I-3 - Taxation Act

Section 785.2.3 Disposition versions

2009-05-15

785.2.3. If an individual, other than a trust, becomes resident in Canada at a particular time in a taxation year, owns at the particular time a property that the individual last acquired on a trust distribution to which section 688 would, but for section 692, have applied and at a time (in this section referred to as the “distribution time”) that was after 1 October 1996 and before the particular time, and was a beneficiary under the trust at the last time, before the particular time, at which the individual ceased to be resident in Canada, the following rules apply:

(a)  subject to subparagraphs b and c, section 688.1 does not apply to the distribution in relation to all properties acquired by the individual at the distribution time that were taxable Canadian properties of the individual throughout the period that began at the distribution time and that ends at the particular time, if the individual and the trust make, in relation to the distribution, a valid election under paragraph d of subsection 7 of section 128.1 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) after 19 December 2006 in respect of all the properties;

(b)  if the application of section 238.4 would reduce the amount that would, but for that section and this section, have been the individual’s loss from the disposition of a property in respect of which an election referred to in subparagraph a is made, subparagraph c applies in respect of the individual, the trust and the property, if the individual

i.  had been resident in Canada at the distribution time,

ii.  had acquired the property at the distribution time at a cost equal to its fair market value at that time,

iii.  had ceased to be resident in Canada immediately after the distribution time, and

iv.  had, immediately before the particular time, disposed of the property for proceeds of disposition equal to its fair market value immediately before that time;

(c)  if this subparagraph applies in respect of an individual, a trust and a property, the following rules apply:

i.  despite subparagraph a of the first paragraph of section 688.1, the trust is deemed to have disposed of the property at the distribution time for proceeds of disposition equal to the aggregate of

(1)  the cost amount to the trust of the property immediately before the distribution time, and

(2)  the amount, if any, by which the reduction under section 238.4 described in subparagraph b exceeds the lesser of the cost amount to the trust of the property immediately before the distribution time and the particular amount, if any, which the individual and the trust specify in respect of the property, in accordance with subclause II of clause B of subparagraph i of paragraph f of subsection 7 of section 128.1 of the Income Tax Act, in the election referred to in subparagraph a for the purposes of that paragraph f, and

ii.  despite subparagraph b of the first paragraph of section 688.1, the individual is deemed to have acquired the property at the distribution time at a cost equal to the amount, if any, by which the amount otherwise determined under subparagraph b of the first paragraph of section 688 exceeds the lesser of the reduction under section 238.4 described in subparagraph b and the particular amount referred to in subparagraph 2 of subparagraph i;

(d)  despite subparagraphs a and b of the first paragraph of section 688.1, if the individual and the trust make a valid election under paragraph g of subsection 7 of section 128.1 of the Income Tax Act after 19 December 2006 in respect of each property that the individual owned throughout the period that began at the distribution time and that ends at the particular time and that is deemed by paragraph b of section 785.1 to have been disposed of because the individual became resident in Canada, the trust’s proceeds of disposition of the property under subparagraph a of the first paragraph of section 688.1 at the distribution time, and the individual’s cost of acquiring the property at the particular time, are deemed to be those proceeds and that cost, determined without reference to this subparagraph, minus the least of

i.  the amount that would, but for this subparagraph d, have been the trust’s gain from the disposition of the property deemed by subparagraph a of the first paragraph of section 688.1 to have occurred,

ii.  the fair market value of the property at the particular time, and

iii.  the amount that the individual and the trust specify, in accordance with subparagraph iii of paragraph g of subsection 7 of section 128.1 of the Income Tax Act, in the election for the purposes of that paragraph g;

(e)  if the trust ceases to exist before the individual’s filing-due date for the individual’s taxation year that includes the particular time and if, in accordance with subparagraph i of paragraph h of subsection 7 of section 128.1 of the Income Tax Act, the individual makes an election or specifies an amount, after 19 December 2006, in accordance with that subsection 7, the individual and the trust are solidarily liable for any amount payable under this Part by the trust as a result of the election or specification; and

(f)  despite sections 1010 to 1011, such assessment of tax payable under this Part by the trust or the individual for any year that is before the year that includes the particular time and that is not before the year that includes the distribution time shall be made by the Minister as is necessary to give effect to an election referred to in this paragraph, except that such assessments are not to affect the computation of

i.  interest payable under this Part to or by the trust or the individual in respect of any period that is before the individual’s filing-due date for the taxation year that includes the particular time, or

ii.  any penalty payable under this Part.

Chapter V.2 of Title II of Book I applies in relation to an election made under subsection 7 of section 128.1 of the Income Tax Act or in relation to an election made under this section before 20 December 2006.

2004, c. 8, s. 156; 2009, c. 5, s. 339.

2006-03-01

785.2.3. Where an individual, other than a trust, becomes resident in Canada at a particular time in a taxation year, owns at the particular time a property that the individual last acquired on a trust distribution to which section 688 would, but for section 692, have applied and at a time, in this section referred to as the “distribution time”, that was after 1 October 1996 and before the particular time, and was a beneficiary of the trust at the last time, before the particular time, at which the individual ceased to be resident in Canada, the following rules apply:

(a)  subject to paragraphs b and c, if the individual and the trust jointly so elect by notifying the Minister in writing on or before the earlier of their filing-due dates for their taxation years that include the particular time, section 688.1 does not apply to the distribution in relation to all properties acquired by the individual at the distribution time that were taxable Canadian properties of the individual throughout the period that began at the distribution time and that ends at the particular time;

(b)  where the application of section 238.4 would reduce the amount that would, but for that section and this section, have been the individual’s loss from the disposition of a property in respect of which an election under paragraph a is made, paragraph c applies in respect of the individual, the trust and the property, if the individual

i.  had been resident in Canada at the distribution time,

ii.  had acquired the property at the distribution time at a cost equal to its fair market value at that time,

iii.  had ceased to be resident in Canada immediately after the distribution time, and

iv.  had, immediately before the particular time, disposed of the property for proceeds of disposition equal to its fair market value immediately before that time;

(c)  where this paragraph applies in respect of an individual, a trust and a property, the following rules apply:

i.  notwithstanding paragraph a of section 688.1, the trust is deemed to have disposed of the property at the distribution time for proceeds of disposition equal to the aggregate of

(1)  the cost amount to the trust of the property immediately before the distribution time, and

(2)  the amount, if any, by which the reduction under section 238.4 described in paragraph b exceeds the lesser of the cost amount to the trust of the property immediately before the distribution time and the amount, if any, which the individual and the trust specify for the purposes of this paragraph in the joint election made in respect of the property under paragraph a, and

ii.  notwithstanding paragraph b of section 688.1, the individual is deemed to have acquired the property at the distribution time at a cost equal to the amount, if any, by which the amount otherwise determined under paragraph b of section 688 exceeds the lesser of the reduction under section 238.4 described in paragraph b and the amount specified in accordance with subparagraph 2 of subparagraph i;

(d)  notwithstanding paragraphs a and b of section 688.1, if the individual and the trust jointly so elect by notifying the Minister in writing on or before the earlier of their filing-due dates for their taxation years that include the particular time, in respect of each property that the individual owned throughout the period that began at the distribution time and that ends at the particular time and that is deemed by paragraph b of section 785.1 to have been disposed of because the individual became resident in Canada, the trust’s proceeds of disposition of the property under paragraph a of section 688.1 at the distribution time, and the individual’s cost of acquiring the property at the particular time, are deemed to be those proceeds and that cost, determined without reference to this paragraph, minus the least of

i.  the amount that would, but for this paragraph, have been the trust’s gain from the disposition of the property deemed by paragraph a of section 688.1 to have occurred,

ii.  the fair market value of the property at the particular time, and

iii.  the amount that the individual and the trust specify in the joint election made for the purposes of this paragraph;

(e)  if the trust ceases to exist before the individual’s filing-due date for the individual’s taxation year that includes the particular time,

i.  an election or specification described in this section may be made by the individual alone by notifying the Minister in writing on or before that filing-due date, and

ii.  if the individual alone makes such an election or specification, the individual and the trust are solidarily liable for any amount payable under this Part by the trust as a result of the election or specification; and

(f)  notwithstanding sections 1010 to 1011, such assessment of tax payable under this Part by the trust or the individual for any year that is before the year that includes the particular time and that is not before the year that includes the distribution time shall be made by the Minister as is necessary to give effect to an election under this section, except that no such assessment shall affect the computation of

i.  interest payable under this Part to or by the trust or the individual in respect of any period that is before the individual’s filing-due date for the taxation year that includes the particular time, or

ii.  any penalty payable under this Part.

2004, c. 8, s. 156.