions of that are after 2023 and before 2025.

• 33 (1) Subparagraph 130.1(1)(a)(ii) of the Act is replaced by the following:

  • (ii) 2/3 of all capital gains dividends paid by the corporation during the period commencing 91 days after the commencement of the year and ending 90 days after the end of the year; and

• (2) Subparagraph 130.1(4)(a)(i) of the Act is replaced by the following:

  • (i) 1.5 times the taxed capital gains of the corporation for the year

• (3) Paragraph 130.1(4)(b) of the Act is replaced by the following:

  • (b) notwithstanding any other provision of this Act, if an amount is received by a taxpayer in a taxation year as, on account of, in lieu of payment of or in satisfaction of, the dividend

  • (i) the amount shall not be included in computing the taxpayer’s income for the year as income from a share of the capital stock of the corporation, and

  • (ii) if the dividend was in respect of capital gains of the corporation from dispositions of property

    • (A) that occurred before June 25, 2024 and the taxation year of the taxpayer began after June 24, 2024, 3/4 of the amount is deemed to be a capital gain of the taxpayer from the disposition of a capital property in the year,

    • (B) that occurred before June 25, 2024 and the taxation year of the taxpayer begins before June 25, 2024, the amount is deemed to be a capital gain of the taxpayer from the disposition of a capital property in the year and before June 25, 2024, and

    • (C) in any other case, the amount is deemed to be a capital gain of the taxpayer from the disposition of a capital property after June 24, 2024 and in the year.

• (4) Section 130.1 of the Act is amended by adding the following after subsection (4.1):

  • Marginal note:Reporting for 2024

    (4.2) If paragraph (4)(b) applies to a dividend paid by a mortgage investment corporation to a shareholder of any class of shares of its capital stock in the period that begins 91 days after the beginning of the corporation’s taxation year that begins before June 25, 2024 and ends after June 24, 2024 and ends 90 days after the end of that year, the corporation must disclose to the shareholder in prescribed form the amount of the dividend that is in respect of capital gains realized on dispositions of property that occurred before June 25, 2024, and if it does not do so, the full amount of the dividend is deemed to be in respect of capital gains from dispositions of property that occurred after June 24, 2024.

  • Marginal note:Allocation — 2024

    (4.3) If subsection (4) applies in respect of a dividend paid by a mortgage investment corporation in the period that begins 91 days after the beginning of the corporation’s taxation year that begins before June 25, 2024 and ends after June 24, 2024 and ends 90 days after the end of that year, and the corporation does not elect under subsection (4.4), the following rules apply:

    • (a) the portion of the dividend that is in respect of capital gains of the corporation from dispositions of property by the corporation in the year and in the particular period that began at the beginning of the year and ended at the end of June 24, 2024 (in this subsection referred to as the “first period”) is deemed to be that proportion of the dividend that the corporation’s net capital gains from dispositions of property in the particular period to which the dividend relates is of the total of the corporation’s net capital gains from dispositions of property in the first and second period referred to in this subsection;

    • (b) the portion of the dividend that is in respect of capital gains of the corporation from dispositions of property by the corporation in the year and in the particular period that begins at the beginning of June 25, 2024 and ends at the end of the year (in this subsection referred to as the “second period”), is deemed to be that proportion of the dividend that the corporation’s net capital gains from dispositions of property in the particular period is of the total of the corporation’s net capital gains from dispositions of property in the first and second period referred to in this subsection; and

    • (c) in this subsection net capital gains from dispositions of property in

      • (i) the first period means the amount, if any, by which the corporation’s capital gains from dispositions of property in the first period exceeds the corporation’s capital losses from dispositions of property in the first period, and

      • (ii) the second period means the amount, if any, by which the corporation’s capital gains from dispositions of property in the second period exceeds the corporation’s capital losses from dispositions of property in the second period.

  • Marginal note:Allocation — 2024 election

    (4.4) If subsection (4) applies in respect of a dividend paid by a mortgage investment corporation in the period that begins 91 days after the beginning of the corporation’s taxation year that begins before June 25, 2024 and ends after June 24, 2024 and ends 90 days after the end of that year and the corporation so elects under this subsection in its return of income

    • (a) the portion of each dividend paid in the period that is in respect of capital gains from dispositions of property that occurred in the year and before June 25, 2024 is deemed to be that proportion of the dividend that the number of days that are in that year and before June 25, 2024 is of the number of days that are in that year; and

    • (b) the portion of each dividend paid in the period that is in respect of capital gains from dispositions of property that occurred in the year and in the period that begins at the beginning of June 25, 2024 and ends at the end of the year, is deemed to be that proportion of the dividend that the number of days that are in the year and in that period is of the number of days that are in the year.

  • Marginal note:Allocation — 2024

    (4.5) If no dividend to which subsection (4.4) applies is paid by a mortgage investment corporation in respect of its net taxable capital gains for its taxation year that begins before June 25, 2024 and ends after June 24, 2024 and the corporation has net capital gains or net capital losses from dispositions of property in the year and the corporation so elects under this subsection in its return of income for the year

    • (a) the portion of those net capital gains and net capital losses that is in respect of capital gains and losses from dispositions of property that occurred before June 25, 2024 is deemed to be that proportion of the net capital gains or net capital losses respectively that the number of days that are in the year and before June 25, 2024 is of the number of days that are in the year;

    • (b) the portion of those net capital gains and net capital losses that is in respect of capital gains and losses from dispositions of property that occurred in the year and in the period that began at the beginning of June 25, 2024 and ended at the end of the year, is deemed to be that proportion of the net capital gains or net capital losses respectively that the number of days that are in the year and in that period is of the number of days that are in the year; and

    • (c) for the purposes of this subsection,

      • (i) the net capital gains of a corporation from dispositions of property in the year is the amount, if any, by which the corporation’s capital gains from dispositions of property in a year exceeds the corporation’s capital losses from dispositions of property in the year, and

      • (ii) the net capital losses of a corporation from dispositions of property in the year is the amount, if any, by which the corporation’s capital losses from dispositions of property in a year exceeds the corporation’s capital gains from dispositions of property in the year.

• (5) Subsections (1) to (4) apply to taxation years that end after June 24, 2024, except that, for a corporation’s taxation year that includes June 25, 2024,

  • (a) the reference to the fraction ‘‘2/3’’ in subparagraph 130.1(1)(a)(ii) of the Act, as enacted by subsection (1), is to be read as a reference to the fraction in paragraph 38(a) of the Act, as enacted by subsection 4(1), that applies to the corporation for the year; and

  • (b) the reference to “1.5’’ in subparagraph 130.1(4)(a)(i) of the Act, as enacted by subsection (2), is to be read as a reference to the fraction that is the reciprocal of the fraction in paragraph 38(a) of the Act, as enacted by subsection 4(1), that applies to the corporation for the year.

• 34 (1) Paragraph 131(1)(b) of the Act is replaced by the following:

  • (b) notwithstanding any other provision of this Act (other than paragraph (5.1)(b)), if an amount is received by a taxpayer in a taxation year as, on account of, in lieu of payment of or in satisfaction of, the dividend

  • (i) the amount shall not be included in computing the taxpayer’s income for the year as income from a share of the capital stock of the corporation, and

  • (ii) if the dividend was in respect of capital gains of the corporation from dispositions of property

    • (A) that occurred before June 25, 2024 and the taxation year of the taxpayer began after June 24, 2024, 3/4 of the amount is deemed to be a capital gain of the taxpayer from the disposition of a capital property in the year,

    • (B) that occurred before June 25, 2024 and the taxation year of the taxpayer begins before June 25, 2024, the amount is deemed to be a capital gain of the taxpayer from the disposition of a capital property in the year and before June 25, 2024, and

    • (C) in any other case, the amount is deemed to be a capital gain of the taxpayer from the disposition of a capital property after June 24, 2024 and in the year.

• (2) Section 131 of the Act is amended by adding the following after subsection (1):

  • Marginal note:Ordering

    (1.01) For the purposes of subparagraphs (1)(b)(i) and (ii),

    • (a) dividends paid by a corporation are deemed to be paid in respect of the corporation’s net capital gains in the order in which those net capital gains were realized by the corporation;

    • (b) capital gains redemptions are deemed to be made in respect of net capital gains in the order in which those net capital gains were realized by the corporation to the extent that they are not reduced by dividends; and

    • (c) for the purposes of applying paragraphs (a) and (b),

      • (i) net capital gains of a corporation for a year is the amount by which the corporation’s capital gains from dispositions of property in the year exceed the corporation’s capital losses from dispositions of property in the year,

      • (ii) net capital losses of a corporation for a year is the amount by which the corporation’s capital losses from dispositions of property in the year exceed the corporation’s capital gains from dispositions of property in the year,

      • (iii) net capital gains of a corporation for a year are deemed to be realized evenly throughout the year, and

      • (iv) net capital losses of a corporation for a year are deemed to be a capital loss of the corporation from the disposition of property in the following year.

• (3) Section 131 of the Act is amended by adding the following after subsection (1.4):

  • Marginal note:Reporting for 2024

    (1.5) If paragraph (1)(b) applies to a dividend paid by a mutual fund corporation to a shareholder of any class of shares of its capital stock, the corporation must disclose to the shareholder in prescribed form the amount of the dividend that is in respect of capital gains realized on dispositions of property that occurred before June 25, 2024, and if it does not do so, the full amount of the dividend is deemed to be in respect of capital gains from dispositions of property that occurred after June 24, 2024.

  • Marginal note:Allocation — 2024

    (1.6) If subsection (1) applies in respect of a dividend paid by a mutual fund corporation in the period that begins 60 days after the beginning of the corporation’s taxation year that begins before June 25, 2024 and ends after June 24, 2024 and ends 60 days after the end of that year, and the corporation does not elect under subsection (1.7), the following rules apply:

    • (a) the portion of the dividend that is in respect of capital gains of the corporation from dispositions of property by the corporation in the year and in the particular period that began at the beginning of the year and ended at the end of June 24, 2024 (in this subsection referred to as the “first period”) is deemed to be that proportion of the dividend that the corporation’s net capital gains from dispositions of property in the particular period to which the dividend relates is of the total of the corporation’s net capital gains from dispositions of property in the first and second period referred to in this subsection;

    • (b) the portion of the dividend that is in respect of capital gains of the corporation from dispositions of property by the corporation in the year and in the particular period that begins at the beginning of June 25, 2024 and ends at the end of the year (in this subsection referred to as the “second period”), is deemed to be that proportion of the dividend that the corporation’s net capital gains from dispositions of property in the particular period is of the total of the corporation’s net capital gains from dispositions of property in the first and second period referred to in this subsection; and

    • (c) in this subsection and in subsection (1.8), net capital gains from dispositions of property in

      • (i) the first period means the amount, if any, by which the corporation’s capital gains from dispositions of property in the first period exceeds the corporation’s capital losses from dispositions of property in the first period, and

      • (ii) the second period means the amount, if any, by which the corporation’s capital gains from dispositions of property in the second period exceeds the corporation’s capital losses from dispositions of property in the second period.

  • Marginal note:Allocation — 2024 election

    (1.7) If subsection (1) applies in respect of a dividend paid by a mutual fund corporation in the period that begins 60 days after the beginning of the corporation’s taxation year that includes June 25, 2024 and ends 60 days after the end of that year and the corporation so elects under this paragraph in its return of income

    • (a) the portion of the dividend that is in respect of capital gains from dispositions of property that occurred in the year and before June 25, 2024 is deemed to be that proportion of the dividend that the number of days that are in that year and before June 25, 2024 is of the number of days that are in that year; and

    • (b) the portion of the dividend that is in respect of capital gains from dispositions of property that occurred in the year and in the period that begins at the beginning of June 25, 2024 and ends at the end of the year, is deemed to be that proportion of the dividend that the number of days that are in the year and in that period is of the number of days that are in the year.

  • Marginal note:Allocation — 2024

    (1.8) For the purposes of subsections (1.6) and (1.7), if the total amount of dividends paid by a mutual fund corporation in the period that begins 60 days after the beginning of the corporation’s taxation year that begins before June 25, 2024 and ends after June 24, 2024 and ends 60 days after the end of that year and to which subsection (1) applies exceeds the total amount of the corporation’s net capital gains from dispositions of property in that year

    • (a) the amount of those dividends to which subsections (1.6) and (1.7) apply is the amount of the corporation’s net capital gains from dispositions of property in that year; and

    • (b) the amount, if any, by which the total amount of the dividends paid by the corporation in the period exceeds the total amount of the corporation’s net capital gains from dispositions of property in that year is deemed to be a dividend in respect of capital gains from dispositions of property in the first period described in subsection (1.6) that ends in the year.

  • Marginal note:Allocation — 2024

    (1.9) If no dividend to which subsection (1.7) applies is paid by a mutual fund corporation in respect of its net taxable capital gains for its taxation year that begins before June 25, 2024 and ends after June 24, 2024, the corporation has net capital gains or net capital losses from dispositions of property in the year and the corporation so elects under this subsection in its return of income for the year

    • (a) the portion of those net capital gains and net capital losses that is in respect of capital gains and losses from dispositions of property that occurred before June 25, 2024 is deemed to be that proportion of the net capital gains or net capital losses respectively that the number of days that are in the year and before June 25, 2024 is of the number of days that are in the year;

    • (b) the portion of those net capital gains and net capital losses that is in respect of capital gains and losses from dispositions of property that occurred in the year and in the period that began at the beginning of June 25, 2024 and ended at the end of the year, is deemed to be that proportion of the net capital gains or net capital losses respectively that the number of days that are in the year and in that period is of the number of days that are in the year; and

    • (c) for the purposes of this subsection,

      • (i) the net capital gains of a mutual fund corporation from dispositions of property in the year is the amount, if any, by which the corporation’s capital gains from dispositions of property in a year exceeds the corporation’s capital losses from dispositions of property in the year, and

      • (ii) the net capital losses of a mutual fund corporation from dispositions of property in the year is the amount, if any, by which the corporation’s capital losses from dispositions of property in a year exceeds the corporation’s capital gains from dispositions of property in the year.

• (4) The portion of clause 131(2)(a)(i)(A) of the Act before subclause (I) is replaced by the following:

  • (A) 18.67% of the total of

• (5) The portion of subparagraph (a)(ii) of the definition capital gains dividend account in subsection 131(6) of the Act before the formula is replaced by the following:

  • (ii) all amounts each of which is an amount in respect of a distribution made by a trust to the corporation, at a time that is after the corporation’s 2004 taxation year and before the corporation’s taxation year that includes June 25, 2024 and at which it is a mutual fund corporation, in respect of capital gains of the trust equal to twice the amount determined by the formula

• (6) Paragraph (a) of the definition capital gains dividend account in subsection 131(6) of the Act is amended by striking out “and” at the end of subparagraph (i), by adding “and” at the end of subparagraph (ii) and by adding the following after subparagraph (ii):

  • (iii) all amounts each of which is an amount (other than an amount deemed to be a capital gain of the corporation under paragraph 104(21.4)(a) or (21.8)(b)) in respect of a distribution made by a trust to the corporation at a time that is on or after the beginning of the corporation’s taxation year that includes June 25, 2024 and at which it is a mutual fund corporation, in respect of a capital gain of the trust equal to the amount determined by the formula

    1.5 × A

    where

    A

    is the amount designated under subsection 104(21) by the trust in respect of the net taxable capital gains of the trust attributable to those capital gains

• (7) Paragraph (b) of the definition capital gains dividend account in subsection 131(6) of the Act is amended by striking out “and” at the end of subparagraph (ii) and by replacing subparagraph (iii) by the following:

  • (iii) an amount equal to 100/14 of its capital gains refund for any taxation year that ended before the taxation year that includes June 25, 2024 throughout which it was a mutual fund corporation where the year ended more than 60 days before that time, and

  • (iv) an amount equal to 100/18.67 of its capital gains refund for its taxation year that includes June 25, 2024, and any subsequent taxation year, throughout which it was a mutual fund corporation where the year ended more than 60 days before that time; (compte de dividendes sur les gains en capital)

• (8) The description of C in the definition capital gains redemptions in subsection 131(6) of the Act is replaced by the following:

  C

  is 100/18.67 of the corporation’s refundable capital gains tax on hand at the end of the year, and

• (9) Subsections (1) to (8) apply to taxation years that end after June 24, 2024, except that for a taxation year of a mutual fund corporation that includes June 25, 2024,

  • (a) the reference to the percentage ‘‘18.67%’’ in clause 131(2)(a)(i)(A) of the Act, as enacted by subsection (4), is to be read as a reference to the percentage determined when 28% is multiplied by the fraction in paragraph 38(a) of the Act, as enacted by subsection 4(1), that applies to the corporation for the year;

  • (b) the reference to “1.5” in the formula in subparagraph (a)(iii) of the definition capital gains dividend account in subsection 131(6) of the Act, as enacted by subsection (6), is to be read as a reference to the fraction that is the reciprocal of the fraction in paragraph 38(a) of the Act, as enacted by subsection 4(1), that applies to the corporation for the year; and

  • (c) the reference to the fraction ‘‘100/18.67’’ in subparagraph (b)(iv) of the definition capital gains dividend account in subsection 131(6) of the Act, as enacted by subsection (7), and in the description of C in the definition capital gains redemptions in subsection 131(6) of the Act, as enacted by subsection (8), are to be read as a reference to the fraction ‘‘100/(28 × Z)”, where ‘‘Z’’ is the fraction in paragraph 38(a) of the Act, as enacted by subsection 4(1), that applies to the corporation for the year.

• 35 (1) Clause 132(1)(a)(i)(A) of the Act is replaced by the following:

  • (A) 22% of the total of the trust’s capital gains redemptions for the year, and

• (2) The description of C in the definition capital gains redemptions in subsection 132(4) of the Act is replaced by the following:

  C

  is 100/22 of the trust’s refundable capital gains tax on hand at the end of the year,

• (3) The description of E in the definition capital gains redemptions in subsection 132(4) of the Act is replaced by the following:

  E

  is 1.5 times the total of all amounts each of which is an amount designated under subsection 104(21) for the year by the trust in respect of a unit of the trust redeemed by the trust at any time in the year and after December 21, 2000; (rachats au titre des gains en capital)

• (4) Subparagraph 132(5.1)(a)(i) of the Act is replaced by the following:

  • (i) 1.5 times the amount designated, and

• (5) Subparagraphs 132(5.1)(b)(i) and (ii) of the Act are replaced by the following:

  • (i) the amount designated is deemed by subsection 104(21) to be a taxable capital gain of the beneficiary only to the extent that it exceeds 2/3 of the TCP gains distribution, and

  • (ii) 2/3 of the TCP gains distribution is to be added to the amount otherwise included under subsection 104(13) in computing the income of the beneficiary, and is deemed to be an amount to which paragraph 212(1)(c) applies.

• (6) The formula in paragraph 132(5.3)(b) of the Act is replaced by the following:

  A – 2/3 × (B + C − D)

• (7) Subsections (1) to (6) apply to taxation years that end after June 24, 2024 except that, for a taxation year of a mutual fund trust that includes June 25, 2024

  • (a) the reference to the percentage “22%” in paragraph 132(1)(a) of the Act, as enacted by subsection (1), is to be read as a reference to the percentage determined when 33% is multiplied by the fraction in paragraph 38(a) of the Act, as enacted by subsection 4(1), that applies to the trust for the year;

  • (b) the reference to the fraction ‘‘100/22’’ in the description of C in the definition capital gains redemptions in subsection 132(4) of the Act, as enacted by subsection (2), is to be read as a reference to the fraction ‘‘100/(33 × Z)’’, where ‘‘Z’’ is the fraction in paragraph 38(a) of the Act, as enacted by subsection 4(1), that applies to the trust for the year;

  • (c) the references to ‘‘1.5’’ in the description of E in the definition capital gains redemptions in subsection 132(4) and subparagraph 132(5.1)(a)(i) of the Act, as enacted by subsections (3) and (4), respectively, are to be read as references to the fraction that is the reciprocal of the fraction in paragraph 38(a) of the Act, as enacted by subsection 4(1), that applies to the taxpayer for the year; and

  • (d) the references to the fraction “2/3” in subparagraphs 132(5.1)(b)(i) and (ii) and the formula in subsection 132(5.3) of the Act, as enacted by subsections (5) and (6), respectively, are to be read as references to the fraction in paragraph 38(a) of the Act, as enacted by subsection 4(1), that applies to the taxpayer for the year.

• 36 (1) Section 138.1 of the Act is amended by adding the following after subsection (3):

  • Marginal note:Segregated funds transitional rules — 2024

    (3.1) If a capital gain or a capital loss is deemed by subsection (3) to be a capital gain or a capital loss of a taxpayer and not that of a related segregated fund trust,

    • (a) if the capital gain or capital loss was in respect of capital gains or capital losses from dispositions of property by the related segregated fund trust that occurred before June 25, 2024 and that taxation year of the taxpayer begins before June 25, 2024 and ends after June 24, 2024, the capital gain or the capital loss is deemed to be a capital gain or a capital loss, as the case may be, of the taxpayer from the disposition by the taxpayer of capital property in the taxpayer’s taxation year and before June 25, 2024;

    • (b) if the capital gain or capital loss was in respect of capital gains or capital losses from dispositions of property by the related segregated fund trust that occurred before June 25, 2024 and the taxation year of the taxpayer began after June 24, 2024, 3/4 of the capital gain or the capital loss is deemed to be a capital gain or a capital loss, as the case may be, of the taxpayer from the disposition by the taxpayer of capital property in the taxpayer’s taxation year;

    • (c) in any other case, the capital gain or capital loss from dispositions of property by the related segregated fund trust is deemed to be a capital gain or a capital loss, as the case may be, of the taxpayer from the disposition by the taxpayer of capital property in the taxpayer’s taxation year and after June 24, 2024; and

    • (d) the related segregated fund trust must disclose to the taxpayer in prescribed form and manner the amount of the capital gain or capital loss that is in respect of capital gains or capital losses realized on dispositions of property that occurred before June 25, 2024.

  • Marginal note:Segregated funds transitional rules — 2024 election

    (3.2) If an amount is deemed under subsection (3) to be a capital gain or capital loss of a policyholder or other beneficiary of a related segregated fund trust, in respect of capital gains or losses realized in a taxation year of the related segregated fund trust that begins before June 25, 2024 and ends after June 24, 2024, and the related segregated fund trust so elects under this subsection in its return of income for the year, the portion of the gains and losses that are in respect of capital gains or losses from dispositions of property that occurred before June 25, 2024 is deemed to be that proportion of the gains or losses that the number of days that are in the year and before June 25, 2024 is of the number of days that are in the year.

• (2) Subsection (1) applies to taxation years that end after June 24, 2024.

• 37 (1) Subparagraph 164(6.1)(a)(iii) of the Act is replaced by the following:

  • (iii) where in computing the taxpayer’s taxable income for the taxation year in which the taxpayer died an amount was deducted under paragraph 110(1)(d) in respect of the benefit deemed by paragraph 7(1)(e) to have been received by the taxpayer in that year by reason of paragraph 7(1)(e) in respect of that right, the total of

    • (A) 1/3 of the amount, if any, by which the amount determined under subparagraph (i) exceeds the amount determined under subparagraph (ii), and

    • (B) the lesser of

      • (I) 1/6 of the amount, if any, by which the amount determined under subparagraph (i) exceeds the amount determined under subparagraph (ii), and

      • (II) the amount that was deducted under paragraph 110(1)(d.4) in respect of the benefit deemed by paragraph 7(1)(e) to have been received by the taxpayer in that year by reason of paragraph 7(1)(e) in respect of that right,

• (2) Subsection (1) applies to deaths that occur after June 24, 2024.

• 38 (1) Subparagraph (a)(i) of the definition transfer pricing capital adjustment in subsection 247(1) of the Act is replaced by the following:

  • (i) 2/3 of the amount, if any, by which the adjusted cost base to the taxpayer of a capital property (other than a depreciable property) is reduced in the year because of an adjustment made under subsection (2), or

• (2) Subparagraph (b)(i) of the definition transfer pricing capital adjustment in subsection 247(1) of the Act is replaced by the following:

  • (i) 2/3 of the amount, if any, by which the adjusted cost base to a partnership of a capital property (other than a depreciable property) is reduced in a fiscal period that ends in the year because of an adjustment made under subsection (2), and

• (3) Clause 247(12)(b)(i)(B) of the Act is replaced by the following:

  • (B) the definition transfer pricing capital adjustment in subsection (1) were read without reference to the references therein to “2/3 of”

• (4) Clause 247(12)(b)(ii)(B) of the Act is replaced by the following:

  • (B) the definition transfer pricing capital adjustment in subsection (1) were read without reference to the references therein to “2/3 of”.

• (5) Subsections (1) to (4) apply to taxation years that end after June 24, 2024 except that, for a taxation year of a taxpayer that includes June 25, 2024, the reference to the fraction ‘‘2/3’’ in subparagraph (a)(i) of the definition transfer pricing capital adjustment in subsection 247(1) of the Act, as enacted by subsection (1), the reference to the fraction ‘‘2/3’’ in subparagraph (b)(i) of the definition transfer pricing capital adjustment in subsection 247(1) of the Act, as enacted by subsection (2), the reference to the fraction ‘‘2/3’’ in clause 247(12)(b)(i)(B) of the Act, as enacted by subsection (3) and the reference to the fraction ‘‘2/3’’ in clause 247(12)(b)(ii)(B) of the Act, as enacted by subsection (4), are to be read as a reference to the fraction in paragraph 38(a) of the Act, as enacted by subsection 4(1), that applies to the taxpayer for the year.

Income Tax Regulations

• 39 (1) Paragraph 5900(1)(a.1) of the Income Tax Regulations is replaced by the following:

  • (a.1) for the purposes of this Part, the portion of the dividend paid out of the hybrid surplus of the affiliate is prescribed to be that proportion of the dividend received that

    • (i) the portion of the whole dividend paid by the affiliate on the shares of that class at that time that was deemed by section 5901 to have been paid out of the affiliate’s hybrid surplus in respect of the corporation

    is of

    • (ii) the whole dividend paid by the affiliate on the shares of that class at that time;

  • (a.2) for the purposes of this Part and paragraph 113(1)(a.1) of the Act, the portion of the dividend paid out of the legacy hybrid surplus of the affiliate is prescribed to be that proportion of the dividend received that

    • (i) the portion of the whole dividend paid by the affiliate on the shares of that class at that time that was deemed by section 5901 to have been paid out of the affiliate’s legacy hybrid surplus in respect of the corporation

    is of

    • (ii) the whole dividend paid by the affiliate on the shares of that class at that time;

  • (a.3) for the purposes of this Part and paragraph 113(1)(a.2) of the Act, the portion of the dividend paid out of the successor hybrid surplus of the affiliate is prescribed to be that proportion of the dividend received that

    • (i) the portion of the whole dividend paid by the affiliate on the shares of that class at that time that was deemed by section 5901 to have been paid out of the affiliate’s successor hybrid surplus in respect of the corporation

    is of

    • (ii) the whole dividend paid by the affiliate on the shares of that class at that time;

• (2) Paragraph 5900(1)(c.1) of the Regulations is replaced by the following:

  • (c.1) for the purposes of this Part, the foreign tax applicable to the portion of the dividend prescribed to have been paid out of the hybrid surplus of the affiliate is prescribed to be that proportion of the hybrid underlying tax applicable, in respect of the corporation, to the whole dividend paid by the affiliate on the shares of that class at that time that

    • (i) the amount of the dividend received by the corporation or the affiliate, as the case may be, on that share at that time

    is of

    • (ii) the whole dividend paid by the affiliate on the shares of that class at that time;

  • (c.2) for the purposes of this Part and paragraph 113(1)(a.1) of the Act, the foreign tax applicable to the portion of the dividend prescribed to have been paid out of the legacy hybrid surplus of the affiliate is prescribed to be that proportion of the legacy hybrid underlying tax applicable, in respect of the corporation, to the whole dividend paid by the affiliate on the shares of that class at that time that

    • (i) the amount of the dividend received by the corporation or the affiliate, as the case may be, on that share at that time

    is of

    • (ii) the whole dividend paid by the affiliate on the shares of that class at that time;

  • (c.3) for the purposes of this Part and paragraph 113(1)(a.2) of the Act, the foreign tax applicable to the portion of the dividend prescribed to have been paid out of the successor hybrid surplus of the affiliate is prescribed to be that proportion of the successor hybrid underlying tax applicable, in respect of the corporation, to the whole dividend paid by the affiliate on the shares of that class at that time that

    • (i) the amount of the dividend received by the corporation or the affiliate, as the case may be, on that share at that time

    is of

    • (ii) the whole dividend paid by the affiliate on the shares of that class at that time; and

• (3) Subsections (1) and (2) apply to dividends received after June 24, 2024.

• 40 (1) Subsection 5901(1) of the Regulations is amended by adding the following after paragraph (a.1):

  • (a.2) the portion of the whole dividend deemed to have been paid out of the affiliate’s legacy hybrid surplus in respect of the corporation at that time is an amount equal to the lesser of

    • (i) the portion determined under paragraph (a.1), and

    • (ii) the affiliate’s legacy hybrid surplus, if any, in respect of the corporation at that time;

  • (a.3) the portion of the whole dividend deemed to have been paid out of the affiliate’s successor hybrid surplus in respect of the corporation at that time is an amount equal to the lesser of

    • (i) the amount, if any, by which the portion determined under paragraph (a.1) exceeds the portion determined under paragraph (a.2), and

    • (ii) the affiliate's successor hybrid surplus, if any, in respect of the corporation at that time;

• (2) Subsection 5901(1.1) of the Regulations is replaced by the following:

  • (1.1) If the corporation resident in Canada that is referred to in subsection (1) elects in writing under this subsection in respect of the whole dividend referred to in subsection (1) and files the election with the Minister on or before the corporation’s filing-due date for its taxation year that includes the day the whole dividend was paid, subsection (1) applies in respect of the whole dividend as if

    • (a) its paragraphs (a.1) and (b) read as follows:

      • (a.1) the portion of the whole dividend deemed to have been paid out of the affiliate’s taxable surplus in respect of the corporation at that time is an amount equal to the lesser of

        • (i) the amount, if any, by which the amount of the whole dividend exceeds the portion determined under paragraph (a), and

        • (ii) the amount, if any, by which the taxable surplus exceeds

          • (A) if the affiliate has an exempt deficit and a hybrid deficit, in respect of the corporation at that time, the total of the exempt deficit and the hybrid deficit,

          • (B) if the affiliate has an exempt deficit and no hybrid deficit, in respect of the corporation at that time, the amount of the exempt deficit, and

          • (C) if the affiliate has a hybrid deficit and no exempt deficit, in respect of the corporation at that time, the amount, if any, by which the hybrid deficit exceeds the affiliate’s exempt surplus in respect of the corporation at that time;

      • (b) the portion of the whole dividend deemed to have been paid out of the affiliate’s hybrid surplus in respect of the corporation at that time is an amount equal to the lesser of

        • (i) the amount, if any, by which the amount of the whole dividend exceeds the total of the portions determined under paragraphs (a) and (a.1),

        • (ii) the amount, if any, by which the hybrid surplus exceeds

          • (A) if the affiliate has an exempt deficit and a taxable deficit, in respect of the corporation at that time, the total of the exempt deficit and the taxable deficit,

          • (B) if the affiliate has an exempt deficit and no taxable deficit, in respect of the corporation at that time, the amount, if any, by which the exempt deficit exceeds the affiliate’s taxable surplus in respect of the corporation at that time, and

          • (C) if the affiliate has a taxable deficit and no exempt deficit, in respect of the corporation at that time, the amount, if any, by which the taxable deficit exceeds the affiliate’s exempt surplus in respect of the corporation at that time;

    • (b) it was read without reference to its paragraphs (a.2) and (a.3); and

    • (c) it was read as if it included the following after its paragraph (b):

      • (b.1) the portion of the whole dividend deemed to have been paid out of the affiliate’s legacy hybrid surplus in respect of the corporation at that time is an amount equal to the lesser of

        • (i) the portion determined under paragraph (b), and

        • (ii) the affiliate’s legacy hybrid surplus, if any, in respect of the corporation at that time; and

      • (b.2) the portion of the whole dividend deemed to have been paid out of the affiliate's successor hybrid surplus in respect of the corporation at that time is an amount equal to the lesser of

        • (i) the amount, if any, by which the portion determined under paragraph (b) exceeds the portion determined under paragraph (b.1), and

        • (ii) the affiliate's successor hybrid surplus, if any, in respect of the corporation at that time; and

• (3) Subsections (1) and (2) apply to dividends paid after June 24, 2024.

• 41 (1) The portion of subparagraph 5902(1)(a)(i) of the Regulations before clause (A) is replaced by the following:

  • (i) the particular affiliate’s exempt surplus or exempt deficit, hybrid surplus or hybrid deficit, hybrid underlying tax, legacy hybrid surplus or legacy hybrid deficit, legacy hybrid underlying tax, successor hybrid surplus or successor hybrid deficit, successor hybrid underlying tax, taxable surplus or taxable deficit, underlying foreign tax and net surplus, in respect of the corporation at the dividend time, are deemed to be those amounts that would otherwise be determined immediately before the dividend time if

• (2) Subparagraph 5902(1)(b)(i.1) of the Regulations is replaced by the following:

  • (i.1) under subparagraph (vi) of the description of B in the definition hybrid surplus in subsection 5907(1) in computing the particular affiliate’s hybrid surplus or hybrid deficit, as the case may be, in respect of the corporation an amount equal to the product obtained when the specified adjustment factor in respect of the disposition is multiplied by the total of all amounts each of which is the portion of any elected dividend that is prescribed by paragraph 5900(1)(a.2) to have been paid out of the legacy hybrid surplus of the particular affiliate or paragraph 5900(1)(a.3) to have been paid out of the successor hybrid surplus of the particular affiliate,

• (3) Subparagraph 5902(1)(b)(i.2) of the Regulations is replaced by the following:

  • (i.2) under subparagraph (iii) of the description of B in the definition hybrid underlying tax in subsection 5907(1) in computing the particular affiliate’s hybrid underlying tax in respect of the corporation an amount equal to the product obtained when the specified adjustment factor in respect of the disposition is multiplied by the total of all amounts each of which is the amount prescribed by paragraph 5900(1)(c.2) to be the foreign tax applicable to the portion of any elected dividend that is prescribed by paragraph 5900(1)(a.2) to have been paid out of the legacy hybrid surplus of the particular affiliate or the amount prescribed by paragraph 5900(1)(c.3) to be the foreign tax applicable to the portion of any elected dividend that is prescribed by paragraph 5900(1)(a.3) to have been paid out of the successor hybrid surplus of the particular affiliate,

• (4) Subsections (1) to (3) apply in respect of elections made in respect of dispositions that occur after June 24, 2024, except that in applying subsection 90(11) of the Act, as amended by subsection 13(4), and subsection 5905(5.6) of the Regulations, as amended by subsection 43(2), the portion of subparagraph 5902(1)(a)(i) of the Regulations before its clause (A), as amended by subsection (1), applies after June 24, 2024.

• 42 (1) The portion of subsection 5903.1(1) of the Regulations before paragraph (a) is replaced by the following:

  • (1) For the purposes of the description of F.1 in the definition foreign accrual property income in subsection 95(1) of the Act, the prescribed amount for the year (referred to in this subsection and subsections (1.1) and (2) as the “particular year”) is the total of all amounts each of which is an amount determined under subsection (1.1), for the particular year, in respect of the foreign accrual capital loss of the affiliate for a taxation year of the affiliate that is

• (2) Section 5903.1 of the Regulations is amended by adding the following after subsection (1):

  • (1.1) For the purposes of subsection (1), the amount determined for the particular year in respect of a foreign accrual capital loss of the affiliate for a taxation year (referred to in this subsection as the “loss year”) of the affiliate is the amount determined by the formula

    A × B ÷ C

    where

    A

    is the portion designated for the particular year by the taxpayer of the foreign accrual capital loss of the affiliate for the loss year;

    B

    is the fraction that would be used for the particular year under section 38 of the Act if the affiliate had a capital loss for the particular year; and

    C

    is the fraction required to be used under section 38 in respect of the affiliate for the loss year.

• (3) The portion of subsection 5903.1(2) of the Regulations before paragraph (a) is replaced by the following:

  • (2) For the purposes of this subsection and subsection (1.1),

• (4) Subsections (1) to (3) apply in respect of capital losses of a foreign affiliate that are incurred in taxation years of the foreign affiliate that end after August 19, 2011.

• 43 (1) Paragraph 5905(5.5)(a.1) of the Regulations is replaced by the following:

  • (a.1) the lesser of the amount of the affiliate’s legacy hybrid surplus in respect of the corporation at that time and the amount, if any, by which the amount of the affiliate’s hybrid surplus in respect of the corporation at that time exceeds the amount determined under subsection (5.7) in respect of the corporation at that time (the lesser of those two amounts being referred to in paragraph (a.2) as the affiliate’s “distributable legacy hybrid surplus”) if, at that time, the amount of the affiliate’s legacy hybrid surplus in respect of the corporation is less than or equal to the amount determined by the formula

    [A × (B – 0.5)] + (C × 0.5)

    where

    A

    is the affiliate’s legacy hybrid underlying tax in respect of the corporation at that time,

    B

    is the corporation’s relevant tax factor (within the meaning assigned by subsection 95(1) of the Act) for the corporation’s taxation year that includes that time, and

    C

    is the affiliate’s legacy hybrid surplus in respect of the corporation at that time;

  • (a.2) the lesser of the amount of the affiliate’s successor hybrid surplus in respect of the corporation at that time and the amount, if any, by which the amount of the affiliate’s hybrid surplus in respect of the corporation at that time exceeds the total of the amount determined under subsection (5.7) in respect of the corporation at that time and the affiliate’s distributable legacy hybrid surplus in respect of the corporation at that time if, at that time, the amount of the affiliate’s successor hybrid surplus in respect of the corporation is less than or equal to the amount determined by the formula

    [A × (B – 2/3)] + (C × 1/3)

    where

    A

    is the affiliate’s successor hybrid underlying tax in respect of the corporation at that time,

    B

    is the corporation’s relevant tax factor (within the meaning assigned by subsection 95(1) of the Act) for the corporation’s taxation year that includes that time, and

    C

    is the affiliate’s successor hybrid surplus in respect of the corporation at that time; and

• (2) Subsection 5905(5.6) of the Regulations is replaced by the following:

  • (5.6) For the purposes of subsection (5.5), the amounts of exempt surplus or exempt deficit, hybrid surplus or hybrid deficit, hybrid underlying tax, legacy hybrid surplus or legacy hybrid deficit, legacy hybrid underlying tax, successor hybrid surplus or successor hybrid deficit, successor hybrid underlying tax, taxable surplus or taxable deficit, and underlying foreign tax, of a foreign affiliate of corporation resident in Canada, in respect of the corporation, at a particular time are those amounts that would be determined, at the particular time, under subparagraph 5902(1)(a)(i) if that subparagraph were applicable at the particular time and the references in that subparagraph to “the dividend time” were references to the particular time.

• (3) The portion of subsection 5905(5.7) of the Regulations before paragraph (a) is replaced by the following:

  • (5.7) For the purposes of paragraphs (5.5)(a.1) and (a.2), the amount determined under this subsection in respect of the corporation at any time is

• (4) Subsections (1) to (3) are deemed to have come into force on June 25, 2024.

• 44 (1) Subsection 5907(1) of the Regulations is amended by adding the following in alphabetical order:

  legacy hybrid deficit

  legacy hybrid deficit, of a foreign affiliate (in this definition referred to as the “subject affiliate”) of a corporation in respect of the corporation, at any time, means the amount that would be the subject affiliate’s hybrid deficit in respect of the corporation at that time if its hybrid surplus and hybrid deficit in respect of the corporation at that time – and, for the purposes of applying subsections 5905(1), (3), (5) and (5.1) in determining the subject affiliate’s hybrid surplus or hybrid deficit, the hybrid surplus and hybrid deficit of each foreign affiliate, in respect of each corporation, referred to in those subsections – were determined as if the definition hybrid surplus were read in accordance with paragraphs (a) to (d) of the definition legacy hybrid surplus; (déficit hybride historique)

  legacy hybrid surplus

  legacy hybrid surplus, of a foreign affiliate (in this definition referred to as the “subject affiliate”) of a corporation in respect of the corporation, at any time, means the amount that would be the subject affiliate’s hybrid surplus in respect of the corporation at that time if its hybrid surplus and hybrid deficit in respect of the corporation at that time — and, for the purposes of applying subsections 5905(1), (3), (5) and (5.1) in determining the subject affiliate’s hybrid surplus or hybrid deficit, the hybrid surplus and hybrid deficit of each foreign affiliate, in respect of each corporation, referred to in those subsections — were determined on the basis that

  • (a) the only capital gains referred to in subparagraph (ii) of the description of A, and the only capital losses referred to in subparagraphs (ii) and (iii) of the description of B, in the definition hybrid surplus were from dispositions occurring before June 25, 2024,

  • (b) the only amounts referred to in subparagraph (iv) of the description of A, and subparagraph (v) of the description of B, in the definition hybrid surplus were amounts in respect of

    • (i) dividends received or paid, respectively, by the subject affiliate before June 25, 2024, and

    • (ii) dividends prescribed under paragraph 5900(1)(a.2) or deemed under paragraph 5901(1)(a.2) (or, where subsection 5901(1.1) applies, paragraph 5901(1)(b.1) as set out in that subsection), respectively, to have been paid out of the legacy hybrid surplus of a foreign affiliate in respect of the corporation,

  • (c) the only amounts added or deducted under subparagraph (v) of the description of A, and subparagraph (vii) of the description of B, in the definition hybrid surplus were amounts that may reasonably be regarded as being added or deducted in respect of capital gains or losses, or dividends paid or received, that are included in computing any foreign affiliate’s legacy hybrid surplus or legacy hybrid deficit, and

  • (d) the only amounts included under subparagraph (vi) of the description of B in the definition hybrid surplus were

    • (i) those required to be included before June 25, 2024, and

    • (ii) those required to be included because a portion of any elected dividend is prescribed by paragraph 5900(1)(a.2) to have been paid out of the legacy hybrid surplus of the subject affiliate; (surplus hybride historique)

  legacy hybrid underlying tax

  legacy hybrid underlying tax, of a foreign affiliate (in this definition referred to as the “subject affiliate”) of a corporation in respect of the corporation, at any time, means the amount that would be the subject affiliate’s hybrid underlying tax in respect of the corporation at that time if its hybrid surplus, hybrid deficit and hybrid underlying tax in respect of the corporation at that time – and, for the purposes of applying subsections 5905(1), (3), (5) and (5.1) in determining the subject affiliate’s hybrid surplus, hybrid deficit or hybrid underlying tax, the hybrid surplus, hybrid deficit and hybrid underlying tax of each foreign affiliate, in respect of each corporation, referred to in those subsections – were determined on the basis that

  • (a) the definitions hybrid surplus and hybrid deficit were read in accordance with paragraphs (a) to (d) of the definition legacy hybrid surplus,

  • (b) the only amounts included under subparagraph (iii) of the description of A in the definition hybrid underlying tax were

    • (i) amounts prescribed to have been foreign tax applicable in respect of dividends received by the subject affiliate before June 25, 2024, and

    • (ii) amounts prescribed by paragraph 5900(1)(c.2) to have been the foreign tax applicable to the portion of any dividend prescribed by paragraph 5900(1)(a.2) to have been paid out of the legacy hybrid surplus of a foreign affiliate in respect of the corporation,

  • (c) the only amounts added or deducted under subparagraph (iv) of the description of A, and subparagraph (iv) of the description of B, in the definition hybrid underlying tax were amounts that may reasonably be regarded as being added or deducted in respect of capital gains or losses, or dividends paid or received, that are included in computing any foreign affiliate’s legacy hybrid surplus or legacy hybrid deficit,

  • (d) the only amounts included under subparagraph (ii) of the description of B in the definition hybrid underlying tax were

    • (i) the hybrid underlying tax applicable to dividends paid by the subject affiliate before June 25, 2024, and

    • (ii) the legacy hybrid underlying tax applicable to dividends deemed under paragraph 5901(1)(a.2) (or, where subsection 5901(1.1) applies, paragraph 5901(1)(b.1) as set out in that subsection) to have been paid out of the subject affiliate’s legacy hybrid surplus in respect of the corporation, and

  • (e) the only amounts included under subparagraph (iii) of the description of B in the definition hybrid underlying tax were

    • (i) those required to be included before June 25, 2024, and

    • (ii) those required to be included because a portion of any elected dividend is prescribed by paragraph 5900(1)(a.2) to have been paid out of the legacy hybrid surplus of the subject affiliate; (montant intrinsèque d’impôt hybride historique)

  legacy hybrid underlying tax applicable

  legacy hybrid underlying tax applicable, in respect of a corporation, to a whole dividend paid at any time on the shares of any class of the capital stock of a foreign affiliate of the corporation by the affiliate, means the amount determined by the formula

  A × B ÷ C

  where

  A

  is the legacy hybrid underlying tax of the affiliate at that time in respect of the corporation,

  B

  is the portion of the whole dividend deemed to have been paid out of the affiliate’s legacy hybrid surplus in respect of the corporation, and

  C

  is the affiliate’s legacy hybrid surplus at that time in respect of the corporation; (montant intrinsèque d’impôt hybride historique applicable)

  successor hybrid deficit

  successor hybrid deficit, of a foreign affiliate (in this definition referred to as the “subject affiliate”) of a corporation in respect of the corporation, at any time, means the amount that would be the subject affiliate’s hybrid deficit in respect of the corporation at that time if its hybrid surplus and hybrid deficit in respect of the corporation at that time — and, for the purposes of applying subsections 5905(1), (3), (5) and (5.1) in determining the subject affiliate’s hybrid surplus or hybrid deficit, the hybrid surplus and hybrid deficit of each foreign affiliate, in respect of each corporation, referred to in those subsections — were determined as if the definition hybrid surplus were read in accordance with paragraphs (a) to (d) of the definition successor hybrid surplus; (déficit hybride remplaçant)

  successor hybrid surplus

  successor hybrid surplus, of a foreign affiliate (in this definition referred to as the “subject affiliate”) of a corporation in respect of the corporation, at any time, means the amount that would be the subject affiliate’s hybrid surplus in respect of the corporation at that time if its hybrid surplus and hybrid deficit in respect of the corporation at that time — and, for the purposes of applying subsections 5905(1), (3), (5) and (5.1) in determining the subject affiliate’s hybrid surplus or hybrid deficit, the hybrid surplus and hybrid deficit of each foreign affiliate, in respect of each corporation, referred to in those subsections — were determined on the basis that

  • (a) the only capital gains referred to in subparagraph (ii) of the description of A, and the only capital losses referred to in subparagraphs (ii) and (iii) of the description of B, in the definition hybrid surplus were from dispositions occurring after June 24, 2024,

  • (b) the only amounts referred to in subparagraph (iv) of the description of A, and subparagraph (v) of the description of B, in the definition hybrid surplus were amounts in respect of dividends prescribed under paragraph 5900(1)(a.3) or deemed under paragraph 5901(1)(a.3) (or, where subsection 5901(1.1) applies, paragraph 5901(1)(b.2) as set out in that subsection), respectively, to have been paid out of the successor hybrid surplus of a foreign affiliate in respect of the corporation,

  • (c) the only amounts added or deducted under subparagraph (v) of the description of A, and subparagraph (vii) of the description of B, in the definition hybrid surplus were amounts that may reasonably be regarded as being added or deducted in respect of capital gains or losses, or dividends paid or received, that are included in computing any foreign affiliate’s successor hybrid surplus or successor hybrid deficit, and

  • (d) the only amounts included under subparagraph (vi) of the description of B in the definition hybrid surplus were those required to be included because a portion of any elected dividend is prescribed by paragraph 5900(1)(a.3) to have been paid out of the successor hybrid surplus of the subject affiliate; (surplus hybride remplaçant)

  successor hybrid underlying tax

  successor hybrid underlying tax, of a foreign affiliate (in this definition referred to as the “subject affiliate”) of a corporation in respect of the corporation, at any time, means the amount that would be the subject affiliate’s hybrid underlying tax in respect of the corporation at that time if its hybrid surplus, hybrid deficit and hybrid underlying tax in respect of the corporation at that time — and, for the purposes of applying subsections 5905(1), (3), (5) and (5.1) in determining the subject affiliate’s hybrid surplus, hybrid deficit or hybrid underlying tax, the hybrid surplus, hybrid deficit and hybrid underlying tax of each foreign affiliate, in respect of each corporation, referred to in those subsections — were determined on the basis that

  • (a) the definitions hybrid surplus and hybrid deficit were read in accordance with paragraphs (a) to (d) of the definition successor hybrid surplus,

  • (b) the only amounts included under subparagraph (iii) of the description of A in the definition hybrid underlying tax were amounts prescribed by paragraph 5900(1)(c.3) to have been the foreign tax applicable to the portion of any dividend prescribed by paragraph 5900(1)(a.3) to have been paid out of the successor hybrid surplus of a foreign affiliate in respect of the corporation,

  • (c) the only amounts added or deducted under subparagraph (iv) of the description of A, and subparagraph (iv) of the description of B, in the definition hybrid underlying tax were amounts that may reasonably be regarded as being added or deducted in respect of capital gains or losses, or dividends paid or received, that are included in computing any foreign affiliate’s successor hybrid surplus or successor hybrid deficit,

  • (d) the only amounts included under subparagraph (ii) of the description of B in the definition hybrid underlying tax were the successor hybrid underlying tax applicable to dividends deemed under paragraph 5901(1)(a.3) (or, where subsection 5901(1.1) applies, paragraph 5901(1)(b.2) as set out in that subsection) to have been paid out of the subject affiliate’s successor hybrid surplus in respect of the corporation, and

  • (e) the only amounts included under subparagraph (iii) of the description of B in the definition hybrid underlying tax were those required to be included because a portion of any elected dividend is prescribed by paragraph 5900(1)(a.3) to have been paid out of the successor hybrid surplus of the subject affiliate; (montant intrinsèque d’impôt hybride remplaçant)

  successor hybrid underlying tax applicable

  successor hybrid underlying tax applicable, in respect of a corporation, to a whole dividend paid at any time on the shares of any class of the capital stock of a foreign affiliate of the corporation by the affiliate, means the amount determined by the formula

  A × B ÷ C

  where

  A

  is the successor hybrid underlying tax of the affiliate at that time in respect of the corporation,

  B

  is the portion of the whole dividend deemed to have been paid out of the affiliate’s successor hybrid surplus in respect of the corporation, and

  C

  is the affiliate’s successor hybrid surplus at that time in respect of the corporation; (montant intrinsèque d’impôt hybride remplaçant applicable)

• (2) The definition hybrid underlying tax applicable in subsection 5907(1) of the Regulations is replaced by the following:

  hybrid underlying tax applicable

  hybrid underlying tax applicable, in respect of a corporation, to a whole dividend paid at any time on the shares of any class of the capital stock of a foreign affiliate of the corporation by the affiliate, means the amount determined by the formula

  A + B

  where

  A

  is the legacy hybrid underlying tax applicable, in respect of the corporation, to the whole dividend, and

  B

  is the successor hybrid underlying tax applicable, in respect of the corporation, to the whole dividend; (montant intrinsèque d’impôt hybride applicable)

• (3) Subsection 5907(1.01) of the Regulations is replaced by the following:

  • (1.01) For the purposes of section 113 of the Act, exempt surplus, legacy hybrid surplus, successor hybrid surplus and taxable surplus have the meanings assigned by subsection (1).

• (4) Subsections (1) and (3) are deemed to have come into force on June 25, 2024.

• (5) Subsection (2) applies to dividends paid after June 24, 2024.