I-3 - Taxation Act

Section 1129.70 Disposition versions

2020-09-24

1129.70. In this Part, unless the context indicates otherwise,

“Canadian immovable or resource property” means

(a)  a property that would, but for the definition of “immovable property”, be an immovable property situated in Canada;

(b)  a Canadian resource property;

(c)  a timber resource property;

(d)  a share of the capital stock of a corporation, a capital or income interest in a trust or an interest in a partnership, if more than 50% of the fair market value of the share or interest is derived directly or indirectly from one or any combination of properties described in any of paragraphs a to c, other than

i.  a share of a taxable Canadian corporation,

ii.  a capital or income interest in a SIFT trust or in a trust that would be a SIFT trust if the definition of “SIFT trust” had effect from 31 October 2006,

iii.  an interest in a SIFT partnership or in a partnership that would be a SIFT partnership if the definition of “SIFT partnership” had effect from 31 October 2006, or

iv.  a capital or income interest in a real estate investment trust; or

(e)  any right in or to a property described in any of paragraphs a to d;

“Canadian resident partnership” at any time means a partnership that, at that time,

(a)  is a Canadian partnership, within the meaning of section 1;

(b)  would, if it were a corporation, be resident in Canada, being thus considered a partnership that has its central management and control in Canada; or

(c)  was formed under the laws of a province;

“capital or income interest” in a trust has, in the case of a capital interest in a trust or an income interest in a trust, the meaning assigned to those expressions by section 683;

“determined gross revenue” , of an entity for a taxation year, means the amount by which the aggregate of all amounts each of which is an amount received or receivable in the year (depending on the method regularly followed by the entity in computing the entity’s income) by the entity exceeds the aggregate of all amounts each of which is the cost to the entity of a property disposed of in the year;

“eligible resale property” , of an entity, means an immovable property (other than capital property) of the entity

(a)  that is contiguous to an immovable property that is capital property or eligible resale property held by the entity or another entity affiliated with the entity; and

(b)  the holding of which is ancillary to the holding of the immovable property described in paragraph a;

“entity” means a corporation, trust or partnership;

“equity”, of an entity, means

(a)  if the entity is a corporation, a share of its capital stock;

(b)  if the entity is a trust, a capital or income interest in the entity;

(c)  if the entity is a partnership, an interest as a member of the entity;

(d)  a liability of the entity (and, for purposes of the definition of “publicly-traded liability”, a security of the entity that is a liability of another entity) if

i.  the liability is convertible into, or exchangeable for, equity of the entity or of another entity, or

ii.  any amount paid or payable in respect of the liability is contingent on the use of or production from property, is determined on the basis of such use or production, or is computed by reference to revenue, profit, cash flow, commodity price or any other similar criterion or by reference to dividends paid or payable to shareholders of any class of shares of the capital stock of a corporation, or to income or capital paid or payable to any member of a partnership or beneficiary under a trust; and

(e)  a right to, or to acquire, anything described in this paragraph and any of paragraphs a to d;

“equity value” of an entity at any time means the fair market value at that time of the aggregate of

(a)  if the entity is a corporation, all of the issued and outstanding shares of its capital stock;

(b)  if the entity is a trust, all of the capital or income interests in the entity; and

(c)  if the entity is a partnership, all of the interests in the entity;

“establishment” has the meaning assigned by sections 12 to 16.2;

“excluded subsidiary entity”, for a taxation year, means an entity none of the equity of which is at any time in the year

(a)  listed on a stock exchange or other public market or traded on such an exchange or other market; nor

(b)  held by any person or partnership other than

i.  a real estate investment trust,

ii.  a taxable Canadian corporation,

iii.  a SIFT trust or a trust that would be a SIFT trust but for subsection 3 of section 534 of the Act giving effect to the Budget Speech delivered on 24 May 2007, to the 1 June 2007 Ministerial Statement Concerning the Government’s 2007-2008 Budgetary Policy and to certain other budget statements (2009, chapter 5),

iv.  a SIFT partnership or a partnership that would be a SIFT partnership but for subsection 3 of section 534 of the Act giving effect to the Budget Speech delivered on 24 May 2007, to the 1 June 2007 Ministerial Statement Concerning the Government’s 2007-2008 Budgetary Policy and to certain other budget statements,

iv.1.  a person or partnership that does not have, in connection with the holding of a security of the entity, property the value of which is determined, all or in part, by reference to a security that is listed on a stock exchange or other public market or traded on such an exchange or other market, or

v.  an excluded subsidiary entity for the year;

“immovable property” of a taxpayer includes a security held by the taxpayer that is a security of a trust that satisfies the conditions set out in paragraphs a to d of the definition of “real estate investment trust” or a security of another entity that would, if it were a trust, satisfy those conditions, or a real right in an immovable, other than a right to a rental or royalty described in paragraph d or d.1 of section 370, but does not include a depreciable property, other than

(a)  a property included, for the purposes of Part I, in Class 1, 3 or 31 of Schedule B to the Regulation respecting the Taxation Act (chapter I-3, r. 1), otherwise than by an election permitted by regulation;

(b)  a property ancillary to the ownership or utilization of a property described in paragraph a; or

(c)  a lease in, or a leasehold interest in respect of, land or property described in paragraph a;

“investment”, in a trust or partnership, means the following property, but does not include an unaffiliated publicly-traded liability of the trust or partnership, nor regulated innovative capital:

(a)  a property that is a security of the trust or partnership, or

(b)  a right which may reasonably be considered to replicate a return on, or the value of, a security of the trust or partnership;

“non-portfolio earnings” of a SIFT entity for a taxation year means the aggregate of

(a)  the amount by which the aggregate of all amounts each of which is the entity’s income for the year determined under Part I and derived from a business carried on by it in Canada or from a non-portfolio property (other than income that is a taxable dividend received by the entity), exceeds the aggregate of all amounts each of which is the entity’s loss for the year determined under Part I and derived from a business carried on by it in Canada or from a non-portfolio property; and

(b)  the amount by which the aggregate of the allowable capital losses of the entity determined under Part I and derived from dispositions of non-portfolio properties during the year is exceeded by the aggregate of

i.  the taxable capital gains of the entity determined under Part I and derived from dispositions of non-portfolio properties during the year, and

ii.  if the entity is a SIFT trust, one half of the aggregate of all amounts each of which is deemed under section 1106 to be a capital gain of the trust for the year in respect of its non-portfolio properties for the year;

“non-portfolio property” , of a particular entity for a taxation year, means a property, held by the particular entity at any time in the year, that is

(a)  a security of a subject entity (other than a portfolio investment entity), if at that time the particular entity holds

i.  securities of the subject entity that have a total fair market value that is greater than the amount that is 10% of the equity value of the subject entity, or

ii.  securities of the subject entity and securities of entities affiliated with the subject entity that together have a total fair market value that is greater than the amount that is 50% of the equity value of the particular entity;

(b)  a Canadian immovable or resource property, if at any time in the year the total fair market value of all properties held by the particular entity that are Canadian immovable or resource properties is greater than the amount that is 50% of the equity value of the particular entity; or

(c)  a property that the particular entity, or a person or partnership with whom the particular entity does not deal at arm’s length, uses at that time in the course of carrying on a business in Canada;

“portfolio investment entity” at any time means an entity that does not at that time hold any non-portfolio property;

“public market” includes any trading system or other organized facility on which securities that are qualified for public distribution are listed or traded, but does not include a facility that is operated solely to carry out the issuance of a security or its redemption, acquisition or cancellation by its issuer;

“publicly-traded liability”, of an entity, means a liability that is a security of the entity, that is not equity of the entity and that is listed on a stock exchange or other public market or traded on such an exchange or other market;

“qualified property” , of a trust at a particular time, means a property that, at that time, is held by the trust and is

(a)  an immovable property that is capital property, an eligible resale property, an indebtedness of a Canadian corporation represented by a bankers’ acceptance, a property described in paragraph a or b of the definition of “qualified investment” in section 204 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) or a deposit with a savings and credit union;

(b)  a security of a subject entity all or substantially all of the determined gross revenue of which, for its taxation year that ends in the trust’s taxation year that includes that time, is from maintaining, improving, leasing or managing immovable properties that are capital properties of the trust or of another entity of which the trust holds a share or an interest, including immovable properties that the trust, or an entity of which the trust holds a share or an interest, holds together with one or more other persons or partnerships;

(c)  a security of a subject entity, if the entity holds no property other than

i.  titles of ownership in immovable properties of the trust or of another subject entity all of the securities of which are held by the trust, including immovable properties that the trust or the other subject entity holds together with one or more other persons or partnerships, or

ii.  property described in paragraph d; or

(d)  ancillary to the earning by the trust of amounts described in subparagraph i or iii of paragraph b of the definition of “real estate investment trust”, other than a property that is

i.  part of an equity of an entity, or

ii.  a mortgage, hypothecary claim, mezzanine loan or similar obligation;

“real estate investment trust” for a taxation year means a trust that is resident in Canada throughout the year, if

(a)  at each time in the taxation year the fair market value at that time of all non-portfolio properties that are qualified properties held by the trust is at least equal to 90% of the fair market value at that time of all non-portfolio properties held by the trust;

(b)  not less than 90% of the trust’s determined gross revenue for the year is from one or any combination of the following sources:

i.  rent from immovable properties,

ii.  interest,

iii.  dispositions of immovable properties that are capital properties,

iv.  dividends,

v.  royalties, and

vi.  dispositions of eligible resale properties;

(c)  not less than 75% of the trust’s determined gross revenue for the year is from one or any combination of the following sources:

i.  rent from immovable properties,

ii.  interest payable on debts secured by hypothecs on immovable properties, and

iii.  dispositions of immovable properties that are capital properties;

(d)  at each time in the year an amount, which is equal to 75% or more of the equity value of the trust at that time, is the amount that is the fair market value of all properties held by the trust each of which is an immovable property that is capital property, an eligible resale property, an indebtedness of a Canadian corporation represented by a bankers’ acceptance, a property described in paragraph a or b of the definition of “qualified investment” in section 204 of the Income Tax Act or a deposit with a savings and credit union; and

(e)  investments in the trust are listed, at any time in the year, on a stock exchange or other public market or traded on such an exchange or other market;

“regulated innovative capital” means equity of a trust, if

(a)  since 1 November 2006, the equity has been authorized, by the Superintendent of Financial Institutions of Canada, by the Autorité des marchés financiers or by a provincial regulatory authority having powers similar to those of the Superintendent of Financial Institutions of Canada, as Tier 1 or Tier 2 capital of a financial institution (within the meaning of subsection 1 of section 181 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.));

(b)  the terms and conditions of the equity have not changed after 1 August 2008;

(c)  the trust has not issued any equity after 31 October 2006; and

(d)  the trust does not hold any non-portfolio property other than

i.  liabilities of the financial institution, and

ii.  shares of the capital stock of the financial institution that were acquired by the trust for the sole purpose of satisfying a right to require the trust to accept, as demanded by a holder of the equity, the surrender of the equity;

“rent from immovable properties” includes rent or similar payments for the use of, or right to use, immovable properties and the amounts paid for services ancillary to the rental of immovable properties and customarily supplied or rendered in connection with the rental of immovable properties, but does not include

(a)  amounts paid for services supplied or rendered, other than such ancillary services, to the tenants of immovable properties;

(b)  fees for managing or operating immovable properties;

(c)  amounts paid for the occupation of, use of, or right to use a room in a hotel or other similar lodging facility; or

(d)  rent based on profits;

“security” of a particular entity means any right, whether immediate or future and whether absolute or contingent, conferred by the particular entity or by an entity that is affiliated with the particular entity, to receive an amount that can reasonably be considered to be all or any part of the capital, of the revenue or of the income of the particular entity, or as interest paid or payable by the particular entity, and includes

(a)  a liability of the particular entity;

(b)  if the particular entity is a corporation,

i.  a share of the capital stock of the corporation, and

ii.  a right to control in any manner whatever the voting rights of a share of the capital stock of the corporation;

(c)  if the particular entity is a trust, a capital or income interest in the particular entity;

(d)  if the particular entity is a partnership, an interest as a member of the particular entity; and

(e)  a right to, or to acquire, anything described in this paragraph and any of paragraphs a to d;

“SIFT entity”, being a specified investment flow-through entity, means a SIFT trust or a SIFT partnership;

“SIFT partnership”, being a specified investment flow-through partnership, for a taxation year, means a partnership other than an excluded subsidiary entity for the year that meets the following conditions at any time during the year:

(a)  the partnership is a Canadian resident partnership;

(b)  investments in the partnership are listed on a stock exchange or other public market or traded on such an exchange or other market; and

(c)  the partnership holds one or more non-portfolio properties;

“SIFT partnership balance-due day” for a taxation year means the day, determined in accordance with section 1086R80 of the Regulation respecting the Taxation Act, on or before which the partnership return provided for in section 1086R78 of that Regulation is required to be filed for the year;

“SIFT trust”, being a specified investment flow-through trust, for a taxation year means a trust (other than a real estate investment trust or an excluded subsidiary entity for the year) that meets the following conditions at any time during the year:

(a)  the trust is resident in Canada;

(b)  investments in the trust are listed on a stock exchange or other public market or traded on such an exchange or other market; and

(c)  the trust holds one or more non-portfolio properties;

“subject entity” means a person or partnership that is

(a)  a corporation resident in Canada;

(b)  a trust resident in Canada;

(c)  a Canadian resident partnership; or

(d)  a person not resident in Canada, or a partnership that is not described in paragraph c, the principal source of income of which is one or any combination of sources in Canada;

“taxable distributions amount”, of a SIFT trust for a taxation year, means the lesser of

(a)  the taxable income for the year of the SIFT trust, determined under Part I, or, if the SIFT trust is not subject to taxation under Part I, the amount that would be its taxable income for the year if it were determined in accordance with Part I, on the assumption that its income is equal to the amount determined in its respect in accordance with paragraph b; and

(b)  the amount determined by the formula

A/(1 - (B + C));

“taxable non-portfolio earnings” of a SIFT partnership, for a taxation year, means the lesser of

(a)  the amount that would, if the SIFT partnership were a taxpayer for the purposes of Part I and if section 600 were read without reference to its paragraph d, be its income for the year as determined under section 28; and

(b)  its non-portfolio earnings for the year;

“taxation year” means

(a)  in the case of a partnership, a fiscal period within the meaning of Part I;

(b)  in the case of a trust, a calendar year; and

(c)  in any other case, a taxation year within the meaning of Part I;

“unaffiliated publicly-traded liability”, of an entity at any time means a publicly-traded liability of the entity if, at that time the fair market value of all publicly-traded liabilities of the entity that are held at that time by persons or partnerships that are not affiliated with the entity is at least 90% of the fair market value of all publicly-traded liabilities of the entity.

In the formula in the definition of “taxable distributions amount” in the first paragraph,

(a)  A is the SIFT trust’s non-deductible distributions amount for the taxation year, within the meaning of section 663.4;

(b)  B is the basic rate, expressed as a decimal fraction, that is determined in respect of the SIFT trust for the taxation year under the third paragraph of section 1129.71 or, if the SIFT trust has an establishment outside Québec in the year, the aggregate of the following rates:

i.  that basic rate represented by the proportion that its business carried on in Québec is of the aggregate of its business carried on in Canada or in Québec and elsewhere, as that proportion would be determined under Chapters I and II of Title XXVII of the Regulation respecting the Taxation Act if the SIFT trust were a corporation, and

ii.  the provincial SIFT tax rate, within the meaning assigned by subsection 1 of section 248 of the Income Tax Act and expressed as a percentage, that would be applicable to the SIFT trust for the year if that definition applied in respect of the SIFT trust for that year and if section 414 of the Income Tax Regulations (C.R.C., c. 945) made under that Act were read without reference to its subsection 4; and

(c)  C is the net corporate income tax rate, within the meaning assigned by subsection 1 of section 248 of the Income Tax Act for the taxation year.

Any amount deducted by a SIFT trust, in accordance with paragraph a of the definition of “taxable distributions amount” in the first paragraph, in computing the amount that would have been its taxable income for a taxation year in which it is not subject to tax under Part I, is deemed to have been deducted in computing its taxable income for the year for the purposes of Part I.

2009, c. 5, s. 534; 2009, c. 15, s. 424; 2010, c. 25, s. 219; 2017, c. 1, s. 385; 2019, c. 14, s. 454; 2020, c. 16, s. 185.

2019-06-19

1129.70. In this Part, unless the context indicates otherwise,

“Canadian real, immovable or resource property” means

(a)  a property that would, but for the definition of “real or immovable property”, be a real or immovable property situated in Canada;

(b)  a Canadian resource property;

(c)  a timber resource property;

(d)  a share of the capital stock of a corporation, a capital or income interest in a trust or an interest in a partnership, if more than 50% of the fair market value of the share or interest is derived directly or indirectly from one or any combination of properties described in any of paragraphs a to c, other than

i.  a share of a taxable Canadian corporation,

ii.  a capital or income interest in a SIFT trust or in a trust that would be a SIFT trust if the definition of “SIFT trust” had effect from 31 October 2006,

iii.  an interest in a SIFT partnership or in a partnership that would be a SIFT partnership if the definition of “SIFT partnership” had effect from 31 October 2006, or

iv.  a capital or income interest in a real estate investment trust; or

(e)  any right to or interest in a property described in any of paragraphs a to d;

“Canadian resident partnership” at any time means a partnership that, at that time,

(a)  is a Canadian partnership, within the meaning of section 1;

(b)  would, if it were a corporation, be resident in Canada, being thus considered a partnership that has its central management and control in Canada; or

(c)  was formed under the laws of a province;

“capital or income interest” in a trust has, in the case of a capital interest in a trust or an income interest in a trust, the meaning assigned to those expressions by section 683;

“determined gross revenue” , of an entity for a taxation year, means the amount by which the aggregate of all amounts each of which is an amount received or receivable in the year (depending on the method regularly followed by the entity in computing the entity’s income) by the entity exceeds the aggregate of all amounts each of which is the cost to the entity of a property disposed of in the year;

“eligible resale property” , of an entity, means real or immovable property (other than capital property) of the entity

(a)  that is contiguous to a real or immovable property that is capital property or eligible resale property held by the entity or another entity affiliated with the entity; and

(b)  the holding of which is ancillary to the holding of the real or immovable property described in paragraph a;

“entity” means a corporation, trust or partnership;

“equity”, of an entity, means

(a)  if the entity is a corporation, a share of its capital stock;

(b)  if the entity is a trust, a capital or income interest in the entity;

(c)  if the entity is a partnership, an interest as a member of the entity;

(d)  a liability of the entity (and, for purposes of the definition of “publicly-traded liability”, a security of the entity that is a liability of another entity) if

i.  the liability is convertible into, or exchangeable for, equity of the entity or of another entity, or

ii.  any amount paid or payable in respect of the liability is contingent on the use of or production from property, is determined on the basis of such use or production, or is computed by reference to revenue, profit, cash flow, commodity price or any other similar criterion or by reference to dividends paid or payable to shareholders of any class of shares of the capital stock of a corporation, or to income or capital paid or payable to any member of a partnership or beneficiary under a trust; and

(e)  a right to, or to acquire, anything described in this paragraph and any of paragraphs a to d;

“equity value” of an entity at any time means the fair market value at that time of the aggregate of

(a)  if the entity is a corporation, all of the issued and outstanding shares of its capital stock;

(b)  if the entity is a trust, all of the capital or income interests in the entity; and

(c)  if the entity is a partnership, all of the interests in the entity;

“establishment” has the meaning assigned by sections 12 to 16.2;

“excluded subsidiary entity”, for a taxation year, means an entity none of the equity of which is at any time in the year

(a)  listed on a stock exchange or other public market or traded on such an exchange or other market; nor

(b)  held by any person or partnership other than

i.  a real estate investment trust,

ii.  a taxable Canadian corporation,

iii.  a SIFT trust or a trust that would be a SIFT trust but for subsection 3 of section 534 of the Act giving effect to the Budget Speech delivered on 24 May 2007, to the 1 June 2007 Ministerial Statement Concerning the Government’s 2007-2008 Budgetary Policy and to certain other budget statements (2009, chapter 5),

iv.  a SIFT partnership or a partnership that would be a SIFT partnership but for subsection 3 of section 534 of the Act giving effect to the Budget Speech delivered on 24 May 2007, to the 1 June 2007 Ministerial Statement Concerning the Government’s 2007-2008 Budgetary Policy and to certain other budget statements,

iv.1.  a person or partnership that does not have, in connection with the holding of a security of the entity, property the value of which is determined, all or in part, by reference to a security that is listed on a stock exchange or other public market or traded on such an exchange or other market, or

v.  an excluded subsidiary entity for the year;

“investment”, in a trust or partnership, means the following property, but does not include an unaffiliated publicly-traded liability of the trust or partnership, nor regulated innovative capital:

(a)  a property that is a security of the trust or partnership, or

(b)  a right which may reasonably be considered to replicate a return on, or the value of, a security of the trust or partnership;

“non-portfolio earnings” of a SIFT entity for a taxation year means the aggregate of

(a)  the amount by which the aggregate of all amounts each of which is the entity’s income for the year determined under Part I and derived from a business carried on by it in Canada or from a non-portfolio property (other than income that is a taxable dividend received by the entity), exceeds the aggregate of all amounts each of which is the entity’s loss for the year determined under Part I and derived from a business carried on by it in Canada or from a non-portfolio property; and

(b)  the amount by which the aggregate of the allowable capital losses of the entity determined under Part I and derived from dispositions of non-portfolio properties during the year is exceeded by the aggregate of

i.  the taxable capital gains of the entity determined under Part I and derived from dispositions of non-portfolio properties during the year, and

ii.  if the entity is a SIFT trust, one half of the aggregate of all amounts each of which is deemed under section 1106 to be a capital gain of the trust for the year in respect of its non-portfolio properties for the year;

“non-portfolio property” , of a particular entity for a taxation year, means a property, held by the particular entity at any time in the year, that is

(a)  a security of a subject entity (other than a portfolio investment entity), if at that time the particular entity holds

i.  securities of the subject entity that have a total fair market value that is greater than the amount that is 10% of the equity value of the subject entity, or

ii.  securities of the subject entity and securities of entities affiliated with the subject entity that together have a total fair market value that is greater than the amount that is 50% of the equity value of the particular entity;

(b)  a Canadian real, immovable or resource property, if at any time in the year the total fair market value of all properties held by the particular entity that are Canadian real, immovable or resource properties is greater than the amount that is 50% of the equity value of the particular entity; or

(c)  a property that the particular entity, or a person or partnership with whom the particular entity does not deal at arm’s length, uses at that time in the course of carrying on a business in Canada;

“portfolio investment entity” at any time means an entity that does not at that time hold any non-portfolio property;

“public market” includes any trading system or other organized facility on which securities that are qualified for public distribution are listed or traded, but does not include a facility that is operated solely to carry out the issuance of a security or its redemption, acquisition or cancellation by its issuer;

“publicly-traded liability”, of an entity, means a liability that is a security of the entity, that is not equity of the entity and that is listed on a stock exchange or other public market or traded on such an exchange or other market;

“qualified property” , of a trust at a particular time, means a property that, at that time, is held by the trust and is

(a)  a real or immovable property that is capital property, an eligible resale property, an indebtedness of a Canadian corporation represented by a bankers’ acceptance, a property described in paragraph a or b of the definition of “qualified investment” in section 204 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) or a deposit with a savings and credit union;

(b)  a security of a subject entity all or substantially all of the determined gross revenue of which, for its taxation year that ends in the trust’s taxation year that includes that time, is from maintaining, improving, leasing or managing real or immovable properties that are capital properties of the trust or of another entity of which the trust holds a share or an interest, including real or immovable properties that the trust, or an entity of which the trust holds a share or an interest, holds together with one or more other persons or partnerships;

(c)  a security of a subject entity, if the entity holds no property other than

i.  titles of ownership in real or immovable properties of the trust or of another subject entity all of the securities of which are held by the trust, including real or immovable properties that the trust or the other subject entity holds together with one or more other persons or partnerships, or

ii.  property described in paragraph d; or

(d)  ancillary to the earning by the trust of amounts described in subparagraph i or iii of paragraph b of the definition of “real estate investment trust”, other than a property that is

i.  part of an equity of an entity, or

ii.  a mortgage, hypothecary claim, mezzanine loan or similar obligation;

“real estate investment trust” for a taxation year means a trust that is resident in Canada throughout the year, if

(a)  at each time in the taxation year the fair market value at that time of all non-portfolio properties that are qualified properties held by the trust is at least equal to 90% of the fair market value at that time of all non-portfolio properties held by the trust;

(b)  not less than 90% of the trust’s determined gross revenue for the year is from one or any combination of the following sources:

i.  rent from real or immovable properties,

ii.  interest,

iii.  dispositions of real or immovable properties that are capital properties,

iv.  dividends,

v.  royalties, and

vi.  dispositions of eligible resale properties;

(c)  not less than 75% of the trust’s determined gross revenue for the year is from one or any combination of the following sources:

i.  rent from real or immovable properties,

ii.  interest payable on debts secured by hypothecs on real or immovable properties, and

iii.  dispositions of real or immovable properties that are capital properties;

(d)  at each time in the year an amount, which is equal to 75% or more of the equity value of the trust at that time, is the amount that is the fair market value of all properties held by the trust each of which is a real or immovable property that is capital property, an eligible resale property, an indebtedness of a Canadian corporation represented by a bankers’ acceptance, a property described in paragraph a or b of the definition of “qualified investment” in section 204 of the Income Tax Act or a deposit with a savings and credit union; and

(e)  investments in the trust are listed, at any time in the year, on a stock exchange or other public market or traded on such an exchange or other market;

“real or immovable property” of a taxpayer includes a security held by the taxpayer that is a security of a trust that satisfies the conditions set out in paragraphs a to d of the definition of “real estate investment trust” or a security of another entity that would, if it were a trust, satisfy those conditions, or an interest in real property or a real right in an immovable, other than a right to a rental or royalty described in paragraph d or d.1 of section 370, but does not include a depreciable property, other than

(a)  a property included, for the purposes of Part I, in Class 1, 3 or 31 of Schedule B to the Regulation respecting the Taxation Act (chapter I-3, r. 1), otherwise than by an election permitted by regulation;

(b)  a property ancillary to the ownership or utilization of a property described in paragraph a; or

(c)  a lease in, or a leasehold interest in respect of, land or property described in paragraph a;

“regulated innovative capital” means equity of a trust, if

(a)  since 1 November 2006, the equity has been authorized, by the Superintendent of Financial Institutions of Canada, by the Autorité des marchés financiers or by a provincial regulatory authority having powers similar to those of the Superintendent of Financial Institutions of Canada, as Tier 1 or Tier 2 capital of a financial institution (within the meaning of subsection 1 of section 181 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.));

(b)  the terms and conditions of the equity have not changed after 1 August 2008;

(c)  the trust has not issued any equity after 31 October 2006; and

(d)  the trust does not hold any non-portfolio property other than

i.  liabilities of the financial institution, and

ii.  shares of the capital stock of the financial institution that were acquired by the trust for the sole purpose of satisfying a right to require the trust to accept, as demanded by a holder of the equity, the surrender of the equity;

“rent from real or immovable properties” includes rent or similar payments for the use of, or right to use, real or immovable properties and the amounts paid for services ancillary to the rental of real or immovable properties and customarily supplied or rendered in connection with the rental of real or immovable properties, but does not include

(a)  amounts paid for services supplied or rendered, other than such ancillary services, to the tenants of real or immovable properties;

(b)  fees for managing or operating real or immovable properties;

(c)  amounts paid for the occupation of, use of, or right to use a room in a hotel or other similar lodging facility; or

(d)  rent based on profits;

“security” of a particular entity means any right, whether immediate or future and whether absolute or contingent, conferred by the particular entity or by an entity that is affiliated with the particular entity, to receive an amount that can reasonably be considered to be all or any part of the capital, of the revenue or of the income of the particular entity, or as interest paid or payable by the particular entity, and includes

(a)  a liability of the particular entity;

(b)  if the particular entity is a corporation,

i.  a share of the capital stock of the corporation, and

ii.  a right to control in any manner whatever the voting rights of a share of the capital stock of the corporation;

(c)  if the particular entity is a trust, a capital or income interest in the particular entity;

(d)  if the particular entity is a partnership, an interest as a member of the particular entity; and

(e)  a right to, or to acquire, anything described in this paragraph and any of paragraphs a to d;

“SIFT entity”, being a specified investment flow-through entity, means a SIFT trust or a SIFT partnership;

“SIFT partnership”, being a specified investment flow-through partnership, for a taxation year, means a partnership other than an excluded subsidiary entity for the year that meets the following conditions at any time during the year:

(a)  the partnership is a Canadian resident partnership;

(b)  investments in the partnership are listed on a stock exchange or other public market or traded on such an exchange or other market; and

(c)  the partnership holds one or more non-portfolio properties;

“SIFT partnership balance-due day” for a taxation year means the day, determined in accordance with section 1086R80 of the Regulation respecting the Taxation Act, on or before which the partnership return provided for in section 1086R78 of that Regulation is required to be filed for the year;

“SIFT trust”, being a specified investment flow-through trust, for a taxation year means a trust (other than a real estate investment trust or an excluded subsidiary entity for the year) that meets the following conditions at any time during the year:

(a)  the trust is resident in Canada;

(b)  investments in the trust are listed on a stock exchange or other public market or traded on such an exchange or other market; and

(c)  the trust holds one or more non-portfolio properties;

“subject entity” means a person or partnership that is

(a)  a corporation resident in Canada;

(b)  a trust resident in Canada;

(c)  a Canadian resident partnership; or

(d)  a person not resident in Canada, or a partnership that is not described in paragraph c, the principal source of income of which is one or any combination of sources in Canada;

“taxable distributions amount”, of a SIFT trust for a taxation year, means the lesser of

(a)  the taxable income for the year of the SIFT trust, determined under Part I, or, if the SIFT trust is not subject to taxation under Part I, the amount that would be its taxable income for the year if it were determined in accordance with Part I, on the assumption that its income is equal to the amount determined in its respect in accordance with paragraph b; and

(b)  the amount determined by the formula

A/(1 - (B + C));

“taxable non-portfolio earnings” of a SIFT partnership, for a taxation year, means the lesser of

(a)  the amount that would, if the SIFT partnership were a taxpayer for the purposes of Part I and if section 600 were read without reference to its paragraph d, be its income for the year as determined under section 28; and

(b)  its non-portfolio earnings for the year;

“taxation year” means

(a)  in the case of a partnership, a fiscal period within the meaning of Part I;

(b)  in the case of a trust, a calendar year; and

(c)  in any other case, a taxation year within the meaning of Part I;

“unaffiliated publicly-traded liability”, of an entity at any time means a publicly-traded liability of the entity if, at that time the fair market value of all publicly-traded liabilities of the entity that are held at that time by persons or partnerships that are not affiliated with the entity is at least 90% of the fair market value of all publicly-traded liabilities of the entity.

In the formula in the definition of “taxable distributions amount” in the first paragraph,

(a)  A is the SIFT trust’s non-deductible distributions amount for the taxation year, within the meaning of section 663.4;

(b)  B is the basic rate, expressed as a decimal fraction, that is determined in respect of the SIFT trust for the taxation year under the third paragraph of section 1129.71 or, if the SIFT trust has an establishment outside Québec in the year, the aggregate of the following rates:

i.  that basic rate represented by the proportion that its business carried on in Québec is of the aggregate of its business carried on in Canada or in Québec and elsewhere, as that proportion would be determined under Chapters I and II of Title XXVII of the Regulation respecting the Taxation Act if the SIFT trust were a corporation, and

ii.  the provincial SIFT tax rate, within the meaning assigned by subsection 1 of section 248 of the Income Tax Act and expressed as a percentage, that would be applicable to the SIFT trust for the year if that definition applied in respect of the SIFT trust for that year and if section 414 of the Income Tax Regulations (C.R.C., c. 945) made under that Act were read without reference to its subsection 4; and

(c)  C is the net corporate income tax rate, within the meaning assigned by subsection 1 of section 248 of the Income Tax Act for the taxation year.

Any amount deducted by a SIFT trust, in accordance with paragraph a of the definition of “taxable distributions amount” in the first paragraph, in computing the amount that would have been its taxable income for a taxation year in which it is not subject to tax under Part I, is deemed to have been deducted in computing its taxable income for the year for the purposes of Part I.

2009, c. 5, s. 534; 2009, c. 15, s. 424; 2010, c. 25, s. 219; 2017, c. 1, s. 385; 2019, c. 14, s. 454.

2017-02-08

1129.70. In this Part, unless the context indicates otherwise,

“Canadian real, immovable or resource property” means

(a)  a property that would, but for the definition of “real or immovable property”, be a real or immovable property situated in Canada;

(b)  a Canadian resource property;

(c)  a timber resource property;

(d)  a share of the capital stock of a corporation, a capital or income interest in a trust or an interest in a partnership, if more than 50% of the fair market value of the share or interest is derived directly or indirectly from one or any combination of properties described in any of paragraphs a to c, other than

i.  a share of a taxable Canadian corporation,

ii.  a capital or income interest in a SIFT trust or in a trust that would be a SIFT trust if the definition of “SIFT trust” had effect from 31 October 2006,

iii.  an interest in a SIFT partnership or in a partnership that would be a SIFT partnership if the definition of “SIFT partnership” had effect from 31 October 2006, or

iv.  a capital or income interest in a real estate investment trust; or

(e)  any right to or interest in a property described in any of paragraphs a to d;

“Canadian resident partnership” at any time means a partnership that, at that time,

(a)  is a Canadian partnership, within the meaning of section 1;

(b)  would, if it were a corporation, be resident in Canada, being thus considered a partnership that has its central management and control in Canada; or

(c)  was formed under the laws of a province;

“capital or income interest” in a trust has, in the case of a capital interest in a trust or an income interest in a trust, the meaning assigned to those expressions by section 683;

“determined gross revenue” , of an entity for a taxation year, means the amount by which the aggregate of all amounts each of which is an amount received or receivable in the year (depending on the method regularly followed by the entity in computing the entity’s income) by the entity exceeds the aggregate of all amounts each of which is the cost to the entity of a property disposed of in the year;

“eligible resale property” , of an entity, means real or immovable property (other than capital property) of the entity

(a)  that is contiguous to a real or immovable property that is capital property or eligible resale property held by the entity or another entity affiliated with the entity; and

(b)  the holding of which is ancillary to the holding of the real or immovable property described in paragraph a;

“entity” means a corporation, trust or partnership;

“equity”, of an entity, means

(a)  if the entity is a corporation, a share of its capital stock;

(b)  if the entity is a trust, a capital or income interest in the entity;

(c)  if the entity is a partnership, an interest as a member of the entity;

(d)  a liability of the entity (and, for purposes of the definition of “publicly-traded liability”, a security of the entity that is a liability of another entity) if

i.  the liability is convertible into, or exchangeable for, equity of the entity or of another entity, or

ii.  any amount paid or payable in respect of the liability is contingent on the use of or production from property, is determined on the basis of such use or production, or is computed by reference to revenue, profit, cash flow, commodity price or any other similar criterion or by reference to dividends paid or payable to shareholders of any class of shares of the capital stock of a corporation, or to income or capital paid or payable to any member of a partnership or beneficiary under a trust; and

(e)  a right to, or to acquire, anything described in this paragraph and any of paragraphs a to d;

“equity value” of an entity at any time means the fair market value at that time of the aggregate of

(a)  if the entity is a corporation, all of the issued and outstanding shares of the capital stock of the corporation;

(b)  if the entity is a trust, all of the capital or income interests in the trust; and

(c)  if the entity is a partnership, all of the interests in the partnership;

“establishment” has the meaning assigned by sections 12 to 16.2;

“excluded subsidiary entity”, for a taxation year, means an entity none of the equity of which is at any time in the year

(a)  listed on a stock exchange or other public market or traded on such an exchange or other market; nor

(b)  held by any person or partnership other than

i.  a real estate investment trust,

ii.  a taxable Canadian corporation,

iii.  a SIFT trust or a trust that would be a SIFT trust but for subsection 3 of section 534 of the Act giving effect to the Budget Speech delivered on 24 May 2007, to the 1 June 2007 Ministerial Statement Concerning the Government’s 2007-2008 Budgetary Policy and to certain other budget statements (2009, chapter 5),

iv.  a SIFT partnership or a partnership that would be a SIFT partnership but for subsection 3 of section 534 of the Act giving effect to the Budget Speech delivered on 24 May 2007, to the 1 June 2007 Ministerial Statement Concerning the Government’s 2007-2008 Budgetary Policy and to certain other budget statements,

iv.1.  a person or partnership that does not have, in connection with the holding of a security of the entity, property the value of which is determined, all or in part, by reference to a security that is listed on a stock exchange or other public market or traded on such an exchange or other market, or

v.  an excluded subsidiary entity for the year;

“investment”, in a trust or partnership, means the following property, but does not include an unaffiliated publicly-traded liability of the trust or partnership, nor regulated innovative capital:

(a)  a property that is a security of the trust or partnership, or

(b)  a right which may reasonably be considered to replicate a return on, or the value of, a security of the trust or partnership;

“non-portfolio earnings” of a SIFT entity for a taxation year means the aggregate of

(a)  the amount by which the aggregate of all amounts each of which is the entity’s income for the year determined under Part I and derived from a business carried on by it in Canada or from a non-portfolio property (other than income that is a taxable dividend received by the entity), exceeds the aggregate of all amounts each of which is the entity’s loss for the year determined under Part I and derived from a business carried on by it in Canada or from a non-portfolio property; and

(b)  the amount by which the aggregate of the allowable capital losses of the entity determined under Part I and derived from dispositions of non-portfolio properties during the year is exceeded by the aggregate of

i.  the taxable capital gains of the entity determined under Part I and derived from dispositions of non-portfolio properties during the year, and

ii.  if the entity is a SIFT trust, one half of the aggregate of all amounts each of which is deemed under section 1106 to be a capital gain of the trust for the year in respect of its non-portfolio properties for the year;

“non-portfolio property” , of a particular entity for a taxation year, means a property, held by the particular entity at any time in the year, that is

(a)  a security of a subject entity (other than a portfolio investment entity), if at that time the particular entity holds

i.  securities of the subject entity that have a total fair market value that is greater than the amount that is 10% of the equity value of the subject entity, or

ii.  securities of the subject entity and securities of entities affiliated with the subject entity that together have a total fair market value that is greater than the amount that is 50% of the equity value of the particular entity;

(b)  a Canadian real, immovable or resource property, if at any time in the year the total fair market value of all properties held by the particular entity that are Canadian real, immovable or resource properties is greater than the amount that is 50% of the equity value of the particular entity; or

(c)  a property that the particular entity, or a person or partnership with whom the particular entity does not deal at arm’s length, uses at that time in the course of carrying on a business in Canada;

“portfolio investment entity” at any time means an entity that does not at that time hold any non-portfolio property;

“public market” includes any trading system or other organized facility on which securities that are qualified for public distribution are listed or traded, but does not include a facility that is operated solely to carry out the issuance of a security or its redemption, acquisition or cancellation by its issuer;

“publicly-traded liability”, of an entity, means a liability that is a security of the entity, that is not equity of the entity and that is listed on a stock exchange or other public market or traded on such an exchange or other market;

“qualified property” , of a trust at a particular time, means a property that, at that time, is held by the trust and is

(a)  a real or immovable property that is capital property, an eligible resale property, an indebtedness of a Canadian corporation represented by a bankers’ acceptance, a property described in paragraph a or b of the definition of “qualified investment” in section 204 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) or a deposit with a savings and credit union;

(b)  a security of a subject entity all or substantially all of the determined gross revenue of which, for its taxation year that ends in the trust’s taxation year that includes that time, is from maintaining, improving, leasing or managing real or immovable properties that are capital properties of the trust or of another entity of which the trust holds a share or an interest, including real or immovable properties that the trust, or an entity of which the trust holds a share or an interest, holds together with one or more other persons or partnerships;

(c)  a security of a subject entity, if the entity holds no property other than

i.  titles of ownership in real or immovable properties of the trust or of another subject entity all of the securities of which are held by the trust, including real or immovable properties that the trust or the other subject entity holds together with one or more other persons or partnerships, or

ii.  property described in paragraph d; or

(d)  ancillary to the earning by the trust of amounts described in subparagraph i or iii of paragraph b of the definition of “real estate investment trust”, other than a property that is

i.  part of an equity of an entity, or

ii.  a mortgage, hypothecary claim, mezzanine loan or similar obligation;

“real estate investment trust” for a taxation year means a trust that is resident in Canada throughout the year, if

(a)  at each time in the taxation year the fair market value at that time of all non-portfolio properties that are qualified properties held by the trust is at least equal to 90% of the fair market value at that time of all non-portfolio properties held by the trust;

(b)  not less than 90% of the trust’s determined gross revenue for the year is from one or any combination of the following sources:

i.  rent from real or immovable properties,

ii.  interest,

iii.  dispositions of real or immovable properties that are capital properties,

iv.  dividends,

v.  royalties, and

vi.  dispositions of eligible resale properties;

(c)  not less than 75% of the trust’s determined gross revenue for the year is from one or any combination of the following sources:

i.  rent from real or immovable properties,

ii.  interest payable on debts secured by hypothecs on real or immovable properties, and

iii.  dispositions of real or immovable properties that are capital properties;

(d)  at each time in the year an amount, which is equal to 75% or more of the equity value of the trust at that time, is the amount that is the fair market value of all properties held by the trust each of which is a real or immovable property that is capital property, an eligible resale property, an indebtedness of a Canadian corporation represented by a bankers’ acceptance, a property described in paragraph a or b of the definition of “qualified investment” in section 204 of the Income Tax Act or a deposit with a savings and credit union; and

(e)  investments in the trust are listed, at any time in the year, on a stock exchange or other public market or traded on such an exchange or other market;

“real or immovable property” of a taxpayer includes a security held by the taxpayer that is a security of a trust that satisfies the conditions set out in paragraphs a to d of the definition of “real estate investment trust” or a security of another entity that would, if it were a trust, satisfy those conditions, or an interest in real property or a real right in an immovable, other than a right to a rental or royalty described in paragraph d or d.1 of section 370, but does not include a depreciable property, other than

(a)  a property included, for the purposes of Part I, in Class 1, 3 or 31 of Schedule B to the Regulation respecting the Taxation Act (chapter I-3, r. 1), otherwise than by an election permitted by regulation;

(b)  a property ancillary to the ownership or utilization of a property described in paragraph a; or

(c)  a lease in, or a leasehold interest in respect of, land or property described in paragraph a;

“regulated innovative capital” means equity of a trust, if

(a)  since 1 November 2006, the equity has been authorized, by the Superintendent of Financial Institutions of Canada, by the Autorité des marchés financiers or by a provincial regulatory authority having powers similar to those of the Superintendent of Financial Institutions of Canada, as Tier 1 or Tier 2 capital of a financial institution (within the meaning of subsection 1 of section 181 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.));

(b)  the terms and conditions of the equity have not changed after 1 August 2008;

(c)  the trust has not issued any equity after 31 October 2006; and

(d)  the trust does not hold any non-portfolio property other than

i.  liabilities of the financial institution, and

ii.  shares of the capital stock of the financial institution that were acquired by the trust for the sole purpose of satisfying a right to require the trust to accept, as demanded by a holder of the equity, the surrender of the equity;

“rent from real or immovable properties” includes rent or similar payments for the use of, or right to use, real or immovable properties and the amounts paid for services ancillary to the rental of real or immovable properties and customarily supplied or rendered in connection with the rental of real or immovable properties, but does not include

(a)  amounts paid for services supplied or rendered, other than such ancillary services, to the tenants of real or immovable properties;

(b)  fees for managing or operating real or immovable properties;

(c)  amounts paid for the occupation of, use of, or right to use a room in a hotel or other similar lodging facility; or

(d)  rent based on profits;

“security” of a particular entity means any right, whether immediate or future and whether absolute or contingent, conferred by the particular entity or by an entity that is affiliated with the particular entity, to receive an amount that can reasonably be considered to be all or any part of the capital, of the revenue or of the income of the particular entity, or as interest paid or payable by the particular entity, and includes

(a)  a liability of the particular entity;

(b)  if the particular entity is a corporation,

i.  a share of the capital stock of the corporation, and

ii.  a right to control in any manner whatever the voting rights of a share of the capital stock of the corporation;

(c)  if the particular entity is a trust, a capital or income interest in the particular entity;

(d)  if the particular entity is a partnership, an interest as a member of the particular entity; and

(e)  a right to, or to acquire, anything described in this paragraph and any of paragraphs a to d;

“SIFT entity”, being a specified investment flow-through entity, means a SIFT trust or a SIFT partnership;

“SIFT partnership”, being a specified investment flow-through partnership, for a taxation year, means a partnership other than an excluded subsidiary entity for the year that meets the following conditions at any time during the year:

(a)  the partnership is a Canadian resident partnership;

(b)  investments in the partnership are listed on a stock exchange or other public market or traded on such an exchange or other market; and

(c)  the partnership holds one or more non-portfolio properties;

“SIFT partnership balance-due day” for a taxation year means the day, determined in accordance with section 1086R80 of the Regulation respecting the Taxation Act, on or before which the partnership return provided for in section 1086R78 of that Regulation is required to be filed for the year;

“SIFT trust”, being a specified investment flow-through trust, for a taxation year means a trust (other than a real estate investment trust or an excluded subsidiary entity for the year) that meets the following conditions at any time during the year:

(a)  the trust is resident in Canada;

(b)  investments in the trust are listed on a stock exchange or other public market or traded on such an exchange or other market; and

(c)  the trust holds one or more non-portfolio properties;

“subject entity” means a person or partnership that is

(a)  a corporation resident in Canada;

(b)  a trust resident in Canada;

(c)  a Canadian resident partnership; or

(d)  a person not resident in Canada, or a partnership that is not described in paragraph c, the principal source of income of which is one or any combination of sources in Canada;

“taxable distributions amount”, of a SIFT trust for a taxation year, means the lesser of

(a)  the taxable income for the year of the SIFT trust, determined under Part I, or, if the SIFT trust is not subject to taxation under Part I, the amount that would be its taxable income for the year if it were determined in accordance with Part I, on the assumption that its income is equal to the amount determined in its respect in accordance with paragraph b; and

(b)  the amount determined by the formula

A/(1 - (B + C));

“taxable non-portfolio earnings” of a SIFT partnership, for a taxation year, means the lesser of

(a)  the amount that would, if the SIFT partnership were a taxpayer for the purposes of Part I and if section 600 were read without reference to its paragraph d, be its income for the year as determined under section 28; and

(b)  its non-portfolio earnings for the year;

“taxation year” means

(a)  in the case of a partnership, a fiscal period within the meaning of Part I;

(b)  in the case of a trust, a calendar year; and

(c)  in any other case, a taxation year within the meaning of Part I;

“unaffiliated publicly-traded liability”, of an entity at any time means a publicly-traded liability of the entity if, at that time the fair market value of all publicly-traded liabilities of the entity that are held at that time by persons or partnerships that are not affiliated with the entity is at least 90% of the fair market value of all publicly-traded liabilities of the entity.

In the formula in the definition of “taxable distributions amount” in the first paragraph,

(a)  A is the SIFT trust’s non-deductible distributions amount for the taxation year, within the meaning of section 663.4;

(b)  B is the basic rate, expressed as a decimal fraction, that is determined in respect of the SIFT trust for the taxation year under the third paragraph of section 1129.71 or, if the SIFT trust has an establishment outside Québec in the year, the aggregate of the following rates:

i.  that basic rate represented by the proportion that its business carried on in Québec is of the aggregate of its business carried on in Canada or in Québec and elsewhere, as that proportion would be determined under Chapters I and II of Title XXVII of the Regulation respecting the Taxation Act if the SIFT trust were a corporation, and

ii.  the provincial SIFT tax rate, within the meaning assigned by subsection 1 of section 248 of the Income Tax Act and expressed as a percentage, that would be applicable to the SIFT trust for the year if that definition applied in respect of the SIFT trust for that year and if section 414 of the Income Tax Regulations (C.R.C., c. 945) made under that Act were read without reference to its subsection 4; and

(c)  C is the net corporate income tax rate, within the meaning assigned by subsection 1 of section 248 of the Income Tax Act for the taxation year.

Any amount deducted by a SIFT trust, in accordance with paragraph a of the definition of “taxable distributions amount” in the first paragraph, in computing the amount that would have been its taxable income for a taxation year in which it is not subject to tax under Part I, is deemed to have been deducted in computing its taxable income for the year for the purposes of Part I.

2009, c. 5, s. 534; 2009, c. 15, s. 424; 2010, c. 25, s. 219; 2017, c. 1, s. 385.

2010-10-27

1129.70. In this Part, unless the context indicates otherwise,

“Canadian real, immovable or resource property” means

(a)  a property that would, but for the definition of “real or immovable property”, be a real or immovable property situated in Canada;

(b)  a Canadian resource property;

(c)  a timber resource property;

(d)  a share of the capital stock of a corporation, an income or capital interest in a trust or an interest in a partnership (other than a taxable Canadian corporation, a SIFT trust or a SIFT partnership, as the case may be), if more than 50% of the fair market value of the share or interest is derived directly or indirectly from one or any combination of properties described in paragraphs a to c; or

(e)  any right to or interest in a property described in any of paragraphs a to d;

“Canadian resident partnership” at any time means a partnership that, at that time,

(a)  is a Canadian partnership, within the meaning of section 1;

(b)  would, if it were a corporation, be resident in Canada, being thus considered a partnership that has its central management and control in Canada; or

(c)  was formed under the laws of a province;

“entity” means a corporation, trust or partnership;

“equity”, of an entity, means

(a)  if the entity is a corporation, a share of its capital stock;

(b)  if the entity is a trust, an income or capital interest in the entity;

(c)  if the entity is a partnership, an interest as a member of the entity;

(d)  a liability of the entity (and, for purposes of the definition of “publicly-traded liability”, a security of the entity that is a liability of another entity) if

i.  the liability is convertible into, or exchangeable for, equity of the entity or of another entity, or

ii.  any amount paid or payable in respect of the liability is contingent on the use of or production from property, is determined on the basis of such use or production, or is computed by reference to revenue, profit, cash flow, commodity price or any other similar criterion or by reference to dividends paid or payable to shareholders of any class of shares of the capital stock of a corporation, or to income or capital paid or payable to any member of a partnership or beneficiary under a trust; and

(e)  a right to, or to acquire, anything described in this paragraph and any of paragraphs a to d;

“equity value” of an entity at any time means the fair market value at that time of the aggregate of

(a)  if the entity is a corporation, all of the issued and outstanding shares of the capital stock of the corporation;

(b)  if the entity is a trust, all of the income or capital interests in the trust; and

(c)  if the entity is a partnership, all of the interests in the partnership;

“establishment” has the meaning assigned by sections 12 to 16.2;

“excluded subsidiary entity”, for a taxation year, means an entity none of the equity of which is at any time in the year

(a)  listed on a stock exchange or other public market or traded on such an exchange or other market; nor

(b)  held by any person or partnership other than

i.  a real estate investment trust,

ii.  a taxable Canadian corporation,

iii.  a SIFT trust or a trust that would be a SIFT trust but for subsection 3 of section 534 of the Act giving effect to the Budget Speech delivered on 24 May 2007, to the 1 June 2007 Ministerial Statement Concerning the Government’s 2007-2008 Budgetary Policy and to certain other budget statements (2009, chapter 5),

iv.  a SIFT partnership or a partnership that would be a SIFT partnership but for subsection 3 of section 534 of the Act giving effect to the Budget Speech delivered on 24 May 2007, to the 1 June 2007 Ministerial Statement Concerning the Government’s 2007-2008 Budgetary Policy and to certain other budget statements, or

v.  an excluded subsidiary entity for the year;

“investment”, in a trust or partnership, means the following property, but does not include an unaffiliated publicly-traded liability of the trust or partnership, nor regulated innovative capital:

(a)  a property that is a security of the trust or partnership, or

(b)  a right which may reasonably be considered to replicate a return on, or the value of, a security of the trust or partnership;

“non-portfolio earnings” of a SIFT entity for a taxation year means the aggregate of

(a)  the amount by which the aggregate of all amounts each of which is the entity’s income for the year determined under Part I and derived from a business carried on by it in Canada or from a non-portfolio property (other than income that is a taxable dividend received by the entity), exceeds the aggregate of all amounts each of which is the entity’s loss for the year determined under Part I and derived from a business carried on by it in Canada or from a non-portfolio property; and

(b)  the amount by which the aggregate of the allowable capital losses of the entity determined under Part I and derived from dispositions of non-portfolio properties during the year is exceeded by the aggregate of

i.  the taxable capital gains of the entity determined under Part I and derived from dispositions of non-portfolio properties during the year, and

ii.  if the entity is a SIFT trust, one half of the aggregate of all amounts each of which is deemed under section 1106 to be a capital gain of the trust for the year in respect of its non-portfolio properties for the year;

“non-portfolio property” of a trust or partnership for a taxation year means a property, held by the trust or partnership at any time in the year, that is

(a)  a security of a subject entity (other than a portfolio investment entity), if at that time the trust or partnership holds

i.  securities of the subject entity that have a total fair market value that is greater than the amount that is 10% of the equity value of the subject entity, or

ii.  securities of the subject entity and securities of entities affiliated with the subject entity that together have a total fair market value that is greater than the amount that is 50% of the equity value of the trust or partnership;

(b)  a Canadian real, immovable or resource property, if at any time in the year the total fair market value of all properties held by the trust or partnership that are Canadian real, immovable or resource properties is greater than the amount that is 50% of the equity value of the trust or partnership; or

(c)  a property that the trust or partnership, or a person or partnership with whom the trust or partnership does not deal at arm’s length, uses at that time in the course of carrying on a business in Canada;

“portfolio investment entity” at any time means an entity that does not at that time hold any non-portfolio property;

“public market” includes any trading system or other organized facility on which securities that are qualified for public distribution are listed or traded, but does not include a facility that is operated solely to carry out the issuance of a security or its redemption, acquisition or cancellation by its issuer;

“publicly-traded liability”, of an entity, means a liability that is a security of the entity, that is not equity of the entity and that is listed on a stock exchange or other public market or traded on such an exchange or other market;

“qualified property” of a trust means a property, held by the trust, that is

(a)  a real or immovable property;

(b)  a security of a subject entity, if the entity derives all or substantially all of its revenues from maintaining, improving, leasing or managing real or immovable properties that are capital properties of the trust or of another entity of which the trust holds a share or an interest, including real or immovable properties that the trust, or the other entity, holds together with one or more other persons or partnerships;

(c)  a security of a subject entity, if the entity holds no property other than

i.  titles of ownership in real or immovable properties of the trust or of another subject entity all of the securities of which are held by the trust, including real or immovable properties that the trust or the other subject entity holds together with one or more other persons or partnerships, or

ii.  property described in paragraph d; or

(d)  ancillary to the earning by the trust of the amounts described in subparagraph i or iii of paragraph b of the definition of “real estate investment trust”;

“real estate investment trust” for a taxation year means a trust that is resident in Canada throughout the year, if

(a)  the trust at no time in the year holds any non-portfolio property other than qualified properties;

(b)  not less than 95% of the trust’s revenues for the year are derived from one or any combination of the following sources:

i.  rent from real or immovable properties,

ii.  interest,

iii.  capital gains from dispositions of real or immovable properties,

iv.  dividends, and

v.  royalties;

(c)  not less than 75% of the trust’s revenues for the year are derived from one or any combination of the following sources:

i.  rent from real or immovable properties,

ii.  interest payable on debts secured by hypothecs on real or immovable properties, and

iii.  capital gains from dispositions of real or immovable properties; and

(d)  at each time in the year an amount, that is equal to 75% or more of the equity value of the trust at that time, is the amount that is the total fair market value of all properties held by the trust each of which is real or immovable property, indebtedness of a Canadian corporation represented by a bankers’ acceptance, property described in paragraph a or b of the definition of “qualified investment” in section 204 of the Income Tax Act, or a deposit with a credit union;

“real or immovable property” of a taxpayer includes a security held by the taxpayer that is a security of a trust that satisfies the conditions set out in paragraphs a to d of the definition of “real estate investment trust” or a security of another entity that would, if it were a trust, satisfy those conditions, or an interest in real property or a real right in an immovable, other than a right to a rental or royalty described in paragraph d or d.1 of section 370, but does not include a depreciable property, other than

(a)  a property included, for the purposes of Part I, in Class 1, 3 or 31 of Schedule B to the Regulation respecting the Taxation Act (chapter I-3, r. 1), otherwise than by an election permitted by regulation;

(b)  a property ancillary to the ownership or utilization of a property described in paragraph a; or

(c)  a lease in, or a leasehold interest in respect of, land or property described in paragraph a;

“regulated innovative capital” means equity of a trust, if

(a)  since 1 November 2006, the equity has been authorized, by the Superintendent of Financial Institutions of Canada, by the Autorité des marchés financiers or by a provincial regulatory authority having powers similar to those of the Superintendent of Financial Institutions of Canada, as Tier 1 or Tier 2 capital of a financial institution (within the meaning of subsection 1 of section 181 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.));

(b)  the terms and conditions of the equity have not changed after 1 August 2008;

(c)  the trust has not issued any equity after 31 October 2006; and

(d)  the trust does not hold any non-portfolio property other than

i.  liabilities of the financial institution, and

ii.  shares of the capital stock of the financial institution that were acquired by the trust for the sole purpose of satisfying a right to require the trust to accept, as demanded by a holder of the equity, the surrender of the equity;

“rent from real or immovable properties” includes rent or similar payments for the use of, or right to use, real or immovable properties, the amounts paid for services ancillary to the rental of real or immovable properties and customarily supplied or rendered in connection with the rental of real or immovable properties and a payment that is included under paragraph a of section 663 in computing the recipient’s income and that was derived from the part of a trust’s income (determined without reference to section 657) that may be attributed to rent from real or immovable properties, but does not include

(a)  amounts paid for services supplied or rendered, other than such ancillary services, to the tenants of real or immovable properties;

(b)  fees for managing or operating real or immovable properties;

(c)  amounts paid for the occupation of, use of, or right to use a room in a hotel or other similar lodging facility; or

(d)  rent based on profits;

“security” of a particular entity means any right, whether immediate or future and whether absolute or contingent, conferred by the particular entity or by an entity that is affiliated with the particular entity, to receive an amount that can reasonably be considered to be all or any part of the capital, of the revenue or of the income of the particular entity, or as interest paid or payable by the particular entity, and includes

(a)  a liability of the particular entity;

(b)  if the particular entity is a corporation,

i.  a share of the capital stock of the corporation, and

ii.  a right to control in any manner whatever the voting rights of a share of the capital stock of the corporation;

(c)  if the particular entity is a trust, an income or a capital interest in the particular entity;

(d)  if the particular entity is a partnership, an interest as a member of the particular entity; and

(e)  a right to, or to acquire, anything described in this paragraph and any of paragraphs a to d;

“SIFT entity”, being a specified investment flow-through entity, means a SIFT trust or a SIFT partnership;

“SIFT partnership”, being a specified investment flow-through partnership, for a taxation year, means a partnership other than an excluded subsidiary entity for the year that meets the following conditions at any time during the year:

(a)  the partnership is a Canadian resident partnership;

(b)  investments in the partnership are listed on a stock exchange or other public market or traded on such an exchange or other market; and

(c)  the partnership holds one or more non-portfolio properties;

“SIFT partnership balance-due day” for a taxation year means the day, determined in accordance with section 1086R80 of the Regulation respecting the Taxation Act, on or before which the partnership return provided for in section 1086R78 of that Regulation is required to be filed for the year;

“SIFT trust”, being a specified investment flow-through trust, for a taxation year means a trust (other than a real estate investment trust or an excluded subsidiary entity for the year) that meets the following conditions at any time during the year:

(a)  the trust is resident in Canada;

(b)  investments in the trust are listed on a stock exchange or other public market or traded on such an exchange or other market; and

(c)  the trust holds one or more non-portfolio properties;

“subject entity” means a person or partnership that is

(a)  a corporation resident in Canada;

(b)  a trust resident in Canada;

(c)  a Canadian resident partnership; or

(d)  a person not resident in Canada, or a partnership that is not described in paragraph c, the principal source of income of which is one or any combination of sources in Canada;

“taxable distributions amount”, of a SIFT trust for a taxation year, means the lesser of

(a)  the taxable income for the year of the SIFT trust, determined under Part I, or, if the SIFT trust is not subject to taxation under Part I, the amount that would be its taxable income for the year if it were determined in accordance with Part I, on the assumption that its income is equal to the amount determined in its respect in accordance with paragraph b; and

(b)  the amount determined by the formula

A/(1 - (B + C));

“taxable non-portfolio earnings” of a SIFT partnership, for a taxation year, means the lesser of

(a)  the amount that would, if the SIFT partnership were a taxpayer for the purposes of Part I and if section 600 were read without reference to its paragraph d, be its income for the year as determined under section 28; and

(b)  its non-portfolio earnings for the year;

“taxation year” means

(a)  in the case of a partnership, a fiscal period within the meaning of Part I;

(b)  in the case of a trust, a calendar year; and

(c)  in any other case, a taxation year within the meaning of Part I;

“unaffiliated publicly-traded liability”, of an entity at any time means a publicly-traded liability of the entity if, at that time the fair market value of all publicly-traded liabilities of the entity that are held at that time by persons or partnerships that are not affiliated with the entity is at least 90% of the fair market value of all publicly-traded liabilities of the entity.

In the formula in the definition of “taxable distributions amount” in the first paragraph,

(a)  A is the SIFT trust’s non-deductible distributions amount for the taxation year, within the meaning of section 663.4;

(b)  B is the basic rate, expressed as a decimal fraction, that is determined in respect of the SIFT trust for the taxation year under the third paragraph of section 1129.71 or, if the SIFT trust has an establishment outside Québec in the year, the aggregate of the following rates:

i.  that basic rate represented by the proportion that its business carried on in Québec is of the aggregate of its business carried on in Canada or in Québec and elsewhere, as that proportion would be determined under Chapters I and II of Title XXVII of the Regulation respecting the Taxation Act if the SIFT trust were a corporation, and

ii.  the provincial SIFT tax rate, within the meaning assigned by subsection 1 of section 248 of the Income Tax Act and expressed as a percentage, that would be applicable to the SIFT trust for the year if that definition applied in respect of the SIFT trust for that year and if section 414 of the Income Tax Regulations (C.R.C., c. 945) made under that Act were read without reference to its subsection 4; and

(c)  C is the net corporate income tax rate, within the meaning assigned by subsection 1 of section 248 of the Income Tax Act for the taxation year.

Any amount deducted by a SIFT trust, in accordance with paragraph a of the definition of “taxable distributions amount” in the first paragraph, in computing the amount that would have been its taxable income for a taxation year in which it is not subject to tax under Part I, is deemed to have been deducted in computing its taxable income for the year for the purposes of Part I.

2009, c. 5, s. 534; 2009, c. 15, s. 424; 2010, c. 25, s. 219.

2009-06-04

1129.70. In this Part, unless the context indicates otherwise,

“Canadian real, immovable or resource property” means

(a)  a property that would, but for the definition of “real or immovable property”, be a real or immovable property situated in Canada;

(b)  a Canadian resource property;

(c)  a timber resource property;

(d)  a share of the capital stock of a corporation, an income or a capital interest in a trust or an interest in a partnership, if more than 50% of the fair market value of the share or interest is derived directly or indirectly from one or any combination of properties described in paragraphs a to c; or

(e)  any right to or interest in a property described in any of paragraphs a to d;

“Canadian resident partnership” at any time means a partnership that, at that time,

(a)  is a Canadian partnership, within the meaning of section 1;

(b)  would, if it were a corporation, be resident in Canada, being thus considered a partnership that has its central management and control in Canada; or

(c)  was formed under the laws of a province;

“entity” means a corporation, trust or partnership;

“equity value” of an entity at any time means the fair market value at that time of the aggregate of

(a)  if the entity is a corporation, all of the issued and outstanding shares of the capital stock of the corporation;

(b)  if the entity is a trust, all of the income or capital interests in the trust; and

(c)  if the entity is a partnership, all of the interests in the partnership;

“establishment” has the meaning assigned by sections 12 to 16.2;

“investment”, in a trust or partnership, means

(a)  a property that is a security of the trust or partnership; or

(b)  a right which may reasonably be considered to replicate a return on, or the value of, a security of the trust or partnership;

“non-portfolio earnings” of a SIFT entity for a taxation year means the aggregate of

(a)  the amount by which the aggregate of all amounts each of which is the entity’s income for the year determined under Part I and derived from a business carried on by it in Canada or from a non-portfolio property (other than income that is a taxable dividend received by the entity), exceeds the aggregate of all amounts each of which is the entity’s loss for the year determined under Part I and derived from a business carried on by it in Canada or from a non-portfolio property; and

(b)  the amount by which the aggregate of the allowable capital losses of the entity determined under Part I and derived from dispositions of non-portfolio properties during the year is exceeded by the aggregate of

i.  the taxable capital gains of the entity determined under Part I and derived from dispositions of non-portfolio properties during the year, and

ii.  if the entity is a SIFT trust, one half of the aggregate of all amounts each of which is deemed under section 1106 to be a capital gain of the trust for the year in respect of its non-portfolio properties for the year;

“non-portfolio property” of a trust or partnership for a taxation year means a property, held by the trust or partnership at any time in the year, that is

(a)  a security of a subject entity, if at that time the trust or partnership holds

i.  securities of the subject entity that have a total fair market value that is greater than the amount that is 10% of the equity value of the subject entity, or

ii.  securities of the subject entity and securities of entities affiliated with the subject entity that together have a total fair market value that is greater than the amount that is 50% of the equity value of the trust or partnership;

(b)  a Canadian real, immovable or resource property, if at any time in the year the total fair market value of all properties held by the trust or partnership that are Canadian real, immovable or resource properties is greater than the amount that is 50% of the equity value of the trust or partnership; or

(c)  a property that the trust or partnership, or a person or partnership with whom the trust or partnership does not deal at arm’s length, uses at that time in the course of carrying on a business in Canada;

“public market” includes any trading system or other organized facility on which securities that are qualified for public distribution are listed or traded, but does not include a facility that is operated solely to carry out the issuance of a security or its redemption, acquisition or cancellation by its issuer;

“qualified property” of a trust means a property, held by the trust, that is

(a)  a real or immovable property situated in Canada;

(b)  a security of a subject entity, if the entity derives all or substantially all of its revenues from maintaining, improving, leasing or managing real or immovable properties that are capital properties of the trust or of another entity of which the trust holds a share or an interest, including real or immovable properties that the trust, or the other entity, holds together with one or more other persons or partnerships;

(c)  a security of a subject entity, if the entity holds no property other than

i.  titles of ownership in real or immovable properties of the trust, including real or immovable properties that the trust holds together with one or more other persons or partnerships, or

ii.  property described in paragraph d; or

(d)  ancillary to the earning by the trust of the amounts described in subparagraph i or iii of paragraph b of the definition of “real estate investment trust”;

“real estate investment trust” for a taxation year means a trust that is resident in Canada throughout the year, if

(a)  the trust at no time in the year holds any non-portfolio property other than qualified properties;

(b)  not less than 95% of the trust’s revenues for the year are derived from one or any combination of the following sources:

i.  rent from real or immovable properties,

ii.  interest,

iii.  capital gains from dispositions of real or immovable properties,

iv.  dividends, and

v.  royalties;

(c)  not less than 75% of the trust’s revenues for the year are derived from one or any combination of the following sources:

i.  rent from real or immovable properties, to the extent that it is derived from real or immovable properties situated in Canada,

ii.  interest payable on debts secured by hypothecs on real or immovable properties situated in Canada, and

iii.  capital gains from dispositions of real or immovable properties situated in Canada; and

(d)  at no time in the year is the total fair market value of all properties held by the trust—each of which is a real or immovable property situated in Canada, cash, or a property described in paragraph a of the definition of “fully exempt interest” in subsection 3 of section 212 of the Income Tax Act (Revised Statutes of Canada, 1985, chapter 1, 5th Supplement)—less than 75% of the equity value of the trust at that time;

“real or immovable property” of a taxpayer includes a security held by the taxpayer that is a security of a trust that satisfies the conditions set out in paragraphs a to d of the definition of “real estate investment trust” or a security of another entity that would, if it were a trust, satisfy those conditions, or an interest in real property or a real right in an immovable, other than a right to a rental or royalty described in paragraph d or d.1 of section 370, but does not include a depreciable property, other than

(a)  a property included, for the purposes of Part I, in Class 1, 3 or 31 of Schedule B to the Regulation respecting the Taxation Act (R.R.Q., c. I-3, r. 1), otherwise than by an election permitted by regulation;

(b)  a property ancillary to the ownership or utilization of a property described in paragraph a; or

(c)  a lease in, or a leasehold interest in respect of, land or property described in paragraph a;

“rent from real or immovable properties” includes rent or similar payments for the use of, or right to use, real or immovable properties and the amounts paid for services ancillary to the rental of real or immovable properties and customarily supplied or rendered in connection with the rental of real or immovable properties, but does not include

(a)  amounts paid for services supplied or rendered, other than such ancillary services, to the tenants of real or immovable properties;

(b)  fees for managing or operating real or immovable properties;

(c)  amounts paid for the occupation of, use of, or right to use a room in a hotel or other similar lodging facility; or

(d)  rent based on profits;

“security” of a particular entity means any right, whether immediate or future and whether absolute or contingent, conferred by the particular entity or by an entity that is affiliated with the particular entity, to receive an amount that can reasonably be considered to be all or any part of the capital, of the revenue or of the income of the particular entity, or as interest paid or payable by the particular entity, and includes

(a)  a liability of the particular entity;

(b)  if the particular entity is a corporation,

i.  a share of the capital stock of the corporation, and

ii.  a right to control in any manner whatever the voting rights of a share of the capital stock of the corporation;

(c)  if the particular entity is a trust, an income or a capital interest in the particular entity;

(d)  if the particular entity is a partnership, an interest as a member of the particular entity; and

(e)  a right to, or to acquire, anything described in this paragraph and any of paragraphs a to d;

“SIFT entity”, being a specified investment flow-through entity, means a SIFT trust or a SIFT partnership;

“SIFT partnership”, being a specified investment flow-through partnership, for a taxation year, means a partnership that meets the following conditions at any time during the year:

(a)  the partnership is a Canadian resident partnership;

(b)  investments in the partnership are listed or traded on a stock exchange or other public market; and

(c)  the partnership holds one or more non-portfolio properties;

“SIFT partnership balance-due day” for a taxation year means the day, determined in accordance with section 1086R80 of the Regulation respecting the Taxation Act, on or before which the partnership return provided for in section 1086R78 of that Regulation is required to be filed for the year;

“SIFT trust”, being a specified investment flow-through trust, for a taxation year means a trust, other than a real estate investment trust for the year, that meets the following conditions at any time during the year:

(a)  the trust is resident in Canada;

(b)  investments in the trust are listed or traded on a stock exchange or other public market; and

(c)  the trust holds one or more non-portfolio properties;

“subject entity” means a person or partnership that is

(a)  a corporation resident in Canada;

(b)  a trust resident in Canada;

(c)  a Canadian resident partnership; or

(d)  a person not resident in Canada, or a partnership that is not described in paragraph c, the principal source of income of which is one or any combination of sources in Canada;

“taxable distributions amount”, of a SIFT trust for a taxation year, means the lesser of

(a)  the taxable income for the year of the SIFT trust, determined under Part I, or, if the SIFT trust is not subject to taxation under Part I, the amount that would be its taxable income for the year if it were determined in accordance with Part I, on the assumption that its income is equal to the amount determined in its respect in accordance with paragraph b; and

(b)  the amount determined by the formula

A/(1 - (B + C));

“taxable non-portfolio earnings” of a SIFT partnership, for a taxation year, means the lesser of

(a)  the amount that would, if the SIFT partnership were a taxpayer for the purposes of Part I and if section 600 were read without reference to its paragraph d, be its income for the year as determined under section 28; and

(b)  its non-portfolio earnings for the year;

“taxation year” means

(a)  in the case of a partnership, a fiscal period within the meaning of Part I;

(b)  in the case of a trust, a calendar year; and

(c)  in any other case, a taxation year within the meaning of Part I.

In the formula in the definition of “taxable distributions amount” in the first paragraph,

(a)  A is the SIFT trust’s non-deductible distributions amount for the taxation year, within the meaning of section 663.4;

(b)  B is the basic rate, expressed as a decimal fraction, that is determined in respect of the SIFT trust for the taxation year under the third paragraph of section 1129.71 or, if the SIFT trust has an establishment outside Québec in the year, the aggregate of the following rates:

i.  that basic rate represented by the proportion that its business carried on in Québec is of the aggregate of its business carried on in Canada or in Québec and elsewhere, as that proportion would be determined under Chapters I and II of Title XXVII of the Regulation respecting the Taxation Act if the SIFT trust were a corporation, and

ii.  the provincial SIFT tax rate, within the meaning assigned by subsection 1 of section 248 of the Income Tax Act and expressed as a percentage, that would be applicable to the SIFT trust for the year if that definition applied in respect of the SIFT trust for that year and if section 414 of the Income Tax Regulations (C.R.C., c. 945) made under that Act were read without reference to its subsection 4; and

(c)  C is the net corporate income tax rate, within the meaning assigned by subsection 1 of section 248 of the Income Tax Act for the taxation year.

Any amount deducted by a SIFT trust, in accordance with paragraph a of the definition of “taxable distributions amount” in the first paragraph, in computing the amount that would have been its taxable income for a taxation year in which it is not subject to tax under Part I, is deemed to have been deducted in computing its taxable income for the year for the purposes of Part I.

In this Part, “capital interest”, “capital property”, “depreciable property”, “disposition”, “income interest”, “person”, “property”, “share”, “taxpayer” and “trust” have the meaning assigned by section 1.

2009, c. 5, s. 534; 2009, c. 15, s. 424.

2009-05-15

1129.70. In this Part, unless the context indicates otherwise,

“Canadian real, immovable or resource property” means

(a)  a property that would, but for the definition of “real or immovable property”, be a real or immovable property situated in Canada;

(b)  a Canadian resource property;

(c)  a timber resource property;

(d)  a share of the capital stock of a corporation, an income or a capital interest in a trust or an interest in a partnership, if more than 50% of the fair market value of the share or interest is derived directly or indirectly from one or any combination of properties described in paragraphs a to c; or

(e)  any right to or interest in a property described in any of paragraphs a to d;

“Canadian resident partnership” at any time means a partnership that, at that time,

(a)  is a Canadian partnership, within the meaning of section 1;

(b)  would, if it were a corporation, be resident in Canada, being thus considered a partnership that has its central management and control in Canada; or

(c)  was formed under the laws of a province;

“entity” means a corporation, trust or partnership;

“equity value” of an entity at any time means the fair market value at that time of the aggregate of

(a)  if the entity is a corporation, all of the issued and outstanding shares of the capital stock of the corporation;

(b)  if the entity is a trust, all of the income or capital interests in the trust; and

(c)  if the entity is a partnership, all of the interests in the partnership;

“establishment” has the meaning assigned by sections 12 to 16.2;

“investment”, in a trust or partnership, means

(a)  a property that is a security of the trust or partnership; or

(b)  a right which may reasonably be considered to replicate a return on, or the value of, a security of the trust or partnership;

“non-portfolio earnings” of a SIFT entity for a taxation year means the aggregate of

(a)  the amount by which the aggregate of all amounts each of which is the entity’s income for the year determined under Part I and derived from a business carried on by it in Canada or from a non-portfolio property (other than income that is a taxable dividend received by the entity), exceeds the aggregate of all amounts each of which is the entity’s loss for the year determined under Part I and derived from a business carried on by it in Canada or from a non-portfolio property; and

(b)  the amount by which the aggregate of the allowable capital losses of the entity determined under Part I and derived from dispositions of non-portfolio properties during the year is exceeded by the aggregate of

i.  the taxable capital gains of the entity determined under Part I and derived from dispositions of non-portfolio properties during the year, and

ii.  if the entity is a SIFT trust, one half of the aggregate of all amounts each of which is deemed under section 1106 to be a capital gain of the trust for the year in respect of its non-portfolio properties for the year;

“non-portfolio property” of a trust or partnership for a taxation year means a property, held by the trust or partnership at any time in the year, that is

(a)  a security of a subject entity, if at that time the trust or partnership holds

i.  securities of the subject entity that have a total fair market value that is greater than the amount that is 10% of the equity value of the subject entity, or

ii.  securities of the subject entity and securities of entities affiliated with the subject entity that together have a total fair market value that is greater than the amount that is 50% of the equity value of the trust or partnership;

(b)  a Canadian real, immovable or resource property, if at any time in the year the total fair market value of all properties held by the trust or partnership that are Canadian real, immovable or resource properties is greater than the amount that is 50% of the equity value of the trust or partnership; or

(c)  a property that the trust or partnership, or a person or partnership with whom the trust or partnership does not deal at arm’s length, uses at that time in the course of carrying on a business in Canada;

“public market” includes any trading system or other organized facility on which securities that are qualified for public distribution are listed or traded, but does not include a facility that is operated solely to carry out the issuance of a security or its redemption, acquisition or cancellation by its issuer;

“qualified property” of a trust means a property, held by the trust, that is

(a)  a real or immovable property situated in Canada;

(b)  a security of a subject entity, if the entity derives all or substantially all of its revenues from maintaining, improving, leasing or managing real or immovable properties that are capital properties of the trust or of another entity of which the trust holds a share or an interest, including real or immovable properties that the trust, or the other entity, holds together with one or more other persons or partnerships;

(c)  a security of a subject entity, if the entity holds no property other than

i.  titles of ownership in real or immovable properties of the trust, including real or immovable properties that the trust holds together with one or more other persons or partnerships, or

ii.  property described in paragraph d; or

(d)  ancillary to the earning by the trust of the amounts described in subparagraph i or iii of paragraph b of the definition of “real estate investment trust”;

“real estate investment trust” for a taxation year means a trust that is resident in Canada throughout the year, if

(a)  the trust at no time in the year holds any non-portfolio property other than qualified properties;

(b)  not less than 95% of the trust’s revenues for the year are derived from one or any combination of the following sources:

i.  rent from real or immovable properties,

ii.  interest,

iii.  capital gains from dispositions of real or immovable properties,

iv.  dividends, and

v.  royalties;

(c)  not less than 75% of the trust’s revenues for the year are derived from one or any combination of the following sources:

i.  rent from real or immovable properties, to the extent that it is derived from real or immovable properties situated in Canada,

ii.  interest payable on debts secured by hypothecs on real or immovable properties situated in Canada, and

iii.  capital gains from dispositions of real or immovable properties situated in Canada; and

(d)  at no time in the year is the total fair market value of all properties held by the trust—each of which is a real or immovable property situated in Canada, cash, or a property described in clause C of subparagraph ii of paragraph b of subsection 1 of section 212 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.))—less than 75% of the equity value of the trust at that time;

“real or immovable property” of a taxpayer includes a security held by the taxpayer that is a security of a trust that satisfies the conditions set out in paragraphs a to d of the definition of “real estate investment trust” or a security of another entity that would, if it were a trust, satisfy those conditions, or an interest in real property or a real right in an immovable, other than a right to a rental or royalty described in paragraph d or d.1 of section 370, but does not include a depreciable property, other than

(a)  a property included, for the purposes of Part I, in Class 1, 3 or 31 of Schedule B to the Regulation respecting the Taxation Act (R.R.Q., 1981, c. I-3, r. 1), otherwise than by an election permitted by regulation;

(b)  a property ancillary to the ownership or utilization of a property described in paragraph a; or

(c)  a lease in, or a leasehold interest in respect of, land or property described in paragraph a;

“rent from real or immovable properties” includes rent or similar payments for the use of, or right to use, real or immovable properties and the amounts paid for services ancillary to the rental of real or immovable properties and customarily supplied or rendered in connection with the rental of real or immovable properties, but does not include

(a)  amounts paid for services supplied or rendered, other than such ancillary services, to the tenants of real or immovable properties;

(b)  fees for managing or operating real or immovable properties;

(c)  amounts paid for the occupation of, use of, or right to use a room in a hotel or other similar lodging facility; or

(d)  rent based on profits;

“security” of a particular entity means any right, whether immediate or future and whether absolute or contingent, conferred by the particular entity or by an entity that is affiliated with the particular entity, to receive an amount that can reasonably be considered to be all or any part of the capital, of the revenue or of the income of the particular entity, or as interest paid or payable by the particular entity, and includes

(a)  a liability of the particular entity;

(b)  if the particular entity is a corporation,

i.  a share of the capital stock of the corporation, and

ii.  a right to control in any manner whatever the voting rights of a share of the capital stock of the corporation;

(c)  if the particular entity is a trust, an income or a capital interest in the particular entity;

(d)  if the particular entity is a partnership, an interest as a member of the particular entity; and

(e)  a right to, or to acquire, anything described in this paragraph and any of paragraphs a to d;

“SIFT entity”, being a specified investment flow-through entity, means a SIFT trust or a SIFT partnership;

“SIFT partnership”, being a specified investment flow-through partnership, for a taxation year, means a partnership that meets the following conditions at any time during the year:

(a)  the partnership is a Canadian resident partnership;

(b)  investments in the partnership are listed or traded on a stock exchange or other public market; and

(c)  the partnership holds one or more non-portfolio properties;

“SIFT partnership balance-due day” for a taxation year means the day, determined in accordance with section 1086R23.3 of the Regulation respecting the Taxation Act, on or before which the partnership return provided for in section 1086R23.1 of that Regulation is required to be filed for the year;

“SIFT trust”, being a specified investment flow-through trust, for a taxation year means a trust, other than a real estate investment trust for the year, that meets the following conditions at any time during the year:

(a)  the trust is resident in Canada;

(b)  investments in the trust are listed or traded on a stock exchange or other public market; and

(c)  the trust holds one or more non-portfolio properties;

“subject entity” means a person or partnership that is

(a)  a corporation resident in Canada;

(b)  a trust resident in Canada;

(c)  a Canadian resident partnership; or

(d)  a person not resident in Canada, or a partnership that is not described in paragraph c, the principal source of income of which is one or any combination of sources in Canada;

“taxable distributions amount”, of a SIFT trust for a taxation year, means the lesser of

(a)  the taxable income for the year of the SIFT trust, determined under Part I, or, if the SIFT trust is not subject to taxation under Part I, the amount that would be its taxable income for the year if it were determined in accordance with Part I, on the assumption that its income is equal to the amount determined in its respect in accordance with paragraph b; and

(b)  the amount determined by the formula

A/(1 - (B + C));

“taxable non-portfolio earnings” of a SIFT partnership, for a taxation year, means the lesser of

(a)  the amount that would, if the SIFT partnership were a taxpayer for the purposes of Part I and if section 600 were read without reference to its paragraph d, be its income for the year as determined under section 28; and

(b)  its non-portfolio earnings for the year;

“taxation year” means

(a)  in the case of a partnership, a fiscal period within the meaning of Part I;

(b)  in the case of a trust, a calendar year; and

(c)  in any other case, a taxation year within the meaning of Part I.

In the formula in the definition of “taxable distributions amount” in the first paragraph,

(a)  A is the SIFT trust’s non-deductible distributions amount for the taxation year, within the meaning of section 663.4;

(b)  B is the basic rate, expressed as a decimal fraction, that is determined in respect of the SIFT trust for the taxation year under the third paragraph of section 1129.71 or, if the SIFT trust has an establishment outside Québec in the year, the aggregate of the following rates:

i.  that basic rate represented by the proportion that its business carried on in Québec is of the aggregate of its business carried on in Canada or in Québec and elsewhere, as that proportion would be determined under Chapters I and II of Title XX of the Regulation respecting the Taxation Act if the SIFT trust were a corporation, and

ii.  the provincial SIFT tax rate, within the meaning assigned by subsection 1 of section 248 of the Income Tax Act and expressed as a percentage, that would be applicable to the SIFT trust for the year if that definition applied in respect of the SIFT trust for that year and if section 414 of the Income Tax Regulations (C.R.C., c. 945) made under that Act were read without reference to its subsection 4; and

(c)  C is the net corporate income tax rate, within the meaning assigned by subsection 1 of section 248 of the Income Tax Act for the taxation year.

Any amount deducted by a SIFT trust, in accordance with paragraph a of the definition of “taxable distributions amount” in the first paragraph, in computing the amount that would have been its taxable income for a taxation year in which it is not subject to tax under Part I, is deemed to have been deducted in computing its taxable income for the year for the purposes of Part I.

In this Part, “capital interest”, “capital property”, “depreciable property”, “disposition”, “income interest”, “person”, “property”, “share”, “taxpayer” and “trust” have the meaning assigned by section 1.

2009, c. 5, s. 534.