I-3 - Taxation Act

Section 450 Disposition versions

2017-12-07

450. The rules set out in the second paragraph apply to a trust and a child of the settlor of the trust in respect of a property to which sections 653 to 656.1 would, if this Act were read without reference to this section, apply to the trust because of the death of the beneficiary under the trust who was the settlor’s spouse if

(a)  the property, or a property for which the property was substituted, was transferred to the trust by the settlor;

(b)  section 440, section 454, as that section applied in respect of a transfer that occurred before 1 January 2000, or subparagraph i of paragraph c of section 454.1 applied to the settlor and the trust in respect of the transfer referred to in subparagraph a;

(c)  the property is, immediately before the beneficiary’s death,

i.  land or a depreciable property of a prescribed class of the trust that was used in a farming or fishing business carried on in Canada,

ii.  a share of the capital stock of a Canadian corporation that would, immediately before the beneficiary’s death, be a share of the capital stock of a family farm or fishing corporation of the settlor, if the settlor owned the share at that time and subparagraph i of subparagraph a.2 of the first paragraph of section 451 were read without reference to “in which the individual or the spouse, a child or the father or mother of the individual was actively engaged on a regular and continuous basis (or, in the case of property used in the operation of a woodlot, was engaged to the extent required by a prescribed forest management plan in respect of that woodlot)”, or

iii.  (subparagraph repealed);

iv.  an interest in a partnership that carried on in Canada a farming or fishing business in which it used all or substantially all of the property;

(d)  in the case of a property referred to in subparagraph ii or iv of subparagraph c, the property, or a property for which the property was substituted, transferred to the trust by the settlor was, immediately before the transfer, a share of the capital stock of a family farm or fishing corporation of the settlor or an interest in a family farm or fishing partnership of the settlor;

(e)  the child of the settlor was resident in Canada immediately before the day on which the beneficiary died; and

(f)  because of the beneficiary’s death, the property is transferred to and becomes vested indefeasibly in the settlor’s child within the period ending 36 months after the beneficiary’s death or, if application has been made to the Minister by the beneficiary’s legal representative before the expiry of that period, within any longer period that the Minister considers reasonable.

The rules to which the first paragraph refers are the following:

(a)  if the trust does not make a valid election under paragraph b of subsection 9.11 or 9.31 of section 70 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) in the trust’s fiscal return filed under Part I of that Act for the year in which the beneficiary died, to have that paragraph b apply to the trust in respect of the property,

i.  sections 422 and 653 to 656.1 do not apply to the trust and the child in respect of the property,

ii.  the trust is deemed, immediately before the beneficiary’s death, to have disposed of the property and received, at the time and in respect of the disposition of the property, proceeds of disposition equal to the following amount, and the child is deemed, immediately after the time and in respect of the disposition of the property, to have acquired the property at a cost equal to those proceeds:

(1)  if the property is a depreciable property of a prescribed class, the lesser of the capital cost of the property to the trust and the amount, determined immediately before the time of the disposition of the property, that is equal to that proportion of the undepreciated capital cost of property of that class to the trust that the capital cost of the property to the trust is of the capital cost to the trust of all property of that class that had not, at or before that time, been disposed of, and

(2)  if the property is land, other than land to which subparagraph 1 applies, or, immediately before the beneficiary’s death, a share referred to in subparagraph ii of subparagraph c of the first paragraph, the adjusted cost base of the property to the trust immediately before the time of the disposition of the property,

iii.  if the property is, immediately before the beneficiary’s death, an interest in a partnership described in subparagraph iv of subparagraph c of the first paragraph, other than an interest to which section 636 applies, the following rules apply:

(1)  the trust is deemed, except for the purposes of section 632, not to have disposed of the property because of the beneficiary’s death,

(2)  the child is deemed to have acquired the property at the time of the beneficiary’s death at a cost equal to the cost of the interest to the trust immediately before the time that is immediately before the time of the beneficiary’s death, and

(3)  each amount required by section 255 or 257 to be added or deducted in computing the adjusted cost base of the property to the trust, immediately before the beneficiary’s death, is deemed to be an amount required by that section 255 or 257 to be added or deducted in computing, at any time at or after the beneficiary’s death, the adjusted cost base of the property to the child,

iv.  for the purposes of sections 93 to 104, Chapter III of Title III and any regulations under paragraph a of section 130 or section 130.1, if a depreciable property of a prescribed class of the trust is deemed under subparagraph ii to be acquired by the child because of the death of the beneficiary under the trust, except where the trust’s proceeds of disposition of the property determined under subparagraph ii are redetermined under sections 93.1 to 93.3, and the capital cost of the property to the trust exceeds the amount determined under subparagraph ii to be the cost of the property to the child, the following rules apply:

(1)  the capital cost of the property to the child is deemed to be equal to the capital cost of the property to the trust, and

(2)  the excess is deemed to have been allowed to the child as depreciation in respect of the property for the taxation years that ended before the acquisition, and

v.  despite subparagraph ii, if a property of the trust is deemed under subparagraph ii to be acquired by the child because of the death of the beneficiary under the trust, and the trust’s proceeds of disposition of the property determined under subparagraph ii are redetermined under sections 93.1 to 93.3, the following rules apply:

(1)  for the purposes of sections 93 to 104, Chapter III of Title III and any regulations under paragraph a of section 130 or section 130.1, if the property is a depreciable property of a prescribed class and the capital cost of the property to the trust exceeds the amount so redetermined under sections 93.1 to 93.3, the capital cost of the property to the child is deemed to be equal to the capital cost of the property to the trust, and the excess is deemed to have been allowed to the child as depreciation in respect of the property for the taxation years that ended before the acquisition, and

(2)  if the property is land, other than land to which subparagraph 1 applies, the cost of the property to the child is deemed to be equal to the trust’s proceeds of disposition of the property as redetermined under sections 93.1 to 93.3; and

(b)  if the trust makes a valid election under paragraph b of subsection 9.11 or 9.31 of section 70 of the Income Tax Act in the trust’s fiscal return filed under Part I of that Act for the year in which the beneficiary died, to have that paragraph b apply to the trust in respect of the property,

i.  subparagraph a applies without reference to its subparagraphs i, ii and iii and as if the references to that subparagraph ii in subparagraphs iv and v of that subparagraph a were read as references to subparagraph iv of this subparagraph b,

ii.  if the property is described in subparagraph i of subparagraph c of the first paragraph, sections 653 to 656.1 do not apply to the trust in respect of the property,

iii.  if the property is described in subparagraph ii or iv of subparagraph c of the first paragraph, section 422 does not apply to the trust and the child in respect of the transfer of the property and section 653 does not apply to the trust in respect of the property,

iv.  subject to subparagraph v, the trust is deemed, immediately before the beneficiary’s death, to have disposed of the property and received, at the time and in respect of the disposition, proceeds of disposition equal to

(1)  subject to the third paragraph and unless otherwise specified by the trust, the amount established in accordance with section 450.5 that is designated in respect of the property by the trust in the trust’s fiscal return filed in accordance with section 1000 for the year in which the beneficiary under the trust died, if the trust and the child, at the end of their respective taxation year in which the death occurred, were resident in Québec and the proportion determined under the second paragraph of section 22, in respect of each of those two latter persons to whom that second paragraph applies for the year in which the beneficiary under the trust died, was not less than 9/10 for that year, or

(2)  the amount that is determined in respect of the property under paragraph b of that subsection 9.11 or 9.31, if subparagraph 1 does not apply in respect of the property,

v.  subparagraph iii of subparagraph a applies in respect of a property described in that subparagraph iii, if the trust makes another valid election under subparagraph iii of paragraph b of subsection 9.31 of section 70 of the Income Tax Act in the trust’s fiscal return filed under Part I of that Act for the year in which the beneficiary died, to have that subparagraph iii of paragraph b apply to the trust in respect of the property, and

vi.  the child is deemed to have acquired the property

(1)  immediately after the time of the disposition of the property and at a cost equal to the proceeds of disposition established in respect of the property under subparagraph iv, or

(2)  if subparagraph v applies, at the time of the beneficiary’s death and at a cost equal to the cost of the interest to the trust immediately before the time that is immediately before the time of the beneficiary’s death.

However, subparagraph 1 of subparagraph iv of subparagraph b of the second paragraph does not apply in respect of the property unless all or substantially all of the difference between the amount that would, but for that subparagraph 1, be referred to in respect of the property in subparagraph 2 of that subparagraph iv and the amount designated in its respect in that subparagraph 1, is justified by a difference between the cost amount of the property to the trust, immediately before the beneficiary’s death, for the purposes of Part I of the Income Tax Act and the cost amount, at that time, for the purposes of this Part, or by another reason considered by the Minister to be acceptable in the circumstances.

On application by the trust, the Minister may allow subparagraph 1 of subparagraph iv of subparagraph b of the second paragraph to be deemed not to have applied in respect of the property, or may allow the trust, after the trust’s filing-due date for the year in which the spouse died, to designate pursuant to that subparagraph i an amount or a new amount in respect of the property; in the latter case, the new amount designated is deemed to be the only amount designated by the trust under that subparagraph in respect of the property.

Where an application made under the fourth paragraph is granted by the Minister, the trust incurs a penalty equal to $100 for each complete month from the trust’s filing-due date for the year in which the spouse died and ending on the day on which the application referred to in that paragraph is sent to the Minister; in such case, this paragraph is deemed not to apply in respect of any other such application made previously by the trust in respect of the transfer of the property.

Where, in respect of the property and by virtue of subsection 3.2 of section 220 of the Income Tax Act, the time for making the election under paragraph b of subsection 9.11 or 9.31 of section 70 of that Act is extended or such an election made previously is amended or rescinded, the trust

(a)  shall notify the Minister in writing and attach to the notice a copy of the document to that effect sent by the trust to the Minister of Revenue of Canada; and

(b)  incurs a penalty equal to $100 for each complete month from the trust’s filing-due date for the year in which the spouse died and ending on the day on which the notice referred to in subparagraph a is sent to the Minister.

However, the total amount of the penalties that the trust incurs under this section in respect of the property may not exceed the greater of the penalties that the trust would otherwise incur in respect of the property, under the fifth paragraph or subparagraph b of the sixth paragraph nor $5,000.

Notwithstanding sections 1010 to 1011, such assessments of tax, interest and penalties under this Part shall be made as are necessary by the Minister for any taxation year to take into account the granting by the Minister of an application made under the fourth paragraph, or the election or the amended or rescinded election referred to in the sixth paragraph.

1975, c. 22, s. 100; 1979, c. 18, s. 32; 1986, c. 15, s. 82; 1986, c. 19, s. 102; 1993, c. 16, s. 185; 1994, c. 22, s. 177; 1995, c. 49, s. 128; 1997, c. 3, s. 71; 1997, c. 85, s. 73; 2000, c. 5, s. 293; 2002, c. 40, s. 37; 2003, c. 2, s. 120; 2004, c. 8, s. 93; 2007, c. 12, s. 58; 2009, c. 5, s. 151; 2017, c. 29, s. 65.

2009-05-15

450. The rules set out in the second paragraph apply to a trust and a child of the settlor of the trust in respect of a property to which sections 653 to 656.1 would, if this Act were read without reference to this section, apply to the trust because of the death of the beneficiary under the trust who was the settlor’s spouse if

(a)  the property, or a property for which the property was substituted, was transferred to the trust by the settlor;

(b)  section 440, section 454, as that section applied in respect of a transfer that occurred before 1 January 2000, or subparagraph i of paragraph c of section 454.1 applied to the settlor and the trust in respect of the transfer referred to in subparagraph a;

(c)  the property is, immediately before the beneficiary’s death,

i.  land or a depreciable property of a prescribed class of the trust that was used in a fishing or farming business carried on in Canada,

ii.  a share of the capital stock of a Canadian corporation that would, immediately before the beneficiary’s death, be a share of the capital stock of a family farm corporation of the settlor, if the settlor owned the share at that time and subparagraph i of subparagraph a of the first paragraph of section 451 were read without reference to “in which the individual or a spouse, a child or the father or mother of the individual was actively engaged on a regular and continuous basis or, in the case of property used in the operation of a woodlot, was engaged to the extent required by a prescribed forest management plan in respect of that woodlot”,

iii.  a share of the capital stock of a Canadian corporation that would, immediately before the beneficiary’s death, be a share of the capital stock of a family fishing corporation of the settlor, if the settlor owned the share at that time and subparagraph i of subparagraph a.1 of the first paragraph of section 451 were read without reference to “in which the individual or the spouse, a child or the father or mother of the individual was actively engaged on a regular and continuous basis”, or

iv.  an interest in a partnership that carried on a fishing or farming business in Canada in which it used all or substantially all of the property;

(d)  in the case of a property referred to in any of subparagraphs ii to iv of subparagraph c, the property, or a property for which the property was substituted, transferred to the trust by the settlor was, immediately before the transfer, a share of the capital stock of a family farm corporation of the settlor, a share of the capital stock of a family fishing corporation of the settlor, an interest in a family farm partnership of the settlor or an interest in a family fishing partnership of the settlor;

(e)  the child of the settlor was resident in Canada immediately before the day on which the beneficiary died; and

(f)  because of the beneficiary’s death, the property is transferred to and becomes vested indefeasibly in the settlor’s child within the period ending 36 months after the beneficiary’s death or, if application has been made to the Minister by the beneficiary’s legal representative before the expiry of that period, within any longer period that the Minister considers reasonable.

The rules to which the first paragraph refers are the following:

(a)  if the trust does not make a valid election under paragraph b of subsection 9.11 or 9.31 of section 70 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) in the trust’s fiscal return filed under Part I of that Act for the year in which the beneficiary died, to have that paragraph b apply to the trust in respect of the property,

i.  sections 422 and 653 to 656.1 do not apply to the trust and the child in respect of the property,

ii.  the trust is deemed, immediately before the beneficiary’s death, to have disposed of the property and received, at the time and in respect of the disposition of the property, proceeds of disposition equal to the following amount, and the child is deemed, immediately after the time and in respect of the disposition of the property, to have acquired the property at a cost equal to those proceeds:

(1)  if the property is a depreciable property of a prescribed class, the lesser of the capital cost of the property to the trust and the amount, determined immediately before the time of the disposition of the property, that is equal to that proportion of the undepreciated capital cost of property of that class to the trust that the capital cost of the property to the trust is of the capital cost to the trust of all property of that class that had not, at or before that time, been disposed of, and

(2)  if the property is land, other than land to which subparagraph 1 applies, or, immediately before the beneficiary’s death, a share referred to in subparagraph ii or iii of subparagraph c of the first paragraph, the adjusted cost base of the property to the trust immediately before the time of the disposition of the property,

iii.  if the property is, immediately before the beneficiary’s death, an interest in a partnership described in subparagraph iv of subparagraph c of the first paragraph, other than an interest to which section 636 applies, the following rules apply:

(1)  the trust is deemed, except for the purposes of section 632, not to have disposed of the property because of the beneficiary’s death,

(2)  the child is deemed to have acquired the property at the time of the beneficiary’s death at a cost equal to the cost of the interest to the trust immediately before the time that is immediately before the time of the beneficiary’s death, and

(3)  each amount required by section 255 or 257 to be added or deducted in computing the adjusted cost base of the property to the trust, immediately before the beneficiary’s death, is deemed to be an amount required by that section 255 or 257 to be added or deducted in computing, at any time at or after the beneficiary’s death, the adjusted cost base of the property to the child,

iv.  for the purposes of sections 93 to 104, Chapter III of Title III and any regulations under paragraph a of section 130 or section 130.1, if a depreciable property of a prescribed class of the trust is deemed under subparagraph ii to be acquired by the child because of the death of the beneficiary under the trust, except where the trust’s proceeds of disposition of the property determined under subparagraph ii are redetermined under sections 93.1 to 93.3, and the capital cost of the property to the trust exceeds the amount determined under subparagraph ii to be the cost of the property to the child, the following rules apply:

(1)  the capital cost of the property to the child is deemed to be equal to the capital cost of the property to the trust, and

(2)  the excess is deemed to have been allowed to the child as depreciation in respect of the property for the taxation years that ended before the acquisition, and

v.  despite subparagraph ii, if a property of the trust is deemed under subparagraph ii to be acquired by the child because of the death of the beneficiary under the trust, and the trust’s proceeds of disposition of the property determined under subparagraph ii are redetermined under sections 93.1 to 93.3, the following rules apply:

(1)  for the purposes of sections 93 to 104, Chapter III of Title III and any regulations under paragraph a of section 130 or section 130.1, if the property is a depreciable property of a prescribed class and the capital cost of the property to the trust exceeds the amount so redetermined under sections 93.1 to 93.3, the capital cost of the property to the child is deemed to be equal to the capital cost of the property to the trust, and the excess is deemed to have been allowed to the child as depreciation in respect of the property for the taxation years that ended before the acquisition, and

(2)  if the property is land, other than land to which subparagraph 1 applies, the cost of the property to the child is deemed to be equal to the trust’s proceeds of disposition of the property as redetermined under sections 93.1 to 93.3; and

(b)  if the trust makes a valid election under paragraph b of subsection 9.11 or 9.31 of section 70 of the Income Tax Act in the trust’s fiscal return filed under Part I of that Act for the year in which the beneficiary died, to have that paragraph b apply to the trust in respect of the property,

i.  subparagraph a applies without reference to its subparagraphs i, ii and iii and as if the references to that subparagraph ii in subparagraphs iv and v of that subparagraph a were read as references to subparagraph iv of this subparagraph b,

ii.  if the property is described in subparagraph i of subparagraph c of the first paragraph, sections 653 to 656.1 do not apply to the trust in respect of the property,

iii.  if the property is described in any of subparagraphs ii to iv of subparagraph c of the first paragraph, section 422 does not apply to the trust and the child in respect of the transfer of the property and section 653 does not apply to the trust in respect of the property,

iv.  subject to subparagraph v, the trust is deemed, immediately before the beneficiary’s death, to have disposed of the property and received, at the time and in respect of the disposition, proceeds of disposition equal to

(1)  subject to the third paragraph and unless otherwise specified by the trust, the amount established in accordance with section 450.5 that is designated in respect of the property by the trust in the trust’s fiscal return filed in accordance with section 1000 for the year in which the beneficiary under the trust died, if the trust and the child, at the end of their respective taxation year in which the death occurred, were resident in Québec and the proportion determined under the second paragraph of section 22, in respect of each of those two latter persons to whom that second paragraph applies for the year in which the beneficiary under the trust died, was not less than 9/10 for that year, or

(2)  the amount that is determined in respect of the property under paragraph b of that subsection 9.11 or 9.31, if subparagraph 1 does not apply in respect of the property,

v.  subparagraph iii of subparagraph a applies in respect of a property described in that subparagraph iii, if the trust makes another valid election under subparagraph iii of paragraph b of subsection 9.31 of section 70 of the Income Tax Act in the trust’s fiscal return filed under Part I of that Act for the year in which the beneficiary died, to have that subparagraph iii of paragraph b apply to the trust in respect of the property, and

vi.  the child is deemed to have acquired the property

(1)  immediately after the time of the disposition of the property and at a cost equal to the proceeds of disposition established in respect of the property under subparagraph iv, or

(2)  if subparagraph v applies, at the time of the beneficiary’s death and at a cost equal to the cost of the interest to the trust immediately before the time that is immediately before the time of the beneficiary’s death.

However, subparagraph 1 of subparagraph iv of subparagraph b of the second paragraph does not apply in respect of the property unless all or substantially all of the difference between the amount that would, but for that subparagraph 1, be referred to in respect of the property in subparagraph 2 of that subparagraph iv and the amount designated in its respect in that subparagraph 1, is justified by a difference between the cost amount of the property to the trust, immediately before the beneficiary’s death, for the purposes of Part I of the Income Tax Act and the cost amount, at that time, for the purposes of this Part, or by another reason considered by the Minister to be acceptable in the circumstances.

On application by the trust, the Minister may allow subparagraph 1 of subparagraph iv of subparagraph b of the second paragraph to be deemed not to have applied in respect of the property, or may allow the trust, after the trust’s filing-due date for the year in which the spouse died, to designate pursuant to that subparagraph i an amount or a new amount in respect of the property; in the latter case, the new amount designated is deemed to be the only amount designated by the trust under that subparagraph in respect of the property.

Where an application made under the fourth paragraph is granted by the Minister, the trust incurs a penalty equal to $100 for each complete month from the trust’s filing-due date for the year in which the spouse died and ending on the day on which the application referred to in that paragraph is sent to the Minister; in such case, this paragraph is deemed not to apply in respect of any other such application made previously by the trust in respect of the transfer of the property.

Where, in respect of the property and by virtue of subsection 3.2 of section 220 of the Income Tax Act, the time for making the election under paragraph b of subsection 9.11 or 9.31 of section 70 of that Act is extended or such an election made previously is amended or rescinded, the trust

(a)  shall notify the Minister in writing and attach to the notice a copy of the document to that effect sent by the trust to the Minister of Revenue of Canada; and

(b)  incurs a penalty equal to $100 for each complete month from the trust’s filing-due date for the year in which the spouse died and ending on the day on which the notice referred to in subparagraph a is sent to the Minister.

However, the total amount of the penalties that the trust incurs under this section in respect of the property may not exceed the greater of the penalties that the trust would otherwise incur in respect of the property, under the fifth paragraph or subparagraph b of the sixth paragraph nor $5,000.

Notwithstanding sections 1010 to 1011, such assessments of tax, interest and penalties under this Part shall be made as are necessary by the Minister for any taxation year to take into account the granting by the Minister of an application made under the fourth paragraph, or the election or the amended or rescinded election referred to in the sixth paragraph.

1975, c. 22, s. 100; 1979, c. 18, s. 32; 1986, c. 15, s. 82; 1986, c. 19, s. 102; 1993, c. 16, s. 185; 1994, c. 22, s. 177; 1995, c. 49, s. 128; 1997, c. 3, s. 71; 1997, c. 85, s. 73; 2000, c. 5, s. 293; 2002, c. 40, s. 37; 2003, c. 2, s. 120; 2004, c. 8, s. 93; 2007, c. 12, s. 58; 2009, c. 5, s. 151.

2007-11-07

450. The rules set out in the second paragraph apply to a trust and a child of the settlor of the trust in respect of a property to which sections 653 to 656.1 would, if this Act were read without reference to this section, apply to the trust because of the death of the beneficiary under the trust who was the settlor’s spouse if

(a)  the property, or a property for which the property was substituted, was transferred to the trust by the settlor;

(b)  section 440, section 454, as that section applied in respect of a transfer that occurred before 1 January 2000, or subparagraph i of paragraph c of section 454.1 applied to the settlor and the trust in respect of the transfer referred to in subparagraph a;

(c)  the property is, immediately before the beneficiary’s death,

i.  land or a depreciable property of a prescribed class of the trust that was used in a fishing or farming business carried on in Canada,

ii.  a share of the capital stock of a Canadian corporation that would, immediately before the beneficiary’s death, be a share of the capital stock of a family farm corporation of the settlor, if the settlor owned the share at that time and subparagraph i of subparagraph a of the first paragraph of section 451 were read without reference to “in which the individual or a spouse, a child or the father or mother of the individual was actively engaged on a regular and continuous basis or, in the case of property used in the operation of a woodlot, was engaged to the extent required by a prescribed forest management plan in respect of that woodlot”,

iii.  a share of the capital stock of a Canadian corporation that would, immediately before the beneficiary’s death, be a share of the capital stock of a family fishing corporation of the settlor, if the settlor owned the share at that time and subparagraph i of subparagraph a.1 of the first paragraph of section 451 were read without reference to “in which the individual or the spouse, a child or the father or mother of the individual was actively engaged on a regular and continuous basis”, or

iv.  an interest in a partnership that carried on a fishing or farming business in Canada in which it used all or substantially all of the property;

(d)  in the case of a property referred to in any of subparagraphs ii to iv of subparagraph c, the property, or a property for which the property was substituted, transferred to the trust by the settlor was, immediately before the transfer, a share of the capital stock of a family farm corporation of the settlor, a share of the capital stock of a family fishing corporation of the settlor, an interest in a family farm partnership of the settlor or an interest in a family fishing partnership of the settlor;

(e)  the child of the settlor was resident in Canada immediately before the day on which the beneficiary died; and

(f)  because of the beneficiary’s death, the property is transferred to and becomes vested indefeasibly in the settlor’s child within the period ending 36 months after the beneficiary’s death or, if application has been made to the Minister by the beneficiary’s legal representative before the expiry of that period, within any longer period that the Minister considers reasonable.

The rules to which the first paragraph refers are the following:

(a)  if the trust does not make a valid election under paragraph b of subsection 9.11 or 9.31 of section 70 of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement) in the trust’s fiscal return filed under Part I of that Act for the year in which the beneficiary died, to have that paragraph b apply to the trust in respect of the property,

i.  sections 422 and 653 to 656.1 do not apply to the trust and the child in respect of the property,

ii.  the trust is deemed, immediately before the beneficiary’s death, to have disposed of the property and received, at the time and in respect of the disposition of the property, proceeds of disposition equal to the following amount, and the child is deemed, immediately after the time and in respect of the disposition of the property, to have acquired the property at a cost equal to those proceeds:

(1)  if the property is a depreciable property of a prescribed class, the lesser of the capital cost of the property to the trust and the amount, determined immediately before the time of the disposition of the property, that is equal to that proportion of the undepreciated capital cost of property of that class to the trust that the capital cost of the property to the trust is of the capital cost to the trust of all property of that class that had not, at or before that time, been disposed of, and

(2)  if the property is land, other than land to which subparagraph 1 applies, or, immediately before the beneficiary’s death, a share referred to in subparagraph ii or iii of subparagraph c of the first paragraph, the adjusted cost base of the property to the trust immediately before the time of the disposition of the property,

iii.  if the property is, immediately before the beneficiary’s death, an interest in a partnership described in subparagraph iv of subparagraph c of the first paragraph, other than an interest to which section 636 applies, the following rules apply:

(1)  the trust is deemed, except for the purposes of section 632, not to have disposed of the property because of the beneficiary’s death,

(2)  the child is deemed to have acquired the property at the time of the beneficiary’s death at a cost equal to the cost of the interest to the trust immediately before the time that is immediately before the time of the beneficiary’s death, and

(3)  each amount required by section 255 or 257 to be added or deducted in computing the adjusted cost base of the property to the trust, immediately before the beneficiary’s death, is deemed to be an amount required by that section 255 or 257 to be added or deducted in computing, at any time at or after the beneficiary’s death, the adjusted cost base of the property to the child,

iv.  for the purposes of sections 93 to 104, Chapter III of Title III and any regulations under paragraph a of section 130 or section 130.1, if a depreciable property of a prescribed class of the trust is deemed under subparagraph ii to be acquired by the child because of the death of the beneficiary under the trust, except where the trust’s proceeds of disposition of the property determined under subparagraph ii are redetermined under sections 93.1 to 93.3, and the capital cost of the property to the trust exceeds the amount determined under subparagraph ii to be the cost of the property to the child, the following rules apply:

(1)  the capital cost of the property to the child is deemed to be equal to the capital cost of the property to the trust, and

(2)  the excess is deemed to have been allowed to the child as depreciation in respect of the property for the taxation years that ended before the acquisition, and

v.  despite subparagraph ii, if a property of the trust is deemed under subparagraph ii to be acquired by the child because of the death of the beneficiary under the trust, and the trust’s proceeds of disposition of the property determined under subparagraph ii are redetermined under sections 93.1 to 93.3, the following rules apply:

(1)  for the purposes of sections 93 to 104, Chapter III of Title III and any regulations under paragraph a of section 130 or section 130.1, if the property is a depreciable property of a prescribed class and the capital cost of the property to the trust exceeds the amount so redetermined under sections 93.1 to 93.3, the capital cost of the property to the child is deemed to be equal to the capital cost of the property to the trust, and the excess is deemed to have been allowed to the child as depreciation in respect of the property for the taxation years that ended before the acquisition, and

(2)  if the property is land, other than land to which subparagraph 1 applies, the cost of the property to the child is deemed to be equal to the trust’s proceeds of disposition of the property as redetermined under sections 93.1 to 93.3; and

(b)  if the trust makes a valid election under paragraph b of subsection 9.11 or 9.31 of section 70 of the Income Tax Act in the trust’s fiscal return filed under Part I of that Act for the year in which the beneficiary died, to have that paragraph b apply to the trust in respect of the property,

i.  subparagraph a applies without reference to its subparagraphs i, ii and iii and as if the references to that subparagraph ii in subparagraphs iv and v of that subparagraph a were read as references to subparagraph iv of this subparagraph b,

ii.  if the property is described in subparagraph i of subparagraph c of the first paragraph, sections 653 to 656.1 do not apply to the trust in respect of the property,

iii.  if the property is described in any of subparagraphs ii to iv of subparagraph c of the first paragraph, section 422 does not apply to the trust and the child in respect of the transfer of the property and section 653 does not apply to the trust in respect of the property,

iv.  subject to subparagraph v, the trust is deemed, immediately before the beneficiary’s death, to have disposed of the property and received, at the time and in respect of the disposition, proceeds of disposition equal to

(1)  subject to the third paragraph and unless otherwise specified by the trust, the amount established in accordance with section 450.5 that is designated in respect of the property by the trust in the trust’s fiscal return filed in accordance with section 1000 for the year in which the beneficiary under the trust died, if the trust and the child, at the end of their respective taxation year in which the death occurred, were resident in Québec and the proportion determined under the second paragraph of section 22, in respect of each of those two latter persons to whom that second paragraph applies for the year in which the beneficiary under the trust died, was not less than 9/10 for that year, or

(2)  the amount that is determined in respect of the property under paragraph b of that subsection 9.11 or 9.31, if subparagraph 1 does not apply in respect of the property,

v.  subparagraph iii of subparagraph a applies in respect of a property described in that subparagraph iii, if the trust makes another valid election under subparagraph iii of paragraph b of subsection 9.31 of section 70 of the Income Tax Act in the trust’s fiscal return filed under Part I of that Act for the year in which the beneficiary died, to have that subparagraph iii of paragraph b apply to the trust in respect of the property, and

vi.  the child is deemed to have acquired the property

(1)  immediately after the time of the disposition of the property and at a cost equal to the proceeds of disposition established in respect of the property under subparagraph iv, or

(2)  if subparagraph v applies, at the time of the beneficiary’s death and at a cost equal to the cost of the interest to the trust immediately before the time that is immediately before the time of the beneficiary’s death.

However, subparagraph 1 of subparagraph iv of subparagraph b of the second paragraph does not apply in respect of the property unless all or substantially all of the difference between the amount that would, but for that subparagraph 1, be referred to in respect of the property in subparagraph 2 of that subparagraph iv and the amount designated in its respect in that subparagraph 1, is justified by a difference between the cost amount of the property to the trust, immediately before the beneficiary’s death, for the purposes of Part I of the Income Tax Act and the cost amount, at that time, for the purposes of this Part, or by another reason considered by the Minister to be acceptable in the circumstances.

On application by the trust, the Minister may allow subparagraph 1 of subparagraph iv of subparagraph b of the second paragraph to be deemed not to have applied in respect of the property, or may allow the trust, after the trust’s filing-due date for the year in which the spouse died, to designate pursuant to that subparagraph i an amount or a new amount in respect of the property; in the latter case, the new amount designated is deemed to be the only amount designated by the trust under that subparagraph in respect of the property.

Where an application made under the fourth paragraph is granted by the Minister, the trust incurs a penalty equal to $100 for each complete month from the trust’s filing-due date for the year in which the spouse died and ending on the day on which the application referred to in that paragraph is sent to the Minister; in such case, this paragraph is deemed not to apply in respect of any other such application made previously by the trust in respect of the transfer of the property.

Where, in respect of the property and by virtue of subsection 3.2 of section 220 of the Income Tax Act, the time for making the election under paragraph b of subsection 9.11 or 9.31 of section 70 of that Act is extended or such an election made previously is amended or revoked, the trust

(a)  shall notify the Minister in writing and attach to the notice a copy of the document to that effect sent by the trust to the Minister of Revenue of Canada; and

(b)  incurs a penalty equal to $100 for each complete month from the trust’s filing-due date for the year in which the spouse died and ending on the day on which the notice referred to in subparagraph a is sent to the Minister.

However, the total amount of the penalties that the trust incurs under this section in respect of the property may not exceed the greater of the penalties that the trust would otherwise incur in respect of the property, under the fifth paragraph or subparagraph b of the sixth paragraph nor $5,000.

Notwithstanding sections 1010 to 1011, such assessments of tax, interest and penalties under this Part shall be made as are necessary by the Minister for any taxation year to take into account the granting by the Minister of an application made under the fourth paragraph, or the election or the amended or revoked election referred to in the sixth paragraph.

1975, c. 22, s. 100; 1979, c. 18, s. 32; 1986, c. 15, s. 82; 1986, c. 19, s. 102; 1993, c. 16, s. 185; 1994, c. 22, s. 177; 1995, c. 49, s. 128; 1997, c. 3, s. 71; 1997, c. 85, s. 73; 2000, c. 5, s. 293; 2002, c. 40, s. 37; 2003, c. 2, s. 120; 2004, c. 8, s. 93; 2007, c. 12, s. 58.

2006-03-01

450. Where property of an individual has been transferred or distributed to a trust referred to in section 440 or in section 454, as that section applied in respect of a transfer that occurred before 1 January 2000, or a trust to which subparagraph i of paragraph c of section 454.1 applies, and the property was, immediately before that transfer or distribution, a share of the capital stock of a family farm corporation of the individual, an interest in a family farm partnership of the individual, land situated in Canada or depreciable property of a prescribed class situated in Canada and the property or, if the property is such land or such depreciable property, a property that is a capital replacement property therefor in respect of which the trust has made an election under section 96 or 279, was, immediately before the death of the individual’s spouse who was a beneficiary under the trust, in the case of such a share, a share of the capital stock of a Canadian corporation that would be a share of the capital stock of a family farm corporation if subparagraph i of subparagraph a of the first paragraph of section 451 were read without reference to “in which the individual or a spouse, a child or the father or mother of the individual was actively engaged on a regular and continuous basis or, in the case of property used in the operation of a woodlot, was engaged to the extent required by a prescribed forest management plan in respect of that woodlot”, or, in the case of such an interest, an interest in a partnership that carried on the business of farming in Canada in which it used all or substantially all of its property in carrying on that business, or, in the case of such land, such depreciable property or such capital replacement property, property used in carrying on the business of farming, the following rules apply if the property, on the death of the spouse and by reason thereof, is transferred or distributed and indefeasibly vested in a child of the individual who was resident in Canada immediately before the death:

(a)  sections 653 to 656.1 are not applicable to the trust in respect of the property;

(b)  the trust is deemed to have, immediately before the spouse’s death, disposed of the property and received proceeds of disposition therefor equal to the following amount, and the child is deemed to have acquired the property at the time of the death at a cost equal to those proceeds:

i.  where the property was depreciable property of a prescribed class, the lesser of the capital cost and the cost amount to the trust of the property immediately before the spouse’s death, and

ii.  where the property is land, other than land to which subparagraph i applies, or a share of the capital stock of a family farm corporation, the adjusted cost base to the trust of the property immediately before the spouse’s death;

(b.1)  where the property is an interest in a family farm partnership, other than an interest to which section 636 applies,

i.  the trust is deemed, except for the purposes of section 632, not to have disposed of the property as a consequence of the death of the spouse,

ii.  the child is deemed to have acquired the property at the time of the spouse’s death at a cost equal to the cost to the trust of the property, and

iii.  each amount added or deducted under section 255 or 257, as the case may be, in computing the adjusted cost base to the trust of the property is deemed to be required by that section 255 or 257 to be added or deducted in computing the adjusted cost base to the child of the property;

(c)  for the purposes of sections 93 to 104, Chapter III of Title III and any regulations made under paragraph a of section 130 or section 130.1, where depreciable property of a prescribed class of the trust is deemed under subparagraph b to be acquired by the child as a consequence of the spouse’s death, except where the trust’s proceeds of disposition of the property under subparagraph b are redetermined under sections 93.1 to 93.3, and the capital cost to the trust of the property exceeds the amount determined under subparagraph b to be the cost to the child of the property, the following rules apply:

i.  the capital cost to the child of the property is deemed to be equal to the capital cost to the trust of the property, and

ii.  the excess is deemed to have been allowed to the child as depreciation in respect of the property for the taxation years that ended before the acquisition; and

(d)  notwithstanding subparagraph b, where property of the trust is deemed under subparagraph b to be acquired by the child as a consequence of the spouse’s death, and the trust’s proceeds of disposition of the property under subparagraph b are redetermined under sections 93.1 to 93.3, the following rules apply:

i.  for the purposes of sections 93 to 104, Chapter III of Title III and any regulations made under paragraph a of section 130 or section 130.1, where the property was depreciable property of a prescribed class and the capital cost to the trust of the property exceeds the amount so redetermined under sections 93.1 to 93.3,

(1)  the capital cost to the child of the property is deemed to be equal to the capital cost to the trust of the property, and

(2)  the excess is deemed to have been allowed to the child as depreciation in respect of the property for the taxation years that ended before the acquisition, and

ii.  where the property is land, other than land to which subparagraph i applies, the cost to the child of the property is deemed to be equal to the trust’s proceeds of disposition of the property as redetermined under sections 93.1 to 93.3.

However, if the trust referred to in the first paragraph makes a valid election under subsection 9.1 or 9.3 of section 70 of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement) in respect of property referred to in the first paragraph, the following rules apply:

(a)  the first paragraph applies without reference to subparagraphs b and b.1 thereof, and as if the references to subparagraph b in subparagraphs c and d of that paragraph were read as references to subparagraph b of this paragraph;

(b)  the trust is deemed to have, immediately before the spouse’s death, disposed of the property and received proceeds of disposition therefor equal to

i.  subject to the fourth paragraph and unless otherwise indicated by the trust, such amount established in accordance with section 450.5 as is designated in respect of the property by the trust in its fiscal return filed in accordance with section 1000 for the year in which the spouse died, where the trust and the child, at the end of the trust’s taxation year in which the death occurred, were resident in Québec and where the proportion determined under the second paragraph of section 22, in respect of each of those two latter persons to whom that second paragraph applies for the year in which the spouse died, was not less than 9/10 for that year, or

ii.  such amount as is determined in respect of the property under subsection 9.1 or 9.3, as the case may be, where subparagraph i does not apply in respect of the property, and

(c)  the child is deemed to have acquired the property at the time of the death at a cost equal to the proceeds of the disposition established in the child’s respect under subparagraph b.

Sections 520.3 and 522.1 to 522.5 apply, with the necessary modifications, in respect of the disposition of the property and the conditions described in subparagraph i of subparagraph b of the second paragraph in relation to the trust and the child for the year in which the spouse died.

However, subparagraph i of subparagraph b of the second paragraph does not apply in respect of the property unless all or substantially all of the difference between the amount that would, but for that subparagraph i, be referred to in respect of the property in subparagraph ii of that subparagraph b and the amount designated in its respect in that subparagraph i, is justified by a difference between the cost amount of the property to the trust, immediately before the spouse’s death, for the purposes of Part I of the Income Tax Act and the cost amount, at that time, for the purposes of this Part, or by another reason considered by the Minister to be acceptable in the circumstances.

On application by the trust, the Minister may allow subparagraph i of subparagraph b of the second paragraph to be deemed not to have applied in respect of the property, or may allow the trust, after the trust’s filing-due date for the year in which the spouse died, to designate pursuant to that subparagraph i an amount or a new amount in respect of the property; in the latter case, the new amount designated is deemed to be the only amount designated by the trust under that subparagraph in respect of the property.

Where an application made under the fifth paragraph is granted by the Minister, the trust incurs a penalty equal to $100 for each complete month from the trust’s filing-due date for the year in which the spouse died and ending on the day on which the application referred to in that paragraph is sent to the Minister; in such case, this paragraph is deemed not to apply in respect of any other such application made previously by the trust in respect of the transfer or distribution of the property.

Where, in respect of the property and by virtue of subsection 3.2 of section 220 of the Income Tax Act, the time for making the election under subsection 9.1 or 9.3, as the case may be, of section 70 of that Act is extended or such an election made previously is amended or revoked, the trust

(a)  shall notify the Minister in writing and attach to the notice a copy of the document to that effect sent by the trust to the Minister of Revenue of Canada; and

(b)  incurs a penalty equal to $100 for each complete month from the trust’s filing-due date for the year in which the spouse died and ending on the day on which the notice referred to in subparagraph a is sent to the Minister.

However, the total amount of the penalties that the trust incurs under this section in respect of the property may not exceed the greater of the penalties that the trust would otherwise incur in respect of the property, under the sixth paragraph or subparagraph b of the seventh paragraph nor $5,000.

Notwithstanding sections 1010 to 1011, such assessments of tax, interest and penalties under this Part shall be made as are necessary by the Minister for any taxation year to take into account the granting by the Minister of an application made under the fifth paragraph, or the election or the amended or revoked election referred to in the seventh paragraph.

1975, c. 22, s. 100; 1979, c. 18, s. 32; 1986, c. 15, s. 82; 1986, c. 19, s. 102; 1993, c. 16, s. 185; 1994, c. 22, s. 177; 1995, c. 49, s. 128; 1997, c. 3, s. 71; 1997, c. 85, s. 73; 2000, c. 5, s. 293; 2002, c. 40, s. 37; 2003, c. 2, s. 120; 2004, c. 8, s. 93.