I-3 - Taxation Act

Section 572.3 Disposition versions

2010-10-27

572.3. In this Title,

“eligible trust” means a trust, other than a trust

(a)  created or maintained for charitable purposes;

(b)  governed by an employee benefit plan;

(c)  described in subparagraph a.1 of the third paragraph of section 647;

(d)  governed by a salary deferral arrangement;

(e)  operated for the purpose of administering or providing pension benefits or employee benefits; or

(f)  where the amount of income or capital that an entity may receive directly from the trust at any time as a beneficiary under the trust depends on the exercise by an entity of, or the failure by an entity to exercise, a discretionary power;

“entity” includes an association, a corporation, a fund, a natural person, a joint venture, an organization, a partnership, a syndicate or a trust;

“exempt trust”, at a particular time in respect of a taxpayer resident in Canada, means a trust that, at that time, is a trust under which the interest of each beneficiary under the trust is, at all times that the interest exists during the trust’s taxation year that includes the particular time, a specified fixed interest of the beneficiary in the trust, if at the particular time

(a)  the trust is an eligible trust;

(b)  there are at least 150 beneficiaries each of whom holds a specified fixed interest, in the trust, that has a fair market value of at least $500; and

(c)  the total of all amounts each of which is the fair market value of an interest as a beneficiary under the trust held by a specified purchaser in respect of the taxpayer is not more than 10% of the total fair market value of all interests as a beneficiary under the trust;

“specified fixed interest”, at any time, of an entity in a trust, means an interest of the entity as a beneficiary under the trust if

(a)  the interest includes, at that time, rights of the entity as a beneficiary under the trust to receive, at or after that time and directly from the trust, all or part of the income and capital of the trust;

(b)  the interest was issued by the trust, at or before that time, to an entity, in exchange for consideration and the fair market value, at the time at which the interest was issued, of that consideration was equal to the fair market value, at the time at which it was issued, of the interest;

(c)  the only manner in which any part of the interest may cease to be the entity’s is by way of a disposition (determined without reference to section 7.2 and subparagraph e of the second paragraph of section 248) by the entity of that part; and

(d)  no amount of the income or capital of the trust that an entity may receive directly from the trust at any time as a beneficiary under the trust depends on the exercise by an entity of, or the failure by an entity to exercise, a discretionary power;

“specified purchaser”, at a particular time, in respect of a taxpayer resident in Canada, means an entity that is, at that time,

(a)  the taxpayer;

(b)  an entity resident in Canada with which the taxpayer does not deal at arm’s length;

(c)  a foreign affiliate of an entity described in any of paragraphs a, b and d to f;

(d)  a trust (other than an exempt trust) in which an entity described in any of paragraphs a to c, e and f is beneficially interested;

(e)  a partnership of which an entity described in any of paragraphs a to d and f is a member; or

(f)  an entity (other than an entity described in any of paragraphs a to e) with which an entity described in any of those paragraphs does not deal at arm’s length.

2010, c. 25, s. 44.