Income Tax Act — I-3.3 122.1
) Subsection (1.2) applies to an entity for a taxation year in respect of an amount and another entity (referred to in this subsection and subsection (1.2) as the “parent entity”, “specified amount” and “source entity”, respectively), if (a) at any time in the taxation year the parent entity (i) is affiliated with the source entity, or (ii) holds securities of the source entity that (A) are described by any of paragraphs (a) to (c) of the definition equity in subsection (1), and (B) have a total fair market value that is greater than 10% of the equity value of the source entity; (b) the specified amount is included in computing the parent entity’s gross REIT revenue for the taxation year in respect of a security of the source entity held by the parent entity; and (c) in the case of a source entity that is a subject entity described in paragraph (b) of the definition qualified REIT property in subsection (1) in respect of the parent entity at each time during the taxation year at which the parent entity holds securities of the source entity, the specified amount cannot reasonably be considered to be derived from the source entity’s gross REIT revenue from maintaining, improving, leasing or managing real or immovable properties that are capital properties of the parent entity or of an entity of which the parent entity holds a share or an interest, including real or immovable properties that the parent entity, or an entity of which the parent entity holds a share or an interest, holds together with one or more other persons or partnerships. Character preservation rule (1.2) If this subsection applies to a parent entity for a taxation year in respect of a specified amount and a source entity, then for the purposes of the definition real estate investment trust in subsection (1), to the extent that the specified amount can reasonably be considered to be derived from gross REIT revenue of the source entity having a particular character, the specified amount is deemed to be gross REIT revenue of the parent entity having the same character and not having any other character. Character of revenue — hedging arrangements (1.3) For the purposes of the definition real estate investment trust in subsection (1), (a) if an amount is included in gross REIT revenue of a trust for a taxation year and it results from an agreement that can reasonably be considered to have been made by the trust to reduce its risk from fluctuations in interest rates in respect of debt incurred by the trust to acquire or refinance real or immovable property, the amount is deemed to have the same character as gross REIT revenue in respect of the real or immovable property and not any other character; and (b) if a real or immovable property is situated in a country other than Canada and an amount included in gross REIT revenue of a trust for a taxation year (i) is a gain from fluctuations in the value of the currency of that country relative to Canadian currency recognized on (A) revenue in respect of the real or immovable property, or (B) debt incurred by the trust for the purpose of earning revenue in respect of the real or immovable property, or (ii) results from an agreement that (A) provides for the purchase, sale or exchange of currency, and (B) can reasonably be considered to have been made by the trust to reduce its risk from currency fluctuations described in subparagraph (i), the amount is deemed to have the same character as gross REIT revenue in respect of the real or immovable property and not any other character. Application of definition SIFT trust (2) The definition SIFT trust applies to a trust for a taxation year of the trust that ends after 2006, except that if the trust would have been a SIFT trust on October 31, 2006 had that definition been in force and applied to the trust as of that date, that definition does not apply to the trust for a taxation year of the trust that ends before the earlier of (a) 2011, and (b) the first day after December 15