Income Tax Act — I-3.3 107
t, through one or more dispositions to which subsection 107.4(3) applied, became a property of the particular trust, and the property was not, at any time after the particular time and before the distribution, the subject of a disposition for proceeds of disposition equal to the fair market value of the property at the time of the disposition; (c) the taxpayer was neither (i) the person (other than a trust described in subparagraph (b)(ii)) from whom the particular trust directly or indirectly received the property, or property for which the property was substituted, nor (ii) an individual in respect of whom subsection 73(1) would be applicable on the transfer of capital property from the person described in subparagraph (i); and (d) the person described in subparagraph (c)(i) was in existence at the time the property was distributed. Distribution of property received on qualifying disposition (4.2) Subsection (2.1) applies (and subsection (2) does not apply) at any time to property distributed after December 20, 2002 to a beneficiary by a personal trust or a trust prescribed for the purpose of subsection (2), if (a) at a particular time before December 21, 2002 there was a qualifying disposition (within the meaning assigned by subsection 107.4(1)) of the property, or of other property for which the property is substituted, by a particular partnership or a particular corporation, as the case may be, to a trust; and (b) the beneficiary is neither the particular partnership nor the particular corporation. Distribution to non-resident (5) Subsection (2.1) applies (and subsection (2) does not apply) in respect of a distribution of a property (other than a share of the capital stock of a non-resident-owned investment corporation or property described in any of subparagraphs 128.1(4)(b)(i) to (iii)) by a trust to a non-resident taxpayer (including a partnership other than a Canadian partnership) in satisfaction of all or part of the taxpayer’s capital interest in the trust. Instalment interest (5.1) If, solely because of the application of subsection (5), paragraphs (2)(a) to (c) do not apply to a distribution in a taxation year of taxable Canadian property by a trust, in applying sections 155 and 156 and subsections 156.1(1) to (3) and 161(2), (4) and (4.01) and any regulations made for the purposes of those provisions, the trust’s tax payable under this Part for the year is deemed to be the lesser of (a) the trust’s tax payable under this Part for the year, determined before taking into consideration the specified future tax consequences for the year, and (b) the amount that would be determined under paragraph (a) if subsection (5) did not apply to each distribution in the year of taxable Canadian property to which the rules in subsection (2) do not apply solely because of the application of subsection (5). Loss reduction (6) Notwithstanding any other provision of this Act, where a person or partnership (in this subsection referred to as the “vendor”) has disposed of property and would, but for this subsection, have had a loss from the disposition, the vendor’s loss otherwise determined in respect of the disposition shall be reduced by such portion of that loss as may reasonably be considered to have accrued during a period in which (a) the property or property for which it was substituted was held by a trust; and (b) either (i) the trust was non-resident and the property (or property for which it was substituted) was not taxable Canadian property of the trust, or (ii) neither the vendor — nor a person that would, if section 251.1 were read without reference to the definition controlled in subsection 251.1(3), be affiliated with the vendor — had a capital interest in the trust. [NOTE: Application provisions are not included in the consolidated text; see relevant amending Acts and regulations.] R.S., 1985, c. 1 (5th Supp.), s. 107; 1994, c. 7, Sch. II, s. 76, Sch. VIII, s. 43, c. 21, s. 47; 1995, c. 3, s. 29, c. 21, s. 35; 1998, c.