I-3 - Taxation Act

Section 692.8 Disposition versions

2019-06-19

692.8. Where at a particular time there is a qualifying disposition of property by a person or partnership, in this section referred to as the “transferor”, to a trust, in this section referred to as the “transferee trust”, the following rules apply:

(a)  the transferor’s proceeds of disposition of the property are deemed to be

i.  where the transferor makes a valid election under subparagraph i of paragraph a of subsection 3 of section 107.4 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) after 19 December 2006 in relation to the disposition, the greater of the cost amount to the transferor of the property immediately before the particular time and the amount specified in respect of the property in the election in accordance with that subparagraph i, and

ii.  in any other case, the cost amount to the transferor of the property immediately before the particular time;

(b)  the transferee trust’s cost of the property is deemed to be the amount by which the amount determined under subparagraph a in respect of the qualifying disposition exceeds the amount by which the transferor’s loss otherwise determined from the qualifying disposition would be reduced by reason of section 638.1, the third and fourth paragraphs of section 686 or sections 741 to 744.2, if the amount determined under subparagraph a were equal to the fair market value of the property at the particular time;

(c)  for the purposes of sections 93 to 104, Chapter III of Title III and any regulations made under paragraph a of section 130 or under section 130.1, if the property was depreciable property of a prescribed class of the transferor and its capital cost to the transferor exceeds the cost at which the transferee trust is deemed by this section to have acquired the property, the following rules apply:

i.  the capital cost of the property to the transferee trust is deemed to be the amount that was the capital cost of the property to the transferor, and

ii.  the excess is deemed to have been allowed as depreciation to the transferee trust in respect of the property for taxation years that ended before the particular time;

(d)  (subparagraph repealed);

(e)  if, as a result of a transaction or event, the property was deemed to be taxable Québec property or taxable Canadian property of the transferor under this subparagraph, subparagraph c of the first paragraph of section 280.6, subparagraph d of the first paragraph of section 301, any of sections 521, 538 and 540.4, paragraph b of section 540.6, section 554, subparagraph c of the second paragraph of section 614 or paragraph d of section 688.4, the property is also deemed to be, at any time that is within 60 months after the transaction or event, taxable Québec property or taxable Canadian property of the transferee trust;

(f)  where the transferor is a segregated fund trust, within the meaning of section 851.2, the following rules apply:

i.  section 851.14 does not apply in respect of a disposition of interest in the transferor that occurs in connection with the qualifying disposition, and

ii.  for the purpose of computing the amount referred to in section 851.14 in respect of a subsequent disposition of an interest in the transferee trust where the interest is deemed to exist in connection with a life insurance policy, the acquisition fee, within the meaning of section 851.17, in respect of the policy shall be determined as if each amount referred to in sections 851.17 and 851.18 in respect of the policyholder’s interest in the transferor had been determined in respect of the policyholder’s interest in the transferee trust;

(g)  if the transferor is a trust to which property was transferred by an individual, other than a trust, the following rules apply:

i.  where section 454 applied in respect of the property so transferred and it is reasonable to consider that the property was so transferred in anticipation of the individual ceasing to be resident in Canada, for the application of subparagraph a.3 of the first paragraph of section 653 and this subparagraph to a disposition by the transferee trust after the particular time, the transferee trust is deemed after the particular time to be a trust to which the individual had transferred property in anticipation of the individual ceasing to be resident in Canada and in circumstances to which section 454 applied, and

ii.  for the purposes of paragraph j of the definition of “excluded right or interest” in section 785.0.1 and the application of this subparagraph to a disposition by the transferee trust after the particular time, where the property so transferred was transferred in circumstances to which this section would apply if section 692.5 were read without reference to paragraphs h and i thereof, the transferee trust is deemed after the particular time to be a trust an interest in which was acquired by the individual as a consequence of a qualifying disposition;

(h)  if the transferor is a trust, other than a personal trust or a trust prescribed for the purposes of section 688, the transferee trust is deemed to be neither a personal trust nor a trust prescribed for the purposes of section 688;

(i)  if the transferor is a trust and a taxpayer disposes of all or part of a capital interest in the transferor because of the qualifying disposition and, as a consequence, acquires a capital interest or part of it in the transferee trust, the following rules apply:

i.  the taxpayer is deemed to dispose of the capital interest or part of it in the transferor for proceeds equal to the cost amount to the taxpayer of that interest or part of it immediately before the particular time, and

ii.  the taxpayer is deemed to acquire the capital interest or part of it in the transferee trust at a cost equal to the amount by which the cost amount referred to in subparagraph i exceeds the amount by which the taxpayer’s loss otherwise determined from the disposition referred to in subparagraph i would be reduced by reason of the third and fourth paragraphs of section 686, if the proceeds under that subparagraph were equal to the fair market value of the capital interest or part of it in the transferor immediately before the particular time;

(j)  where the transferor is a trust, a taxpayer’s beneficial ownership in the property ceases to be derived from the taxpayer’s capital interest in the transferor because of the qualifying disposition and no part of the taxpayer’s capital interest in the transferor was disposed of because of the qualifying disposition, there shall, immediately after the particular time, be added to the cost otherwise determined of the taxpayer’s capital interest in the transferee trust, the amount determined by the formula

A × [(B - C)/B] - D;

(k)  where subparagraph j applies to the qualifying disposition in respect of a taxpayer, the amount that would be determined under that subparagraph in respect of the qualifying disposition if the amount determined under subparagraph d of the second paragraph were nil shall, immediately after the particular time, be deducted in computing the cost otherwise determined of the taxpayer’s capital interest in the transferor;

(l)  where subparagraphs i and j do not apply in respect of the qualifying disposition, the transferor is deemed to acquire the capital interest or part of it in the transferee trust that is acquired as a consequence of the qualifying disposition

i.  where the transferee trust is a personal trust, at a cost equal to nil, and

ii.  in any other case, at a cost equal to the excess referred to in subparagraph b in respect of the qualifying disposition; and

(m)  for the purposes of section 684, where the transferor is a trust and a taxpayer disposes of all or part of an income interest in the transferor because of the qualifying disposition and, as a consequence, acquires an income interest or a part of an income interest in the transferee trust, the taxpayer is deemed not to dispose of any part of the income interest in the transferor at the particular time.

In the formula provided for in subparagraph j of the first paragraph,

(a)  A is the cost amount to the taxpayer of the taxpayer’s capital interest in the transferor immediately before the particular time;

(b)  B is the fair market value immediately before the particular time of the taxpayer’s capital interest in the transferor;

(c)  C is the fair market value at the particular time of the taxpayer’s capital interest in the transferor, determined as if the only property disposed of at the particular time were the particular property; and

(d)  D is the lesser of

i.  the amount by which the cost amount to the taxpayer of the taxpayer’s capital interest in the transferor immediately before the particular time exceeds the fair market value of the taxpayer’s capital interest in the transferor immediately before the particular time, and

ii.  the maximum amount by which the taxpayer’s loss from a disposition of a capital interest otherwise determined would be reduced by reason of the third and fourth paragraphs of section 686 if the taxpayer’s capital interest in the transferor had been disposed of immediately before the particular time.

Chapter V.2 of Title II of Book I applies in relation to an election made under subparagraph i of paragraph a of subsection 3 of section 107.4 of the Income Tax Act or in relation to an election made under this section before 20 December 2006.

2003, c. 2, s. 185; 2004, c. 8, s. 135; 2005, c. 1, s. 135; 2009, c. 5, s. 233; 2009, c. 15, s. 101; 2010, c. 25, s. 57; 2011, c. 6, s. 147; 2019, c. 14, s. 177.

2011-06-06

692.8. Where at a particular time there is a qualifying disposition of property by a person or partnership, in this section referred to as the “transferor”, to a trust, in this section referred to as the “transferee trust”, the following rules apply:

(a)  the transferor’s proceeds of disposition of the property are deemed to be

i.  where the transferor makes a valid election under subparagraph i of paragraph a of subsection 3 of section 107.4 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) after 19 December 2006 in relation to the disposition, the greater of the cost amount to the transferor of the property immediately before the particular time and the amount specified in respect of the property in the election in accordance with that subparagraph i, and

ii.  in any other case, the cost amount to the transferor of the property immediately before the particular time;

(b)  the transferee trust’s cost of the property is deemed to be the amount by which the amount determined under subparagraph a in respect of the qualifying disposition exceeds the amount by which the transferor’s loss otherwise determined from the qualifying disposition would be reduced by reason of section 638.1, the third and fourth paragraphs of section 686 or sections 741 to 744.2, if the amount determined under subparagraph a were equal to the fair market value of the property at the particular time;

(c)  for the purposes of sections 93 to 104, Chapter III of Title III and any regulations made under paragraph a of section 130 or under section 130.1, if the property was depreciable property of a prescribed class of the transferor and its capital cost to the transferor exceeds the cost at which the transferee trust is deemed by this section to have acquired the property, the following rules apply:

i.  the capital cost of the property to the transferee trust is deemed to be the amount that was the capital cost of the property to the transferor, and

ii.  the excess is deemed to have been allowed as depreciation to the transferee trust in respect of the property for taxation years that ended before the particular time;

(d)  if the property was incorporeal capital property of the transferor in respect of a business of the transferor, the following rules apply:

i.  for the purposes of Division III of Chapter II of Title III, Chapter III of Title III and sections 188 and 189, where the incorporeal capital amount of the transferor in respect of the property exceeds the cost at which the transferee trust is deemed by this section to have acquired the property, the following rules apply:

(1)  the incorporeal capital amount of the transferee trust in respect of the property is deemed to be the amount that was the incorporeal capital amount of the transferor in respect of the property, and

(2)  3/4 of the excess is deemed to have been deducted under paragraph b of section 130 by the transferee trust in respect of the property in computing its income for taxation years that ended before the particular time and after the adjustment time, within the meaning of section 107.1, of the transferee trust in respect of the business, and

ii.  for the purpose of determining after the particular time the amount required by paragraph b of section 105 to be included in computing the transferee trust’s income in respect of any subsequent disposition of the property of the business, there shall be added to the amount otherwise determined under subparagraph ii of subparagraph a of the second paragraph of section 107, the proportion of the amount determined under that subparagraph ii in respect of the business of the transferor immediately before the particular time that the fair market value of the incorporeal capital property immediately before the particular time is of the fair market value immediately before the particular time of all incorporeal capital property of the transferor in respect of the business;

(e)  if, as a result of a transaction or event, the property was deemed to be taxable Québec property or taxable Canadian property of the transferor under this subparagraph, subparagraph c of the first paragraph of section 280.6, subparagraph d of the first paragraph of section 301, any of sections 521, 538 and 540.4, paragraph b of section 540.6, section 554, subparagraph c of the second paragraph of section 614 or paragraph d of section 688.4, the property is also deemed to be, at any time that is within 60 months after the transaction or event, taxable Québec property or taxable Canadian property of the transferee trust;

(f)  where the transferor is a segregated fund trust, within the meaning of section 851.2, the following rules apply:

i.  section 851.14 does not apply in respect of a disposition of interest in the transferor that occurs in connection with the qualifying disposition, and

ii.  for the purpose of computing the amount referred to in section 851.14 in respect of a subsequent disposition of an interest in the transferee trust where the interest is deemed to exist in connection with a life insurance policy, the acquisition fee, within the meaning of section 851.17, in respect of the policy shall be determined as if each amount referred to in sections 851.17 and 851.18 in respect of the policyholder’s interest in the transferor had been determined in respect of the policyholder’s interest in the transferee trust;

(g)  if the transferor is a trust to which property was transferred by an individual, other than a trust, the following rules apply:

i.  where section 454 applied in respect of the property so transferred and it is reasonable to consider that the property was so transferred in anticipation of the individual ceasing to be resident in Canada, for the application of subparagraph a.3 of the first paragraph of section 653 and this subparagraph to a disposition by the transferee trust after the particular time, the transferee trust is deemed after the particular time to be a trust to which the individual had transferred property in anticipation of the individual ceasing to be resident in Canada and in circumstances to which section 454 applied, and

ii.  for the purposes of paragraph j of the definition of “excluded right or interest” in section 785.0.1 and the application of this subparagraph to a disposition by the transferee trust after the particular time, where the property so transferred was transferred in circumstances to which this section would apply if section 692.5 were read without reference to paragraphs h and i thereof, the transferee trust is deemed after the particular time to be a trust an interest in which was acquired by the individual as a consequence of a qualifying disposition;

(h)  if the transferor is a trust, other than a personal trust or a trust prescribed for the purposes of section 688, the transferee trust is deemed to be neither a personal trust nor a trust prescribed for the purposes of section 688;

(i)  if the transferor is a trust and a taxpayer disposes of all or part of a capital interest in the transferor because of the qualifying disposition and, as a consequence, acquires a capital interest or part of it in the transferee trust, the following rules apply:

i.  the taxpayer is deemed to dispose of the capital interest or part of it in the transferor for proceeds equal to the cost amount to the taxpayer of that interest or part of it immediately before the particular time, and

ii.  the taxpayer is deemed to acquire the capital interest or part of it in the transferee trust at a cost equal to the amount by which the cost amount referred to in subparagraph i exceeds the amount by which the taxpayer’s loss otherwise determined from the disposition referred to in subparagraph i would be reduced by reason of the third and fourth paragraphs of section 686, if the proceeds under that subparagraph were equal to the fair market value of the capital interest or part of it in the transferor immediately before the particular time;

(j)  where the transferor is a trust, a taxpayer’s beneficial ownership in the property ceases to be derived from the taxpayer’s capital interest in the transferor because of the qualifying disposition and no part of the taxpayer’s capital interest in the transferor was disposed of because of the qualifying disposition, there shall, immediately after the particular time, be added to the cost otherwise determined of the taxpayer’s capital interest in the transferee trust, the amount determined by the formula

A × [(B - C)/B] - D;

(k)  where subparagraph j applies to the qualifying disposition in respect of a taxpayer, the amount that would be determined under that subparagraph in respect of the qualifying disposition if the amount determined under subparagraph d of the second paragraph were nil shall, immediately after the particular time, be deducted in computing the cost otherwise determined of the taxpayer’s capital interest in the transferor;

(l)  where subparagraphs i and j do not apply in respect of the qualifying disposition, the transferor is deemed to acquire the capital interest or part of it in the transferee trust that is acquired as a consequence of the qualifying disposition

i.  where the transferee trust is a personal trust, at a cost equal to nil, and

ii.  in any other case, at a cost equal to the excess referred to in subparagraph b in respect of the qualifying disposition; and

(m)  for the purposes of section 684, where the transferor is a trust and a taxpayer disposes of all or part of an income interest in the transferor because of the qualifying disposition and, as a consequence, acquires an income interest or a part of an income interest in the transferee trust, the taxpayer is deemed not to dispose of any part of the income interest in the transferor at the particular time.

In the formula provided for in subparagraph j of the first paragraph,

(a)  A is the cost amount to the taxpayer of the taxpayer’s capital interest in the transferor immediately before the particular time;

(b)  B is the fair market value immediately before the particular time of the taxpayer’s capital interest in the transferor;

(c)  C is the fair market value at the particular time of the taxpayer’s capital interest in the transferor, determined as if the only property disposed of at the particular time were the particular property; and

(d)  D is the lesser of

i.  the amount by which the cost amount to the taxpayer of the taxpayer’s capital interest in the transferor immediately before the particular time exceeds the fair market value of the taxpayer’s capital interest in the transferor immediately before the particular time, and

ii.  the maximum amount by which the taxpayer’s loss from a disposition of a capital interest otherwise determined would be reduced by reason of the third and fourth paragraphs of section 686 if the taxpayer’s capital interest in the transferor had been disposed of immediately before the particular time.

Chapter V.2 of Title II of Book I applies in relation to an election made under subparagraph i of paragraph a of subsection 3 of section 107.4 of the Income Tax Act or in relation to an election made under this section before 20 December 2006.

2003, c. 2, s. 185; 2004, c. 8, s. 135; 2005, c. 1, s. 135; 2009, c. 5, s. 233; 2009, c. 15, s. 101; 2010, c. 25, s. 57; 2011, c. 6, s. 147.

2010-10-27

692.8. Where at a particular time there is a qualifying disposition of property by a person or partnership, in this section referred to as the “transferor”, to a trust, in this section referred to as the “transferee trust”, the following rules apply:

(a)  the transferor’s proceeds of disposition of the property are deemed to be

i.  where the transferor makes a valid election under subparagraph i of paragraph a of subsection 3 of section 107.4 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) after 19 December 2006 in relation to the disposition, the greater of the cost amount to the transferor of the property immediately before the particular time and the amount specified in respect of the property in the election in accordance with that subparagraph i, and

ii.  in any other case, the cost amount to the transferor of the property immediately before the particular time;

(b)  the transferee trust’s cost of the property is deemed to be the amount by which the amount determined under subparagraph a in respect of the qualifying disposition exceeds the amount by which the transferor’s loss otherwise determined from the qualifying disposition would be reduced by reason of section 638.1, the third and fourth paragraphs of section 686 or sections 741 to 744.2, if the amount determined under subparagraph a were equal to the fair market value of the property at the particular time;

(c)  for the purposes of sections 93 to 104, Chapter III of Title III and any regulations made under paragraph a of section 130 or under section 130.1, if the property was depreciable property of a prescribed class of the transferor and its capital cost to the transferor exceeds the cost at which the transferee trust is deemed by this section to have acquired the property, the following rules apply:

i.  the capital cost of the property to the transferee trust is deemed to be the amount that was the capital cost of the property to the transferor, and

ii.  the excess is deemed to have been allowed as depreciation to the transferee trust in respect of the property for taxation years that ended before the particular time;

(d)  if the property was incorporeal capital property of the transferor in respect of a business of the transferor, the following rules apply:

i.  for the purposes of Division III of Chapter II of Title III, Chapter III of Title III and sections 188 and 189, where the incorporeal capital amount of the transferor in respect of the property exceeds the cost at which the transferee trust is deemed by this section to have acquired the property, the following rules apply:

(1)  the incorporeal capital amount of the transferee trust in respect of the property is deemed to be the amount that was the incorporeal capital amount of the transferor in respect of the property, and

(2)  3/4 of the excess is deemed to have been deducted under paragraph b of section 130 by the transferee trust in respect of the property in computing its income for taxation years that ended before the particular time and after the adjustment time, within the meaning of section 107.1, of the transferee trust in respect of the business, and

ii.  for the purpose of determining after the particular time the amount required by paragraph b of section 105 to be included in computing the transferee trust’s income in respect of any subsequent disposition of the property of the business, there shall be added to the amount otherwise determined under subparagraph ii of subparagraph a of the second paragraph of section 107, the proportion of the amount determined under that subparagraph ii in respect of the business of the transferor immediately before the particular time that the fair market value of the incorporeal capital property immediately before the particular time is of the fair market value immediately before the particular time of all incorporeal capital property of the transferor in respect of the business;

(e)  if the property was deemed to be taxable Québec property or taxable Canadian property of the transferor under this subparagraph, subparagraph c of the first paragraph of section 280.6, subparagraph d of the first paragraph of section 301, any of sections 521, 538 and 540.4, paragraph b of section 540.6, section 554, subparagraph c of the second paragraph of section 614, subparagraph d.1 of the first paragraph of section 688 or paragraph d of section 688.4, the property is deemed to be taxable Québec property or taxable Canadian property of the transferee trust;

(f)  where the transferor is a segregated fund trust, within the meaning of section 851.2, the following rules apply:

i.  section 851.14 does not apply in respect of a disposition of interest in the transferor that occurs in connection with the qualifying disposition, and

ii.  for the purpose of computing the amount referred to in section 851.14 in respect of a subsequent disposition of an interest in the transferee trust where the interest is deemed to exist in connection with a life insurance policy, the acquisition fee, within the meaning of section 851.17, in respect of the policy shall be determined as if each amount referred to in sections 851.17 and 851.18 in respect of the policyholder’s interest in the transferor had been determined in respect of the policyholder’s interest in the transferee trust;

(g)  if the transferor is a trust to which property was transferred by an individual, other than a trust, the following rules apply:

i.  where section 454 applied in respect of the property so transferred and it is reasonable to consider that the property was so transferred in anticipation of the individual ceasing to be resident in Canada, for the application of subparagraph a.3 of the first paragraph of section 653 and this subparagraph to a disposition by the transferee trust after the particular time, the transferee trust is deemed after the particular time to be a trust to which the individual had transferred property in anticipation of the individual ceasing to be resident in Canada and in circumstances to which section 454 applied, and

ii.  for the purposes of paragraph j of the definition of “excluded right or interest” in section 785.0.1 and the application of this subparagraph to a disposition by the transferee trust after the particular time, where the property so transferred was transferred in circumstances to which this section would apply if section 692.5 were read without reference to paragraphs h and i thereof, the transferee trust is deemed after the particular time to be a trust an interest in which was acquired by the individual as a consequence of a qualifying disposition;

(h)  if the transferor is a trust, other than a personal trust or a trust prescribed for the purposes of section 688, the transferee trust is deemed to be neither a personal trust nor a trust prescribed for the purposes of section 688;

(i)  if the transferor is a trust and a taxpayer disposes of all or part of a capital interest in the transferor because of the qualifying disposition and, as a consequence, acquires a capital interest or part of it in the transferee trust, the following rules apply:

i.  the taxpayer is deemed to dispose of the capital interest or part of it in the transferor for proceeds equal to the cost amount to the taxpayer of that interest or part of it immediately before the particular time, and

ii.  the taxpayer is deemed to acquire the capital interest or part of it in the transferee trust at a cost equal to the amount by which the cost amount referred to in subparagraph i exceeds the amount by which the taxpayer’s loss otherwise determined from the disposition referred to in subparagraph i would be reduced by reason of the third and fourth paragraphs of section 686, if the proceeds under that subparagraph were equal to the fair market value of the capital interest or part of it in the transferor immediately before the particular time;

(j)  where the transferor is a trust, a taxpayer’s beneficial ownership in the property ceases to be derived from the taxpayer’s capital interest in the transferor because of the qualifying disposition and no part of the taxpayer’s capital interest in the transferor was disposed of because of the qualifying disposition, there shall, immediately after the particular time, be added to the cost otherwise determined of the taxpayer’s capital interest in the transferee trust, the amount determined by the formula

A × [(B - C)/B] - D;

(k)  where subparagraph j applies to the qualifying disposition in respect of a taxpayer, the amount that would be determined under that subparagraph in respect of the qualifying disposition if the amount determined under subparagraph d of the second paragraph were nil shall, immediately after the particular time, be deducted in computing the cost otherwise determined of the taxpayer’s capital interest in the transferor;

(l)  where subparagraphs i and j do not apply in respect of the qualifying disposition, the transferor is deemed to acquire the capital interest or part of it in the transferee trust that is acquired as a consequence of the qualifying disposition

i.  where the transferee trust is a personal trust, at a cost equal to nil, and

ii.  in any other case, at a cost equal to the excess referred to in subparagraph b in respect of the qualifying disposition; and

(m)  for the purposes of section 684, where the transferor is a trust and a taxpayer disposes of all or part of an income interest in the transferor because of the qualifying disposition and, as a consequence, acquires an income interest or a part of an income interest in the transferee trust, the taxpayer is deemed not to dispose of any part of the income interest in the transferor at the particular time.

In the formula provided for in subparagraph j of the first paragraph,

(a)  A is the cost amount to the taxpayer of the taxpayer’s capital interest in the transferor immediately before the particular time;

(b)  B is the fair market value immediately before the particular time of the taxpayer’s capital interest in the transferor;

(c)  C is the fair market value at the particular time of the taxpayer’s capital interest in the transferor, determined as if the only property disposed of at the particular time were the particular property; and

(d)  D is the lesser of

i.  the amount by which the cost amount to the taxpayer of the taxpayer’s capital interest in the transferor immediately before the particular time exceeds the fair market value of the taxpayer’s capital interest in the transferor immediately before the particular time, and

ii.  the maximum amount by which the taxpayer’s loss from a disposition of a capital interest otherwise determined would be reduced by reason of the third and fourth paragraphs of section 686 if the taxpayer’s capital interest in the transferor had been disposed of immediately before the particular time.

Chapter V.2 of Title II of Book I applies in relation to an election made under subparagraph i of paragraph a of subsection 3 of section 107.4 of the Income Tax Act or in relation to an election made under this section before 20 December 2006.

2003, c. 2, s. 185; 2004, c. 8, s. 135; 2005, c. 1, s. 135; 2009, c. 5, s. 233; 2009, c. 15, s. 101; 2010, c. 25, s. 57.

2009-06-04

692.8. Where at a particular time there is a qualifying disposition of property by a person or partnership, in this section referred to as the “transferor”, to a trust, in this section referred to as the “transferee trust”, the following rules apply:

(a)  the transferor’s proceeds of disposition of the property are deemed to be

i.  where the transferor makes a valid election under subparagraph i of paragraph a of subsection 3 of section 107.4 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) after 19 December 2006 in relation to the disposition, the greater of the cost amount to the transferor of the property immediately before the particular time and the amount specified in respect of the property in the election in accordance with that subparagraph i, and

ii.  in any other case, the cost amount to the transferor of the property immediately before the particular time;

(b)  the transferee trust’s cost of the property is deemed to be the amount by which the amount determined under subparagraph a in respect of the qualifying disposition exceeds the amount by which the transferor’s loss otherwise determined from the qualifying disposition would be reduced by reason of section 638.1, the third and fourth paragraphs of section 686 or sections 741 to 744.2, if the amount determined under subparagraph a were equal to the fair market value of the property at the particular time;

(c)  for the purposes of sections 93 to 104, Chapter III of Title III and any regulations made under paragraph a of section 130 or under section 130.1, if the property was depreciable property of a prescribed class of the transferor and its capital cost to the transferor exceeds the cost at which the transferee trust is deemed by this section to have acquired the property, the following rules apply:

i.  the capital cost of the property to the transferee trust is deemed to be the amount that was the capital cost of the property to the transferor, and

ii.  the excess is deemed to have been allowed as depreciation to the transferee trust in respect of the property for taxation years that ended before the particular time;

(d)  if the property was incorporeal capital property of the transferor in respect of a business of the transferor, the following rules apply:

i.  for the purposes of Division III of Chapter II of Title III, Chapter III of Title III and sections 188 and 189, where the incorporeal capital amount of the transferor in respect of the property exceeds the cost at which the transferee trust is deemed by this section to have acquired the property, the following rules apply:

(1)  the incorporeal capital amount of the transferee trust in respect of the property is deemed to be the amount that was the incorporeal capital amount of the transferor in respect of the property, and

(2)  3/4 of the excess is deemed to have been deducted under paragraph b of section 130 by the transferee trust in respect of the property in computing its income for taxation years that ended before the particular time and after the adjustment time, within the meaning of section 107.1, of the transferee trust in respect of the business, and

ii.  for the purpose of determining after the particular time the amount required by paragraph b of section 105 to be included in computing the transferee trust’s income in respect of any subsequent disposition of the property of the business, there shall be added to the amount otherwise determined under subparagraph ii of subparagraph a of the second paragraph of section 107, the proportion of the amount determined under that subparagraph ii in respect of the business of the transferor immediately before the particular time that the fair market value of the incorporeal capital property immediately before the particular time is of the fair market value immediately before the particular time of all incorporeal capital property of the transferor in respect of the business;

(e)  if the property was deemed to be taxable Canadian property of the transferor under this subparagraph, subparagraph c of the first paragraph of section 280.6, subparagraph d of the first paragraph of section 301, any of sections 521, 538, 540.2 and 554, subparagraph c of the second paragraph of section 614 or subparagraph d.1 of the first paragraph of section 688, the property is deemed to be taxable Canadian property of the transferee trust;

(f)  where the transferor is a segregated fund trust, within the meaning of section 851.2, the following rules apply:

i.  section 851.14 does not apply in respect of a disposition of interest in the transferor that occurs in connection with the qualifying disposition, and

ii.  for the purpose of computing the amount referred to in section 851.14 in respect of a subsequent disposition of an interest in the transferee trust where the interest is deemed to exist in connection with a life insurance policy, the acquisition fee, within the meaning of section 851.17, in respect of the policy shall be determined as if each amount referred to in sections 851.17 and 851.18 in respect of the policyholder’s interest in the transferor had been determined in respect of the policyholder’s interest in the transferee trust;

(g)  if the transferor is a trust to which property was transferred by an individual, other than a trust, the following rules apply:

i.  where section 454 applied in respect of the property so transferred and it is reasonable to consider that the property was so transferred in anticipation of the individual ceasing to be resident in Canada, for the application of subparagraph a.3 of the first paragraph of section 653 and this subparagraph to a disposition by the transferee trust after the particular time, the transferee trust is deemed after the particular time to be a trust to which the individual had transferred property in anticipation of the individual ceasing to be resident in Canada and in circumstances to which section 454 applied, and

ii.  for the purposes of paragraph j of the definition of “excluded right or interest” in section 785.0.1 and the application of this subparagraph to a disposition by the transferee trust after the particular time, where the property so transferred was transferred in circumstances to which this section would apply if section 692.5 were read without reference to paragraphs h and i thereof, the transferee trust is deemed after the particular time to be a trust an interest in which was acquired by the individual as a consequence of a qualifying disposition;

(h)  if the transferor is a trust, other than a personal trust or a trust prescribed for the purposes of section 688, the transferee trust is deemed to be neither a personal trust nor a trust prescribed for the purposes of section 688;

(i)  if the transferor is a trust and a taxpayer disposes of all or part of a capital interest in the transferor because of the qualifying disposition and, as a consequence, acquires a capital interest or part of it in the transferee trust, the following rules apply:

i.  the taxpayer is deemed to dispose of the capital interest or part of it in the transferor for proceeds equal to the cost amount to the taxpayer of that interest or part of it immediately before the particular time, and

ii.  the taxpayer is deemed to acquire the capital interest or part of it in the transferee trust at a cost equal to the amount by which the cost amount referred to in subparagraph i exceeds the amount by which the taxpayer’s loss otherwise determined from the disposition referred to in subparagraph i would be reduced by reason of the third and fourth paragraphs of section 686, if the proceeds under that subparagraph were equal to the fair market value of the capital interest or part of it in the transferor immediately before the particular time;

(j)  where the transferor is a trust, a taxpayer’s beneficial ownership in the property ceases to be derived from the taxpayer’s capital interest in the transferor because of the qualifying disposition and no part of the taxpayer’s capital interest in the transferor was disposed of because of the qualifying disposition, there shall, immediately after the particular time, be added to the cost otherwise determined of the taxpayer’s capital interest in the transferee trust, the amount determined by the formula

A × [(B - C)/B] - D;

(k)  where subparagraph j applies to the qualifying disposition in respect of a taxpayer, the amount that would be determined under that subparagraph in respect of the qualifying disposition if the amount determined under subparagraph d of the second paragraph were nil shall, immediately after the particular time, be deducted in computing the cost otherwise determined of the taxpayer’s capital interest in the transferor;

(l)  where subparagraphs i and j do not apply in respect of the qualifying disposition, the transferor is deemed to acquire the capital interest or part of it in the transferee trust that is acquired as a consequence of the qualifying disposition

i.  where the transferee trust is a personal trust, at a cost equal to nil, and

ii.  in any other case, at a cost equal to the excess referred to in subparagraph b in respect of the qualifying disposition; and

(m)  for the purposes of section 684, where the transferor is a trust and a taxpayer disposes of all or part of an income interest in the transferor because of the qualifying disposition and, as a consequence, acquires an income interest or a part of an income interest in the transferee trust, the taxpayer is deemed not to dispose of any part of the income interest in the transferor at the particular time.

In the formula provided for in subparagraph j of the first paragraph,

(a)  A is the cost amount to the taxpayer of the taxpayer’s capital interest in the transferor immediately before the particular time;

(b)  B is the fair market value immediately before the particular time of the taxpayer’s capital interest in the transferor;

(c)  C is the fair market value at the particular time of the taxpayer’s capital interest in the transferor, determined as if the only property disposed of at the particular time were the particular property; and

(d)  D is the lesser of

i.  the amount by which the cost amount to the taxpayer of the taxpayer’s capital interest in the transferor immediately before the particular time exceeds the fair market value of the taxpayer’s capital interest in the transferor immediately before the particular time, and

ii.  the maximum amount by which the taxpayer’s loss from a disposition of a capital interest otherwise determined would be reduced by reason of the third and fourth paragraphs of section 686 if the taxpayer’s capital interest in the transferor had been disposed of immediately before the particular time.

Chapter V.2 of Title II of Book I applies in relation to an election made under subparagraph i of paragraph a of subsection 3 of section 107.4 of the Income Tax Act or in relation to an election made under this section before 20 December 2006.

2003, c. 2, s. 185; 2004, c. 8, s. 135; 2005, c. 1, s. 135; 2009, c. 5, s. 233; 2009, c. 15, s. 101.

2009-05-15

692.8. Where at a particular time there is a disposition of property by a person or partnership, in this section referred to as the “transferor”, to a trust, in this section referred to as the “transferee trust”, the following rules apply:

(a)  the transferor’s proceeds of disposition of the property are deemed to be

i.  where the transferor makes a valid election under subparagraph i of paragraph a of subsection 3 of section 107.4 of the Income Tax Act (R.S.C. 1985, c. 1 (5th Suppl.)) after 19 December 2006 in relation to the disposition, the greater of the cost amount to the transferor of the property immediately before the particular time and the amount specified in respect of the property in the election in accordance with that subparagraph i, and

ii.  in any other case, the cost amount to the transferor of the property immediately before the particular time;

(b)  the transferee trust’s cost of the property is deemed to be the amount by which the amount determined under subparagraph a in respect of the qualifying disposition exceeds the amount by which the transferor’s loss otherwise determined from the qualifying disposition would be reduced by reason of section 638.1, the third and fourth paragraphs of section 686 or sections 741 to 744.2, if the amount determined under subparagraph a were equal to the fair market value of the property at the particular time;

(c)  for the purposes of sections 93 to 104, Chapter III of Title III and any regulations made under paragraph a of section 130 or under section 130.1, if the property was depreciable property of a prescribed class of the transferor and its capital cost to the transferor exceeds the cost at which the transferee trust is deemed by this section to have acquired the property, the following rules apply:

i.  the capital cost of the property to the transferee trust is deemed to be the amount that was the capital cost of the property to the transferor, and

ii.  the excess is deemed to have been allowed as depreciation to the transferee trust in respect of the property for taxation years that ended before the particular time;

(d)  if the property was incorporeal capital property of the transferor in respect of a business of the transferor, the following rules apply:

i.  for the purposes of Division III of Chapter II of Title III, Chapter III of Title III and sections 188 and 189, where the incorporeal capital amount of the transferor in respect of the property exceeds the cost at which the transferee trust is deemed by this section to have acquired the property, the following rules apply:

(1)  the incorporeal capital amount of the transferee trust in respect of the property is deemed to be the amount that was the incorporeal capital amount of the transferor in respect of the property, and

(2)  3/4 of the excess is deemed to have been deducted under paragraph b of section 130 by the transferee trust in respect of the property in computing its income for taxation years that ended before the particular time and after the adjustment time, within the meaning of section 107.1, of the transferee trust in respect of the business, and

ii.  for the purpose of determining after the particular time the amount required by paragraph b of section 105 to be included in computing the transferee trust’s income in respect of any subsequent disposition of the property of the business, there shall be added to the amount otherwise determined under subparagraph ii of subparagraph a of the second paragraph of section 107, the proportion of the amount determined under that subparagraph ii in respect of the business of the transferor immediately before the particular time that the fair market value of the incorporeal capital property immediately before the particular time is of the fair market value immediately before the particular time of all incorporeal capital property of the transferor in respect of the business;

(e)  if the property was deemed to be taxable Canadian property of the transferor under this subparagraph, subparagraph c of the first paragraph of section 280.6, subparagraph d of the first paragraph of section 301, any of sections 521, 538, 540.2 and 554, subparagraph c of the second paragraph of section 614 or subparagraph d.1 of the first paragraph of section 688, the property is deemed to be taxable Canadian property of the transferee trust;

(f)  where the transferor is a segregated fund trust, within the meaning of section 851.2, the following rules apply:

i.  section 851.14 does not apply in respect of a disposition of interest in the transferor that occurs in connection with the qualifying disposition, and

ii.  for the purpose of computing the amount referred to in section 851.14 in respect of a subsequent disposition of an interest in the transferee trust where the interest is deemed to exist in connection with a life insurance policy, the acquisition fee, within the meaning of section 851.17, in respect of the policy shall be determined as if each amount referred to in sections 851.17 and 851.18 in respect of the policyholder’s interest in the transferor had been determined in respect of the policyholder’s interest in the transferee trust;

(g)  if the transferor is a trust to which property was transferred by an individual, other than a trust, the following rules apply:

i.  where section 454 applied in respect of the property so transferred and it is reasonable to consider that the property was so transferred in anticipation of the individual ceasing to be resident in Canada, for the application of subparagraph a.3 of the first paragraph of section 653 and this subparagraph to a disposition by the transferee trust after the particular time, the transferee trust is deemed after the particular time to be a trust to which the individual had transferred property in anticipation of the individual ceasing to be resident in Canada and in circumstances to which section 454 applied, and

ii.  for the purposes of paragraph j of the definition of “excluded right or interest” in section 785.0.1 and the application of this subparagraph to a disposition by the transferee trust after the particular time, where the property so transferred was transferred in circumstances to which this section would apply if section 692.5 were read without reference to paragraphs h and i thereof, the transferee trust is deemed after the particular time to be a trust an interest in which was acquired by the individual as a consequence of a qualifying disposition;

(h)  if the transferor is a trust, other than a personal trust or a trust prescribed for the purposes of section 688, the transferee trust is deemed to be neither a personal trust nor a trust prescribed for the purposes of section 688;

(i)  if the transferor is a trust and a taxpayer disposes of all or part of a capital interest in the transferor because of the qualifying disposition and, as a consequence, acquires a capital interest or part of it in the transferee trust, the following rules apply:

i.  the taxpayer is deemed to dispose of the capital interest or part of it in the transferor for proceeds equal to the cost amount to the taxpayer of that interest or part of it immediately before the particular time, and

ii.  the taxpayer is deemed to acquire the capital interest or part of it in the transferee trust at a cost equal to the amount by which the cost amount referred to in subparagraph i exceeds the amount by which the taxpayer’s loss otherwise determined from the disposition referred to in subparagraph i would be reduced by reason of the third and fourth paragraphs of section 686, if the proceeds under that subparagraph were equal to the fair market value of the capital interest or part of it in the transferor immediately before the particular time;

(j)  where the transferor is a trust, a taxpayer’s beneficial ownership in the property ceases to be derived from the taxpayer’s capital interest in the transferor because of the qualifying disposition and no part of the taxpayer’s capital interest in the transferor was disposed of because of the qualifying disposition, there shall, immediately after the particular time, be added to the cost otherwise determined of the taxpayer’s capital interest in the transferee trust, the amount determined by the formula

A × [(B − C) / B] − D;

(k)  where subparagraph j applies to the qualifying disposition in respect of a taxpayer, the amount that would be determined under that subparagraph in respect of the qualifying disposition if the amount determined under subparagraph d of the second paragraph were nil shall, immediately after the particular time, be deducted in computing the cost otherwise determined of the taxpayer’s capital interest in the transferor;

(l)  where subparagraphs i and j do not apply in respect of the qualifying disposition, the transferor is deemed to acquire the capital interest or part of it in the transferee trust that is acquired as a consequence of the qualifying disposition

i.  where the transferee trust is a personal trust, at a cost equal to nil, and

ii.  in any other case, at a cost equal to the excess referred to in subparagraph b in respect of the qualifying disposition; and

(m)  for the purposes of section 684, where the transferor is a trust and a taxpayer disposes of all or part of an income interest in the transferor because of the qualifying disposition and, as a consequence, acquires an income interest or a part of an income interest in the transferee trust, the taxpayer is deemed not to dispose of any part of the income interest in the transferor at the particular time.

In the formula provided for in subparagraph j of the first paragraph,

(a)  A is the cost amount to the taxpayer of the taxpayer’s capital interest in the transferor immediately before the particular time;

(b)  B is the fair market value immediately before the particular time of the taxpayer’s capital interest in the transferor;

(c)  C is the fair market value at the particular time of the taxpayer’s capital interest in the transferor, determined as if the only property disposed of at the particular time were the particular property; and

(d)  D is the lesser of

i.  the amount by which the cost amount to the taxpayer of the taxpayer’s capital interest in the transferor immediately before the particular time exceeds the fair market value of the taxpayer’s capital interest in the transferor immediately before the particular time, and

ii.  the maximum amount by which the taxpayer’s loss from a disposition of a capital interest otherwise determined would be reduced by reason of the third and fourth paragraphs of section 686 if the taxpayer’s capital interest in the transferor had been disposed of immediately before the particular time.

Chapter V.2 of Title II of Book I applies in relation to an election made under subparagraph i of paragraph a of subsection 3 of section 107.4 of the Income Tax Act or in relation to an election made under this section before 20 December 2006.

2003, c. 2, s. 185; 2004, c. 8, s. 135; 2005, c. 1, s. 135; 2009, c. 5, s. 233.

2006-03-01

692.8. Where at a particular time there is a disposition of property by a person or partnership, in this section referred to as the “transferor”, to a trust, in this section referred to as the “transferee trust”, the following rules apply:

(a)  the transferor’s proceeds of disposition of the property are deemed to be

i.  where the transferor so elects by notifying the Minister in writing on or before the transferor’s filing-due date for its taxation year that includes the particular time, or at any later time that is acceptable to the Minister, the amount specified in the election that is not less than the cost amount to the transferor of the property immediately before the particular time and not more than the fair market value of the property at that time, and

ii.  in any other case, the cost amount to the transferor of the property immediately before the particular time;

(b)  the transferee trust’s cost of the property is deemed to be the amount by which the amount determined under subparagraph a in respect of the qualifying disposition exceeds the amount by which the transferor’s loss otherwise determined from the qualifying disposition would be reduced by reason of section 638.1, the third and fourth paragraphs of section 686 or sections 741 to 744.2, if the amount determined under subparagraph a were equal to the fair market value of the property at the particular time;

(c)  for the purposes of sections 93 to 104, Chapter III of Title III and any regulations made under paragraph a of section 130 or under section 130.1, if the property was depreciable property of a prescribed class of the transferor and its capital cost to the transferor exceeds the cost at which the transferee trust is deemed by this section to have acquired the property, the following rules apply:

i.  the capital cost of the property to the transferee trust is deemed to be the amount that was the capital cost of the property to the transferor, and

ii.  the excess is deemed to have been allowed as depreciation to the transferee trust in respect of the property for taxation years that ended before the particular time;

(d)  if the property was incorporeal capital property of the transferor in respect of a business of the transferor, the following rules apply:

i.  for the purposes of Division III of Chapter II of Title III, Chapter III of Title III and sections 188 and 189, where the incorporeal capital amount of the transferor in respect of the property exceeds the cost at which the transferee trust is deemed by this section to have acquired the property, the following rules apply:

(1)  the incorporeal capital amount of the transferee trust in respect of the property is deemed to be the amount that was the incorporeal capital amount of the transferor in respect of the property, and

(2)  3/4 of the excess is deemed to have been deducted under paragraph b of section 130 by the transferee trust in respect of the property in computing its income for taxation years that ended before the particular time and after the adjustment time, within the meaning of section 107.1, of the transferee trust in respect of the business, and

ii.  for the purpose of determining after the particular time the amount required by paragraph b of section 105 to be included in computing the transferee trust’s income in respect of any subsequent disposition of the property of the business, there shall be added to the amount otherwise determined under subparagraph ii of subparagraph a of the second paragraph of section 107, the proportion of the amount determined under that subparagraph ii in respect of the business of the transferor immediately before the particular time that the fair market value of the incorporeal capital property immediately before the particular time is of the fair market value immediately before the particular time of all incorporeal capital property of the transferor in respect of the business;

(e)  if the property was deemed to be taxable Canadian property of the transferor by this subparagraph, subparagraph d of the first paragraph of section 301, any of sections 521, 538 and 554, subparagraph c of the second paragraph of section 614 or subparagraph d.1 of the first paragraph of section 688, the property is deemed to be taxable Canadian property of the transferee trust;

(f)  where the transferor is a segregated fund trust, within the meaning of section 851.2, the following rules apply:

i.  section 851.14 does not apply in respect of a disposition of interest in the transferor that occurs in connection with the qualifying disposition, and

ii.  for the purpose of computing the amount referred to in section 851.14 in respect of a subsequent disposition of an interest in the transferee trust where the interest is deemed to exist in connection with a life insurance policy, the acquisition fee, within the meaning of section 851.17, in respect of the policy shall be determined as if each amount referred to in sections 851.17 and 851.18 in respect of the policyholder’s interest in the transferor had been determined in respect of the policyholder’s interest in the transferee trust;

(g)  if the transferor is a trust to which property was transferred by an individual, other than a trust, the following rules apply:

i.  where section 454 applied in respect of the property so transferred and it is reasonable to consider that the property was so transferred in anticipation of the individual ceasing to be resident in Canada, for the application of subparagraph a.3 of the first paragraph of section 653 and this subparagraph to a disposition by the transferee trust after the particular time, the transferee trust is deemed after the particular time to be a trust to which the individual had transferred property in anticipation of the individual ceasing to be resident in Canada and in circumstances to which section 454 applied, and

ii.  for the purposes of paragraph j of the definition of “excluded right or interest” in section 785.0.1 and the application of this subparagraph to a disposition by the transferee trust after the particular time, where the property so transferred was transferred in circumstances to which this section would apply if section 692.5 were read without reference to paragraphs h and i thereof, the transferee trust is deemed after the particular time to be a trust an interest in which was acquired by the individual as a consequence of a qualifying disposition;

(h)  if the transferor is a trust, other than a personal trust or a trust prescribed for the purposes of section 688, the transferee trust is deemed to be neither a personal trust nor a trust prescribed for the purposes of section 688;

(i)  if the transferor is a trust and a taxpayer disposes of all or part of a capital interest in the transferor because of the qualifying disposition and, as a consequence, acquires a capital interest or part of it in the transferee trust, the following rules apply:

i.  the taxpayer is deemed to dispose of the capital interest or part of it in the transferor for proceeds equal to the cost amount to the taxpayer of that interest or part of it immediately before the particular time, and

ii.  the taxpayer is deemed to acquire the capital interest or part of it in the transferee trust at a cost equal to the amount by which the cost amount referred to in subparagraph i exceeds the amount by which the taxpayer’s loss otherwise determined from the disposition referred to in subparagraph i would be reduced by reason of the third and fourth paragraphs of section 686, if the proceeds under that subparagraph were equal to the fair market value of the capital interest or part of it in the transferor immediately before the particular time;

(j)  where the transferor is a trust, a taxpayer’s beneficial ownership in the property ceases to be derived from the taxpayer’s capital interest in the transferor because of the qualifying disposition and no part of the taxpayer’s capital interest in the transferor was disposed of because of the qualifying disposition, there shall, immediately after the particular time, be added to the cost otherwise determined of the taxpayer’s capital interest in the transferee trust, the amount determined by the formula

A × [(B − C) / B] − D;

(k)  where subparagraph j applies to the qualifying disposition in respect of a taxpayer, the amount that would be determined under that subparagraph in respect of the qualifying disposition if the amount determined under subparagraph d of the second paragraph were nil shall, immediately after the particular time, be deducted in computing the cost otherwise determined of the taxpayer’s capital interest in the transferor;

(l)  where subparagraphs i and j do not apply in respect of the qualifying disposition, the transferor is deemed to acquire the capital interest or part of it in the transferee trust that is acquired as a consequence of the qualifying disposition

i.  where the transferee trust is a personal trust, at a cost equal to nil, and

ii.  in any other case, at a cost equal to the excess referred to in subparagraph b in respect of the qualifying disposition; and

(m)  for the purposes of section 684, where the transferor is a trust and a taxpayer disposes of all or part of an income interest in the transferor because of the qualifying disposition and, as a consequence, acquires an income interest or a part of an income interest in the transferee trust, the taxpayer is deemed not to dispose of any part of the income interest in the transferor at the particular time.

In the formula provided for in subparagraph j of the first paragraph,

(a)  A is the cost amount to the taxpayer of the taxpayer’s capital interest in the transferor immediately before the particular time;

(b)  B is the fair market value immediately before the particular time of the taxpayer’s capital interest in the transferor;

(c)  C is the fair market value at the particular time of the taxpayer’s capital interest in the transferor, determined as if the only property disposed of at the particular time were the particular property; and

(d)  D is the lesser of

i.  the amount by which the cost amount to the taxpayer of the taxpayer’s capital interest in the transferor immediately before the particular time exceeds the fair market value of the taxpayer’s capital interest in the transferor immediately before the particular time, and

ii.  the maximum amount by which the taxpayer’s loss from a disposition of a capital interest otherwise determined would be reduced by reason of the third and fourth paragraphs of section 686 if the taxpayer’s capital interest in the transferor had been disposed of immediately before the particular time.

2003, c. 2, s. 185; 2004, c. 8, s. 135; 2005, c. 1, s. 135.