I-3 - Taxation Act

Section 688.1 Disposition versions

2023-09-26

688.1. Where at a particular time a property of a trust is distributed by the trust to a beneficiary under the trust, there would, if this Part were read without reference to subparagraphs d and e of the second paragraph of section 248, be a resulting disposition of all or any part of the beneficiary’s capital interest in the trust, in this section referred to as the “former interest”, and the rules in Title I.2 of Book VI and in sections 569.0.2, 688 and 688.4 do not apply in respect of the distribution, the following rules apply:

(a)  the trust is deemed to dispose of the property for proceeds of disposition equal to its fair market value at that time;

(b)  the beneficiary is deemed to acquire the property at a cost equal to the proceeds referred to in subparagraph a;

(c)  unless the trust is a mutual fund trust, the beneficiary’s proceeds of disposition of the portion of the former interest disposed of by the beneficiary on the distribution are deemed to be equal to the amount by which the proceeds referred to in subparagraph a, other than the portion of the proceeds that is a payment to which subparagraph d or e of the second paragraph of section 248 applies, exceed the amount determined under the second paragraph;

(d)  notwithstanding subparagraphs a to c, where the trust is not resident in Canada at that time, the property is not described in subparagraph b or c of the first paragraph of section 688.0.0.1 and, but for this subparagraph, there would be no income, loss, taxable capital gain or allowable capital loss of a taxpayer in respect of the property by reason of the application of section 467 to the disposition at that time of the property, the following rules apply:

i.  the trust is deemed to dispose of the property for proceeds of disposition equal to the cost amount of the property,

ii.  the beneficiary is deemed to acquire the property at a cost equal to the fair market value of the property, and

iii.  the beneficiary’s proceeds of disposition of the portion of the former interest disposed of by the beneficiary on the distribution are deemed to be equal to the amount by which the fair market value of the property exceeds the aggregate of

(1)  the portion of the amount of the distribution that is a payment to which subparagraph d or e of the second paragraph of section 248 applies, and

(2)  the aggregate of all amounts each of which is an eligible offset at that time of the taxpayer in respect of the former interest; and

(e)  where the trust is a mutual fund trust, the distribution occurs in a taxation year of the trust before its taxation year 2003, the trust has elected under section 688.1.1 for the year and the trust so elects in respect of the distribution in prescribed form filed with the Minister with the trust’s fiscal return for the year, the following rules apply:

i.  this section shall be read without reference to subparagraph c and the second paragraph, and

ii.  the beneficiary’s proceeds of disposition of the portion of the former interest disposed of by the beneficiary on the distribution are deemed to be equal to the amount determined under subparagraph a.

The amount to which subparagraph c of the first paragraph refers is equal to the aggregate of

(a)  where the property referred to in the first paragraph is not a Canadian resource property or foreign resource property, an amount equal to the amount by which the fair market value of the property at the time referred to in that first paragraph exceeds the aggregate of

i.  the cost amount to the trust of the property immediately before that time, and

ii.  the portion, if any, of the excess that would be determined under this subparagraph a if it were read without reference to this subparagraph that is a payment to which subparagraph d or e of the second paragraph of section 248 applies; and

(b)  the aggregate of all amounts each of which is an eligible offset at that time of the beneficiary in respect of the former interest.

1990, c. 59, s. 243; 2000, c. 5, s. 149; 2001, c. 7, s. 75; 2003, c. 2, s. 175; 2009, c. 5, s. 220; 2010, c. 25, s. 53; 2023, c. 19, s. 39.

2010-10-27

688.1. Where at a particular time a property of a trust is distributed by the trust to a beneficiary under the trust, there would, if this Part were read without reference to subparagraphs d and e of the second paragraph of section 248, be a resulting disposition of all or any part of the beneficiary’s capital interest in the trust, in this section referred to as the “former interest”, and the rules in Title I.2 of Book VI and in sections 569.0.2, 688 and 688.4 do not apply in respect of the distribution, the following rules apply:

(a)  the trust is deemed to dispose of the property for proceeds of disposition equal to its fair market value at that time;

(b)  the beneficiary is deemed to acquire the property at a cost equal to the proceeds referred to in subparagraph a;

(c)  subject to subparagraph e, the beneficiary’s proceeds of disposition of the portion of the former interest disposed of by the beneficiary on the distribution are deemed to be equal to the amount by which the proceeds referred to in subparagraph a, other than the portion of the proceeds that is a payment to which subparagraph d or e of the second paragraph of section 248 applies, exceed the amount determined under the second paragraph;

(d)  notwithstanding subparagraphs a to c, where the trust is not resident in Canada at that time, the property is not described in subparagraph b or c of the first paragraph of section 688.0.0.1 and, but for this subparagraph, there would be no income, loss, taxable capital gain or allowable capital loss of a taxpayer in respect of the property by reason of the application of section 467 to the disposition at that time of the property, the following rules apply:

i.  the trust is deemed to dispose of the property for proceeds of disposition equal to the cost amount of the property,

ii.  the beneficiary is deemed to acquire the property at a cost equal to the fair market value of the property, and

iii.  the beneficiary’s proceeds of disposition of the portion of the former interest disposed of by the beneficiary on the distribution are deemed to be equal to the amount by which the fair market value of the property exceeds the aggregate of

(1)  the portion of the amount of the distribution that is a payment to which subparagraph d or e of the second paragraph of section 248 applies, and

(2)  the aggregate of all amounts each of which is an eligible offset at that time of the taxpayer in respect of the former interest; and

(e)  where the trust is a mutual fund trust, the distribution occurs in a taxation year of the trust before its taxation year 2003, the trust has elected under section 688.1.1 for the year and the trust so elects in respect of the distribution in prescribed form filed with the Minister with the trust’s fiscal return for the year, the following rules apply:

i.  this section shall be read without reference to subparagraph c and the second paragraph, and

ii.  the beneficiary’s proceeds of disposition of the portion of the former interest disposed of by the beneficiary on the distribution are deemed to be equal to the amount determined under subparagraph a.

The amount to which subparagraph c of the first paragraph refers is equal to the aggregate of

(a)  where the property referred to in the first paragraph is not a Canadian resource property or foreign resource property, an amount equal to the amount by which the fair market value of the property at the time referred to in that first paragraph exceeds the aggregate of

i.  the cost amount to the trust of the property immediately before that time, and

ii.  the portion, if any, of the excess that would be determined under this subparagraph a if it were read without reference to this subparagraph that is a payment to which subparagraph d or e of the second paragraph of section 248 applies; and

(b)  the aggregate of all amounts each of which is an eligible offset at that time of the beneficiary in respect of the former interest.

1990, c. 59, s. 243; 2000, c. 5, s. 149; 2001, c. 7, s. 75; 2003, c. 2, s. 175; 2009, c. 5, s. 220; 2010, c. 25, s. 53.

2009-05-15

688.1. Where at a particular time a property of a trust is distributed by the trust to a beneficiary under the trust, there would, if this Part were read without reference to subparagraphs d and e of the second paragraph of section 248, be a resulting disposition of all or any part of the beneficiary’s capital interest in the trust, in this section referred to as the “former interest”, and the rules in Title I.2 of Book VI and section 688 do not apply in respect of the distribution, the following rules apply:

(a)  the trust is deemed to dispose of the property for proceeds of disposition equal to its fair market value at that time;

(b)  the beneficiary is deemed to acquire the property at a cost equal to the proceeds referred to in subparagraph a;

(c)  subject to subparagraph e, the beneficiary’s proceeds of disposition of the portion of the former interest disposed of by the beneficiary on the distribution are deemed to be equal to the amount by which the proceeds referred to in subparagraph a, other than the portion of the proceeds that is a payment to which subparagraph d or e of the second paragraph of section 248 applies, exceed the amount determined under the second paragraph;

(d)  notwithstanding subparagraphs a to c, where the trust is not resident in Canada at that time, the property is not described in subparagraph b or c of the first paragraph of section 688.0.0.1 and, but for this subparagraph, there would be no income, loss, taxable capital gain or allowable capital loss of a taxpayer in respect of the property by reason of the application of section 467 to the disposition at that time of the property, the following rules apply:

i.  the trust is deemed to dispose of the property for proceeds of disposition equal to the cost amount of the property,

ii.  the beneficiary is deemed to acquire the property at a cost equal to the fair market value of the property, and

iii.  the beneficiary’s proceeds of disposition of the portion of the former interest disposed of by the beneficiary on the distribution are deemed to be equal to the amount by which the fair market value of the property exceeds the aggregate of

(1)  the portion of the amount of the distribution that is a payment to which subparagraph d or e of the second paragraph of section 248 applies, and

(2)  the aggregate of all amounts each of which is an eligible offset at that time of the taxpayer in respect of the former interest; and

(e)  where the trust is a mutual fund trust, the distribution occurs in a taxation year of the trust before its taxation year 2003, the trust has elected under section 688.1.1 for the year and the trust so elects in respect of the distribution in prescribed form filed with the Minister with the trust’s fiscal return for the year, the following rules apply:

i.  this section shall be read without reference to subparagraph c and the second paragraph, and

ii.  the beneficiary’s proceeds of disposition of the portion of the former interest disposed of by the beneficiary on the distribution are deemed to be equal to the amount determined under subparagraph a.

The amount to which subparagraph c of the first paragraph refers is equal to the aggregate of

(a)  where the property referred to in the first paragraph is not a Canadian resource property or foreign resource property, an amount equal to the amount by which the fair market value of the property at the time referred to in that first paragraph exceeds the aggregate of

i.  the cost amount to the trust of the property immediately before that time, and

ii.  the portion, if any, of the excess that would be determined under this subparagraph a if it were read without reference to this subparagraph that is a payment to which subparagraph d or e of the second paragraph of section 248 applies; and

(b)  the aggregate of all amounts each of which is an eligible offset at that time of the beneficiary in respect of the former interest.

1990, c. 59, s. 243; 2000, c. 5, s. 149; 2001, c. 7, s. 75; 2003, c. 2, s. 175; 2009, c. 5, s. 220.

2006-03-01

688.1. Where at a particular time a property of a trust is distributed by the trust to a beneficiary under the trust, there would, if this Part were read without reference to subparagraphs d and e of the second paragraph of section 248, be a resulting disposition of all or any part of the beneficiary’s capital interest in the trust, in this section referred to as the “former interest”, and the rules in Title I.2 of Book VI and section 688 do not apply in respect of the distribution, the following rules apply:

(a)  the trust is deemed to dispose of the property for proceeds of disposition equal to its fair market value at that time;

(b)  the beneficiary is deemed to acquire the property at a cost equal to the proceeds referred to in subparagraph a;

(c)  subject to subparagraph e, the beneficiary’s proceeds of disposition of the portion of the former interest disposed of by the beneficiary on the distribution are deemed to be equal to the amount by which the proceeds referred to in subparagraph a, other than the portion of the proceeds that is a payment to which subparagraph d or e of the second paragraph of section 248 applies, exceed the amount determined under the second paragraph;

(d)  notwithstanding subparagraphs a to c, where the trust is not resident in Canada at that time, the property is not described in paragraph b or c of section 688.0.0.1 and, but for this subparagraph, there would be no income, loss, taxable capital gain or allowable capital loss of a taxpayer in respect of the property by reason of the application of section 467 to the disposition at that time of the property, the following rules apply:

i.  the trust is deemed to dispose of the property for proceeds of disposition equal to the cost amount of the property,

ii.  the beneficiary is deemed to acquire the property at a cost equal to the fair market value of the property, and

iii.  the beneficiary’s proceeds of disposition of the portion of the former interest disposed of by the beneficiary on the distribution are deemed to be equal to the amount by which the fair market value of the property exceeds the aggregate of

(1)  the portion of the amount of the distribution that is a payment to which subparagraph d or e of the second paragraph of section 248 applies, and

(2)  the aggregate of all amounts each of which is an eligible offset at that time of the taxpayer in respect of the former interest; and

(e)  where the trust is a mutual fund trust, the distribution occurs in a taxation year of the trust before its taxation year 2003, the trust has elected under section 688.1.1 for the year and the trust so elects in respect of the distribution in prescribed form filed with the Minister with the trust’s fiscal return for the year, the following rules apply:

i.  this section shall be read without reference to subparagraph c and the second paragraph, and

ii.  the beneficiary’s proceeds of disposition of the portion of the former interest disposed of by the beneficiary on the distribution are deemed to be equal to the amount determined under subparagraph a.

The amount to which subparagraph c of the first paragraph refers is equal to the aggregate of

(a)  where the property referred to in the first paragraph is not a Canadian resource property or foreign resource property, an amount equal to the amount by which the fair market value of the property at the time referred to in that first paragraph exceeds the aggregate of

i.  the cost amount to the trust of the property immediately before that time, and

ii.  the portion, if any, of the excess that would be determined under subparagraph a if it were read without reference to this subparagraph that is a payment to which subparagraph d or e of the second paragraph of section 248 applies; and

(b)  the aggregate of all amounts each of which is an eligible offset at that time of the beneficiary in respect of the former interest.

1990, c. 59, s. 243; 2000, c. 5, s. 149; 2001, c. 7, s. 75; 2003, c. 2, s. 175.