• Marginal note:Loss restriction event  —  year end

  (4) If at any time a taxpayer is subject to a loss restriction event (other than a foreign affiliate, of a taxpayer resident in Canada, that did not carry on a business in Canada at any time in its last taxation year that began before that time), then for the purposes of this Act,

  • (a) subject to paragraph (b), the taxpayer’s taxation year that would, but for this paragraph, have included that time is deemed to end immediately before that time, a new taxation year of the taxpayer is deemed to begin at that time and, for the purpose of determining the taxpayer’s fiscal period after that time, the taxpayer is deemed not to have established a fiscal period before that time; and

  • (b) subject to paragraph 128(1)(d), section 128.1 and paragraphs 142.6(1)(a) and 149(10)(a), and notwithstanding subsections (1) and (3), if the taxpayer’s taxation year that would, but for this subsection, have been its last taxation year that ended before that time, would, but for this paragraph, have ended within the seven-day period that ended immediately before that time, that taxation year is, except if the taxpayer is subject to a loss restriction event within that period, deemed to end immediately before that time, provided that the taxpayer so elects in its return of income under Part I for that taxation year.

• (e) a partnership and a majority-interest partner of the partnership;

• (a) if one person held the interests of all members of the group, that person would be a majority-interest partner of the partnership; and

• (iv) in determining whether a contributor to one trust is affiliated with a contributor to another trust, individuals connected by blood relationship, marriage, common-law partnership or adoption are deemed to be affiliated with one another.

Marginal note:Definitions

• 251.2 (1) The following definitions apply in this section.

  “beneficiary”

  « bénéficiaire »

  “beneficiary” has the same meaning as in subsection 251.1(3).

  “equity”

  « capitaux propres »

  “equity” has the same meaning as in subsection 122.1(1) read without reference to paragraph (e) of the definition “equity” in that subsection.

  “equity value”

  « valeur des capitaux propres »

  “equity value” has the same meaning as in subsection 122.1(1).

  “majority-interest beneficiary”

  « bénéficiaires détenant une participation majoritaire »

  “majority-interest beneficiary” has the same meaning as in subsection 251.1(3).

  “majority-interest group of beneficiaries”

  « groupe de bénéficiaires détenant une participation majoritaire »

  “majority-interest group of beneficiaries” has the same meaning as in subsection 251.1(3).

  “majority-interest group of partners”

  « groupe d’associés détenant une participation majoritaire »

  “majority-interest group of partners” has the same meaning as in subsection 251.1(3).

  “person”

  « personne »

  “person” includes a partnership.

  “specified right”

  « droit déterminé »

  “specified right”, held at any time by a person in respect of a trust, means a right under a contract, in equity or otherwise, to acquire, either immediately or in the future and either absolutely or contingently, equity of the trust, or to cause the trust to redeem or cancel equity of the trust, unless the right is not exercisable at that time because its exercise is contingent on the death, bankruptcy or permanent disability of an individual.

  “subsidiary”

  « filiale »

  “subsidiary”, of a particular person at any time, means a corporation, partnership or trust (in this definition referred to as the “subject entity”) where

  • (a) the particular person holds at that time property

    • (i) that is equity of the subject entity, or

    • (ii) that derives all or part of its fair market value, directly or indirectly, from equity of the subject entity; and

  • (b) the total of the following amounts is at that time equal to more than 50% of the equity value of the subject entity:

    • (i) each amount that is the fair market value at that time of equity of the subject entity that is held at that time by the particular person or a person with whom the particular person is affiliated, and

    • (ii) each amount (other than an amount described in subparagraph (i)) that is the portion of the fair market value at that time  —  derived directly or indirectly from equity of the subject entity  —  of a property that is held at that time by the particular person or a person with whom the particular person is affiliated.

• Marginal note:Loss restriction event

  (2) For the purposes of this Act, a taxpayer is at any time subject to a loss restriction event if

  • (a) the taxpayer is a corporation and at that time control of the corporation is acquired by a person or group of persons; or

  • (b) the taxpayer is a trust and

    • (i) that time is after March 20, 2013 and after the time at which the trust is created, and

    • (ii) at that time a person becomes a majority-interest beneficiary, or a group of persons becomes a majority-interest group of beneficiaries, of the trust.

• Marginal note:Trusts  — exceptions

  (3) For the purposes of paragraph (2)(b), a person is deemed not to become a majority-interest beneficiary, and a group of persons is deemed not to become a majority-interest group of beneficiaries, as the case may be, of a particular trust solely because of

  • (a) the acquisition of equity of the particular trust by

    • (i) a particular person from another person with whom the particular person was affiliated immediately before the acquisition,

    • (ii) a particular person who was affiliated with the particular trust immediately before the acquisition,

    • (iii) an estate from an individual, if the estate arose on and as a consequence of the death of the individual and the estate acquired the equity from the individual as a consequence of the death, or

    • (iv) a particular person from an estate that arose on and as a consequence of the death of an individual, if the estate acquired the equity from the individual as a consequence of the death and the individual was affiliated with the particular person immediately before the death;

  • (b) a variation in the terms of the particular trust, the satisfaction of, or failure to satisfy, a condition under the terms of the particular trust, the exercise by any person of, or the failure by any person to exercise, a power, or (without limiting the generality of the foregoing) the redemption, surrender or termination of equity of the particular trust at any time, if each majority-interest beneficiary, and each member of a majority-interest group of beneficiaries, of the particular trust immediately after that time was affiliated with the particular trust immediately before

    • (i) that time, or

    • (ii) in the case of the redemption or surrender of equity of the particular trust that was held, immediately before that time, by an estate and that was acquired by the estate from an individual as described in subparagraph (a)(iii), the individual’s death;

  • (c) the transfer at any time of all the equity of the particular trust to a corporation, partnership or another trust (in this paragraph referred to as the “acquirer”), if

    • (i) the only consideration for the transfer is equity (determined without reference to paragraph (d) of the definition “equity” in subsection 122.1(1)) of the acquirer,

    • (ii) at all times before that time the acquirer held no property or held only property having a nominal value, and

    • (iii) immediately after that time the acquirer is neither

      • (A) a subsidiary of any person, nor

      • (B) a corporation controlled, directly or indirectly in any manner whatever, by a person or group of persons;

  • (d) the transfer at any time of equity of the particular trust to a corporation, partnership or another trust (in this paragraph referred to as the “acquirer”), if

    • (i) immediately before that time a person was a majority-interest beneficiary, or a group of persons was a majority-interest group of beneficiaries, of the particular trust,

    • (ii) immediately after that time the person, or group of persons, as the case may be, described in subparagraph (i) in respect of the particular trust, and no other person or group of persons, is

      • (A) if the acquirer is a corporation, a person by whom, or a group of persons by which, the corporation is controlled directly or indirectly in any manner whatever,

      • (B) if the acquirer is a partnership, a majority-interest partner, or a majority-interest group of partners, of the partnership, and

      • (C) if the acquirer is a trust, a majority-interest beneficiary, or a majority-interest group of beneficiaries, of the trust, and

    • (iii) at no time during a series of transactions or events that includes the transfer does the person or group of persons, as the case may be, described in subparagraph (i) in respect of the particular trust, cease to be a person or group of persons described in any of clauses (ii)(A) to (C) in respect of the acquirer; or

  • (e) a transaction (other than a transaction one or more of the parties to which may be excused from completing as a result of changes to this Act) the parties to which are obligated to complete under the terms of an agreement in writing between the parties entered into before March 21, 2013.

• Marginal note:Trusts  — additional cases

  (4) For the purposes of paragraph (2)(b) and subject to subsection (3), a person is deemed to become at a particular time a majority-interest beneficiary of a particular trust if

  • (a) a particular person is at and immediately before the particular time a majority-interest beneficiary, or a member of a majority-interest group of beneficiaries, of the particular trust, and the particular person is at the particular time, but is not immediately before the particular time, a subsidiary of another person (in this paragraph referred to as the “acquirer”), unless

    • (i) the acquirer is immediately before the particular time affiliated with the particular trust, or

    • (ii) this paragraph previously applied to deem a person to become a majority-interest beneficiary of the particular trust because the particular person became, as part of a series of transactions or events that includes the particular person becoming at the particular time a subsidiary of the acquirer, a subsidiary of another person that is at the particular time a subsidiary of the acquirer; or

  • (b) at the particular time, as part of a series of transactions or events, two or more persons acquire equity of the particular trust in exchange for or upon a redemption or surrender of equity of, or as a consequence of a distribution from, a corporation, partnership or another trust, unless

    • (i) a person affiliated with the corporation, partnership or other trust was immediately before the particular time a majority-interest beneficiary of the particular trust,

    • (ii) if all the equity of the particular trust that was acquired at or before the particular time as part of the series were acquired by one person, the person would not at the particular time be a majority-interest beneficiary of the particular trust, or

    • (iii) this paragraph previously applied to deem a person to become a majority-interest beneficiary of the particular trust because of an acquisition of equity of the particular trust that was part of the series.

• Marginal note:Trusts  —  special rules of application

  (5) For the purposes of this section,

  • (a) in determining whether persons are affiliated with each other

    • (i) except for the purposes of paragraph (b) of the definition “subsidiary” in subsection (1), section 251.1 is to be read without reference to the definition “controlled” in subsection 251.1(3),

    • (ii) in determining whether an individual (other than a trust) is affiliated with another individual (other than a trust), individuals connected by blood relationship, marriage or common-law partnership or adoption are deemed to be affiliated with one another, and

    • (iii) if, at any time as part of a series of transactions or events a person acquires equity of a corporation, partnership or trust, and it can reasonably be concluded that one of the reasons for the acquisition, or for making any agreement or undertaking in respect of the acquisition, is to cause a condition in paragraph (3)(a) or (b) or subparagraph (4)(a)(i) or (b)(i) regarding affiliation to be satisfied at a particular time, the condition is deemed not to be satisfied at the particular time; and

  • (b) in determining whether a particular person becomes at any time a majority-interest beneficiary, or a particular group of persons becomes at any time a majority-interest group of beneficiaries, of a trust, the fair market value of each person’s equity of the trust is to be determined at and immediately before that time

    • (i) without reference to the portion of that fair market value that is attributable to property acquired if it can reasonably be concluded that one of the reasons for the acquisition is to cause paragraph (2)(b), or any provision that applies by reference to a trust being subject to a loss restriction event at any time, not to apply,

    • (ii) without reference to the portion of that fair market value that is attributable to a change in the fair market value of all or part of any equity of the trust if it can reasonably be concluded that one of the reasons for the change is to cause paragraph (2)(b), or any provision that applies by reference to a trust being subject to a loss restriction event at any time, not to apply, and

    • (iii) as if each specified right held immediately before that time by the particular person, or by a member of the particular group, in respect of the trust is at that time exercised if it can reasonably be concluded that one of the reasons for the acquisition of the right is to cause paragraph (2)(b), or any provision that applies by reference to a trust being subject to a loss restriction event at any time, not to apply.

• Marginal note:Trusts  —  time of day

  (6) For the purposes of this Act, if a trust is subject to a loss restriction event at a particular time during a day, the trust is deemed to be subject to the loss restriction event at the beginning of that day and not at the particular time unless the trust elects in its return of income under Part I filed for its taxation year that ends immediately before the loss restriction event to have this subsection not apply.