6 GLOSSARY

6 GLOSSARY

Accelerated investment incentive property (AIIP)

Property acquired after November 20, 2018, that becomes ready for use before 2028, other than property that:

• was used for any purpose before being acquired by the trust;

• was acquired further to a rollover;

• has already been the property of the trust or was previously acquired by the trust; or

• was the property of a person or a partnership (or was acquired by a person or a partnership) with whom the trust was not dealing at arm's length when the person or the partnership owned the property (or when the person or the partnership acquired the property).

Allocate (income of a trust)

To transfer:

• a portion of the trust's income to a beneficiary, because either:

  • the beneficiary is entitled to it, regardless of whether the income is actually paid to the beneficiary, or

  • the income was allocated under the income attribution rule;

• a portion of the trust's accumulating income to a preferred beneficiary, pursuant to an election made jointly by the beneficiary and the trust.

462.9, 467, 663

Arm's-length capital

Property, or property substituted for the property, of a specified individual that is not:

• acquired by the individual as income from, or a taxable capital gain or profit from the disposition of, another property that is derived, directly or indirectly, from a related business in respect of the individual;

• borrowed by the specified individual under a loan or other indebtedness; or

• transferred to the specified individual from a person who was related to the specified individual (other than as a consequence of the death of a person).

Arm's-length transfer

A transfer or loan of property (other than restricted property) that is made at a given time by a person or partnership to another person or partnership, under certain conditions, and that is generally not considered to be a contribution to the trust.

Beneficiary

As applicable, the person:

• for whose benefit a trust is created;

• who is entitled to the amount of an insurance policy or an annuity;

• who holds units, in the case of a mutual fund trust;

• who transfers or loans property to the trust and to whom the income attribution rules apply.

Capital interest

The right of a taxpayer as a beneficiary of a trust, including a right to enforce payment of an amount by the trust, provided the right results from the beneficiary's capital interest in the trust (or unit, in the case of an interest in a mutual fund trust).

683

Capital property

Depreciable property of a prescribed class, or any other property whose sale results in a capital gain or capital loss.

249

Connected contributor

A contributor that, at a given time, while resident in Québec, made a contribution to a trust.

Contributor

A person (other than an exempt person but including a person that has ceased to exist) that, directly or through a partnership of which it is a member, makes:

• a contribution to a non-resident trust, by a transfer or loan of property (except an arm's-length transfer); or

• an indirect contribution to a non-resident trust:

  • by a transfer or loan of property (except an arm's-length transfer) as part of a series of transactions, where it is reasonable to consider that the transfer or loan relates to another transfer or loan of property (except an arm's-length transfer) made to the trust by another person or partnership, or

  • by contracting an obligation to make a transfer or loan of property (except an arm's-length transfer), where it is reasonable to consider that the obligation relates to another transfer or loan (except an arm's-length transfer) made to the trust by another person or partnership.

NOTE An exempt person is, as a rule, a person exempted from paying income tax. A trust that contributes to another trust at a given time is deemed to have made the contribution with each person or partnership that is a contributor to the trust at that time. A partnership that contributes to a trust at a given time is deemed to have made the contribution with each person or partnership that is a member of the partnership at that time.

Cost amount

The value of a property, at a given time, that corresponds:

• in the case of depreciable property of a prescribed class, to the result obtained by multiplying the UCC of the property in the class, at that time, by a fraction whose numerator is the capital cost of the property concerned and whose denominator is the capital cost of all the property in the class at that time;

• in the case of capital property that is not depreciable property, to the ACB of the property at that time;

• in the case of property included in the inventory of a taxpayer, to the value of the property at that time.

1

Debts owing to specified non-residents

The total amount of a trust's debts, including any other obligation to pay an amount, that are payable to a specified beneficiary not resident in Canada or to a person not resident in Canada not dealing at arm's length with a specified beneficiary of the trust.

171

Deemed sale

The hypothetical transfer of property by a person, as a result of certain events provided for by law, whereby the person is considered to have actually sold the property.

Deemed sale applicable to certain trusts

The hypothetical sale of property by a trust on a date determined under the Taxation Act (as a rule, the 21st anniversary of the creation of the trust or the date on which the spouse for whom the trust was created died, and the same date every 21 years thereafter).

De facto spouse

A person who, at a given time:

• was living in a conjugal relationship with an individual and was the biological or adoptive mother or father (legally or in fact) of a child of whom the individual was also the parent; or

• had been living in a conjugal relationship with an individual for at least 12 consecutive months (the 12-month period is considered to have been uninterrupted if the persons were separated for a period of less than 90 days).

NOTE A de facto spouse is considered to be the deceased person's surviving spouse only if the two were living in a conjugal relationship immediately before the death.

2.2.1 (2nd par.)

Designate (income)

To accurately identify the source of the income allocated to a beneficiary so that the beneficiary may take advantage of certain provisions of the Taxation Act, such as the possibility of claiming a tax deduction or credit for the amount of income designated.

666, 668, 668.1, 669.1, 669.2, 669.5, 671

Determined gross revenue

For a taxation year, the amount by which the aggregate of all amounts received or receivable by the entity in the year exceeds the cost of the property disposed of in the year.

1129.70

Disposition

As a rule, a transaction in which the trust assigns its property for a consideration or without consideration.

A disposition includes the sale, donation, distribution or exchange of property and the redemption or cancellation of shares by a corporation.

NOTE The term "transfer" is sometimes used where the trust and the assignee are not dealing at arm's length.

248

Donee

A person who receives a donation or gift (as opposed to a donor).

Electing beneficiary

An individual designated as a beneficiary in the instrument that established the trust who makes a joint election with the trust to consider the trust to be a QDT for the trust year. For the beneficiary's taxation year during which the trust's taxation year ends, the following conditions must be met:

• The beneficiary suffers from a severe and prolonged impairment in mental or physical functions.

• The impairment is certified by a health professional.

• The beneficiary does not make the joint election with another trust, for a taxation year of a trust ending during the beneficiary's taxation year, to consider that this other trust is a QDT.

Electing contributor

Resident contributor of a deemed resident trust that has elected to include a portion of the trust's income in the calculation of the contributor's income (the income is calculated after the carry-over of any losses from other years).

Eligible funeral arrangement

An arrangement under which contributions are remitted to a custodian (who is resident in Canada at the time the arrangement is made) for the purpose of funding funeral or cemetery services to be provided by a person licensed or otherwise authorized under the laws of a province to provide such services.

979.19

Eligible resale property

Real or immovable property (other than capital property) of an entity:

• 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

• the holding of which is ancillary to the holding of the real or immovable property.

1129.70

Entity

A corporation, trust or partnership.

1129.70

Equity

As applicable:

• shares of a corporation's capital stock;

• income or capital interest in a trust;

• interest held by the members of a partnership;

• equity-like liabilities; and

• a right to one of the above elements or a right to acquire one of those elements.

1129.70

Equity amount

For a given taxation year, the result of the following calculation (if it is positive):

A - B, where

A is the total of the following amounts:

• the average of the amounts that are equity contributions made to the trust by its specified non-resident beneficiaries before the beginning of each calendar month ending in the year; and

• the tax-paid earnings of the trust;

B is the average of the amounts paid or payable by the trust to its beneficiaries before the beginning of each calendar month ending in the year due to their interest in the trust, where these amounts are not:

• included in the income of those beneficiaries as income allocated by the trust; or

• paid or payable to beneficiaries that are not specified non-resident beneficiaries.

NOTE An equity contribution is: a transfer of property to the trust in exchange for an interest in the trust or a right to acquire such an interest; or a gratuitous transfer of property to the trust by a person that holds an interest in the trust. The tax-paid earnings of a trust resident in Canada, for a given taxation year, correspond to the taxable income of the trust for the year minus the total amount of federal and provincial (Québec or another province in Canada) income tax payable on this income. If the trust did not have the information for the period preceding the implementation of the thin capitalization rules in order to do the A - B calculation, it may have made an election with the CRA to have the equity amount as at March 21, 2013, deemed to correspond to the FMV, as at that date, of all of its assets minus all of its liabilities. Such an election automatically applies for the purposes of Québec legislation.

172

Excluded amount

Amount that is the individual's income for the year from a property or the individual's taxable capital gain or profit for the year from the disposition of a property. The amount must meet the following conditions:

• If the individual has not reached age 24 before the year, the amount is income from a property that the individual inherited from a parent. If the individual inherited the property from another person, the individual must be a full-time student, or be eligible for the disability tax credit, in the year in which the income must be reported.

• The amount is income from a property that was transferred to the individual by his or her spouse or de facto spouse pursuant to a decree, order or judgment of a competent tribunal or pursuant to a written separation agreement if, at that time, the individual and the spouse or de facto spouse were separated and living apart as a result of the breakdown of their marriage or de facto union.

• The amount is a taxable capital gain resulting from the deemed disposition of the individual's capital property immediately before the individual's death.

• The amount is a taxable capital gain (except a capital gain deemed to be a dividend) resulting from the disposition by the individual of property that is, at the time of the disposition, qualified farm or fishing property or qualified small business corporation shares.

• If the individual reached age 17 before the year, the amount is not derived, directly or indirectly, from a related business of the individual or it is derived, directly or indirectly, from an excluded business of the individual.

• If the individual reached age 17 but not age 24 before the year, the amount is either:

  • a safe harbour capital return of the individual; or

  • a reasonable return of the individual, taking into account only the individual's contributions of arm's-length capital.

• If the individual reached age 24 before the year, the income is:

  • income from excluded shares of the individual;

  • a taxable capital gain from the disposition of excluded shares of the individual; or

  • a reasonable return in respect of the individual.

Excluded business

For a given taxation year, the business of a specified individual in which the individual is actively engaged on a regular, continuous and substantial basis during the taxation year or during the five previous taxation years.

NOTE The five previous years during which the specified individual must be engaged do not need to be consecutive. In addition, the years can be before the effective date of the measures regarding split income that apply to adult beneficiaries. A business may be eligible as an excluded business of a specified individual even if it derives income from another business that is related to the specified individual and is not an excluded business. Engagement in the activities of a business during a year is deemed to be active (regular, continuous and substantial) depending on the nature of the individual's engagement in the business and the nature of the business itself. Engagement representing an average of 20 hours of work per week will be deemed active.

Excluded shares

Shares of the capital stock of a corporation owned by the specified individual if:

• less than 90% of the corporation's business income is from the provision of services;

• the corporation is not a professional corporation (a corporation that carries on the professional practice of an accountant, dentist, lawyer, physician, veterinarian or chiropractor);

• the specified individual holds 10% or more of the FMV of the shares of the capital stock of the corporation and 10% or more of the votes that could be cast at an annual meeting of the shareholders of the corporation; and

• all or substantially all of the corporation's income is not derived, directly or indirectly, from one or more related businesses.

Excluded subsidiary entity

For a given taxation year, an entity the equity of which:

• is not listed or traded on a stock exchange or other public market at any time in the year;

• is held exclusively by a qualified investor, such as:

  • a REIT,

  • a taxable Canadian corporation,

  • a SIFT trust or partnership,

  • a person or partnership that does not own, with respect to the holding of a security of the entity, property the value of which is determined by reference to a security that is listed or traded on a stock exchange or other public market, or

  • an excluded subsidiary entity for the taxation year.

1129.70

Excluded trust

A trust that, throughout a given taxation year, is:

• a succession;

• a testamentary trust that is resident in Québec on the last day of its taxation year and for which the total of the cost amounts of its property is, throughout the year, less than one million dollars;

• a testamentary trust that is not resident in Québec on the last day of its taxation year and for which the total of the cost amounts of its property located in Québec is, throughout its taxation year, less than one million dollars;

• a unit trust;

• a mutual fund trust;

• an insurance segregated fund trust;

• a SIFT trust; or

• a tax-exempt trust.

Exempt foreign trust

A non-resident trust that, at a given time in a taxation year, is in one of the following situations:

• The trust was created for a non-resident beneficiary who has an impairment and is a dependant.

• The trust was created as a consequence of the breakdown of a marriage or relationship for non-resident children or for the non-resident former spouse.

• The trust is an agency of the United Nations, it owns and administers a prescribed university or it has received donations from the Crown.

• The trust was created exclusively for charitable purposes.

• The trust is managed by a deferred profit-sharing plan (DPSP), a retirement compensation arrangement or a foreign retirement arrangement.

• The trust is administered to provide benefits to employees for qualifying services.

• The trust is administered to provide benefits for services rendered in the de facto resident country of the trust by non-resident natural persons.

• All of the beneficiaries of the trust hold fixed interests and the trust meets certain other conditions.

593

Exempt person

A person that is exempted from paying income tax under Part 1 of the Taxation Act or one of the following entities:

• Her Majesty in right of Canada or a province;

• a trust resident in Canada or a Canadian corporation established by or arising by reason of a federal or provincial statute, the principal activities of which are to administer, manage or invest the monies of a pension fund or plan established under a federal or provincial statute;

• a trust or corporation established by or arising by reason of a federal or provincial statute with respect to a scheme or program for the compensation of workers injured in an accident in the course of their employment;

• a trust resident in Canada all the beneficiaries of which are exempt persons;

• a Canadian corporation all the shares of which are held by exempt persons;

• a Canadian corporation without capital stock all the property of which is held exclusively for the benefit of exempt persons;

• a partnership all the members of which are exempt persons; and

• a mutual fund trust or corporation.

Fair market value (FMV)

The highest dollar value that may be obtained for property on an open market, where the parties to the transaction deal with each other at arm's length and are not obliged to buy or sell.

Fixed interest

Interest, at a given time, of a person as a beneficiary of a trust (but for section 7.11.1 of the Taxation Act), provided that no amount of the income or capital of the trust to be distributed at any time in respect of any interest in the trust depends on the exercise by any person of any discretionary power, other than:

• the power that is consistent with normal commercial practice and with the terms that would be acceptable to the beneficiaries of the trust if the beneficiaries were dealing with each other at arm's length;

• the exercise of the power will not materially affect the value of an interest as a beneficiary of the trust relative to the value of other such interests under the trust.

Income attribution rule

The rule that applies where a person (the transferor) transfers or loans property to certain types of trusts. Briefly, the rule provides that the income or loss derived from the transferred or loaned property must be reported by the transferor. The transferor must also report the capital gain or capital loss on any subsequent sale of the property by the trust.

Income interest

A right of a taxpayer as a beneficiary of a personal trust to all or part of the trust's income (whether the right is immediate or future, absolute or contingent), or a right to receive all or part of such income.

NOTE An income interest includes a right to enforce payment of an amount by the trust that arises as a consequence of any such right.

683

Investment fund

Trust that, at a given time, meets the following conditions:

• Throughout the period that begins at the later of March 21, 2013, and the end of the calendar year in which it was created and that ends at the given time, it is a trust holding an outstanding class of units that has been qualified for distribution, or lawfully distributed, to the public as described in paragraph 4801(a) of the Income Tax Regulations.

• Throughout the period that begins at the later of March 21, 2013, and the date the trust was created and that ends at the given time, it is a trust that is resident in Canada and meets the following conditions:

  • Its only undertaking is investing its funds in property.

  • It follows a reasonable policy of investment diversification.

  • It does not hold property that is used to carry on a business by the trust or by a person or partnership that is not dealing at arm's length with the trust.

  • It does not hold property that is real or immovable property, Canadian or foreign resource property or an interest or a right in Canadian or foreign resource property.

  • It does not legally control, alone or as a member of a group of persons, a corporation.

  • It does not hold more than 20% of any class of securities of an issuer, unless:

    1. The issuer is a trust that is an investment fund (or a mutual fund corporation that would be an investment fund if it was a trust); and

    2. The total FMV of the trust's property that is equity of the issuer does not exceed 10% of the issuer's equity value and the total FMV of the trust's property that is liabilities of the issuer does not exceed 10% of the total FMV of all of the issuer's liabilities.

NOTE An investment fund is not considered to carry on a business or a partnership solely because it holds an interest as a member of a partnership.

7.18.1, 21.0.5

Investment in a SIFT wind-up entity

One of the following interests (also called "units"):

• if the SIFT wind-up entity is a trust, a capital interest in the trust;

• if the SIFT wind-up entity is a partnership, an interest as a limited partner of the partnership.

1

Key employee

For a given taxation year of an employer participating in an employee life and health trust, any person that was, as applicable:

• a specified employee of the employer during the year (or during a previous taxation year); or

• an employee to whom the employer paid, during two of the previous five taxation years, a salary or wages that exceeded by five times the maximum pensionable earnings for the calendar year, where this income was earned within the meaning of section 40 of the Act respecting the Québec Pension Plan.

869.1

Leveraged insurance policy

A life insurance policy (other than an annuity contract) where:

• an amount is or may become:

  • payable under the terms of a borrowing to a person or partnership that has been assigned an interest in the policy or in an investment account in respect of the policy, or

  • payable (and the interest thereon) under a policy loan;

• either:

  • the return credited to an investment account in respect of the policy is determined by reference to the rate of interest on the borrowing or policy loan and would not be credited to the account if the borrowing or policy loan were not in existence, or

  • the maximum amount of an investment account in respect of the policy is determined by reference to the amount of the borrowing or policy loan.

1

Lifetime benefit trust

With respect to the succession of a person, a personal trust:

• of which the beneficiary, immediately before the death of the person, was the person's spouse and had a mental infirmity, or was the person's child or grandchild and was dependent on the person for support because of a mental infirmity; and

• under which:

  • only the beneficiary may receive or otherwise obtain the enjoyment of, during the beneficiary's lifetime, any portion of the trust's income or capital, and

  • the trustees are required to take into account the beneficiary's needs, including the beneficiary's comfort, care and maintenance when paying amounts from the trust.

21.43 (2nd par.)

Liquidator of a succession

An individual or a trust institution designated (or appointed by a court) to administer or liquidate a succession.

Minor

A minor is a person who was 17 years of age or younger on December 31 of the calendar year in which the income or gain was allocated to him or her.

Non-portfolio earnings

Non-portfolio earnings of a SIFT trust are the total of the following amounts:

• the amount by which its income exceeds its losses from either a business it carries on in Canada or non-portfolio property (except for taxable dividends);

• the amount by which the total amount of its taxable capital gains and half of its dividends on capital gains from non-portfolio property exceeds its allowable capital losses from the disposition of non-portfolio property.

1129.70

Non-portfolio property

Property held by a SIFT trust at a given time in its taxation year that is:

• a security of a subject entity (other than a portfolio investment entity), if, as applicable:

  • the FMV of all the shares of the entity held by the trust, at that time, exceeds 10% of the equity value of the subject entity, or

  • that FMV, added to the FMV of the other securities held by the trust but issued by entities affiliated with the subject entity, exceeds 50% of the equity value of the trust;

• Canadian real, immovable or resource property if its FMV exceeds 50% of the equity value of the trust; or

• property that the trust, or a person or partnership with whom the trust does not deal at arm's length, uses in the course of carrying on a business in Canada.

1129.70

Non-resident portion

All property held by a deemed resident trust that is not, at a given time, part of the resident portion of the trust.

Portfolio investment entity

An entity that does not hold non-portfolio property.

1129.70

Portfolio investment fund

An entity that, at a given time, is a portfolio investment entity and that does not hold any of the following types of property at that time:

• securities issued by an entity, if, as applicable:

  • the FMV of all the shares of the entity held by the trust, at that time, exceeds 10% of the equity value of the entity, or

  • the FMV, added to the FMV of the other securities held by the trust but issued by entities affiliated with the entity, exceeds 50% of the equity value of the trust;

• immovable or mining property, if the FMV of such property exceeds 50% of the equity value of the trust;

• property used in the course of a business that the trust carries on either directly or indirectly.

Proceeds of disposition

See the definition of "selling price."

Preferred beneficiary

An individual resident in Canada who is a beneficiary of a trust at the end of the year and meets one of the two following conditions:

• The beneficiary qualifies for the tax credit for a severe and prolonged impairment in mental or physical functions for the taxation year that ends in the trust's taxation year.

• The beneficiary:

  • is 18 years old before the end of the taxation year and was an individual's dependant during the year because of an impairment in mental or physical functions; and

  • has income for the taxation year (not including income from a preferred beneficiary election) that does not exceed the federal dependent tax credit, in accordance with section 108 of the Income Tax Act.

The beneficiary must also be:

• the settlor of the trust;

• the spouse or the former spouse of the settlor of the trust; or

• the child, grandchild or great-grandchild of the settlor or of the settlor's spouse or former spouse.

658, 752.0.14

Public investment trust

A trust that is, at a given time in its taxation year, a public trust of which all or substantially all of the FMV of the property it holds at that time is related to the following property:

• units of public trusts;

• interests in public partnerships;

• shares of the capital stock of public corporations;

• any combination of the above-mentioned property.

Public trust

A mutual fund trust of which the units are listed on a designated stock exchange in Canada.

1086R57.1

Qualified farm or fishing property

Property that, at a given time, is owned by a personal trust or by a family farm or fishing partnership of which a personal trust is a member, and that is:

• immovable property (land or a building) or a fishing vessel used mainly in a farming or fishing business in Canada:

  • by a person that is a beneficiary who has a right to receive directly from the trust all or a portion of the trust's income or capital, or the beneficiary's spouse, child or parent, or

  • by a family farm or fishing corporation or a family farm or fishing partnership in which the trust holds a share or interest;

• a share of the capital stock of a family farm or fishing corporation; or

• an interest in a family farm or fishing partnership.

NOTE As a rule, the property must be held for at least 24 months prior to the given time by the individual (or the individual's spouse, child, or parent) from whom the trust acquired the property or by a family farm or fishing partnership of which the trust holds a share or interest. Furthermore, for the period during which the property (or property substituted for the property) is owned by the individual or partnership in question, the following requirements must be met: the property is used principally in the farming or fishing business in which the trust's beneficiary is actively engaged on a regular and continuous basis and the individual's gross income from the farming or fishing business must exceed that person's income from all other sources; and the property (or property substituted for the property) is used principally in the operation of a business by a family farm or fishing corporation or a family farm or fishing partnership in which the trust holds a share or interest and in which the beneficiary of the trust is actively engaged on a regular and continuous basis.

Qualified intellectual property

Property acquired after December 3, 2018, that is a patent or a right to use patented information, a licence, a permit, know-how, a commercial secret or other similar property constituting knowledge and that:

• is property included in class 14 or class 44 or property that is incorporeal capital property;

• is used within a reasonable time after being acquired or after its development is completed;

• is used only in Québec and primarily in the course of carrying on a business for the period covering the process of implementing the innovation or invention;

• is not acquired by a person or a partnership with whom the purchaser is not dealing at arm's length.

Qualified property

Property that is held by a REIT, and that constitutes non-portfolio property. It must be one of the following types of property:

• real or immovable property that is capital property, eligible resale property, indebtedness of a Canadian corporation represented by a bankers' acceptance, money and debt obligations or a deposit with a savings and credit union;

• a security of a subject entity, if:

  • the entity derives 90% of its determined gross revenue from maintaining, improving, leasing or managing real or immovable properties of the trust, or

  • the entity holds no property other than titles of ownership in real or immovable properties that the trust holds solely or in co-ownership;

• property that is ancillary to the activity of the trust and that consists in the trust earning:

  • rent from real or immovable properties,

  • capital gains from dispositions of real or immovable properties, other than a share of a taxable Canadian corporation, a capital or income interest in a SIFT trust, an interest in a SIFT partnership or a capital or income interest in a REIT.

1129.70

Qualified small business corporation share

A share that:

• at the time of sale, was owned by the trust or by a partnership related to the trust;

• throughout the 24-month period preceding the sale, was owned only by the trust or by a person or partnership related to the trust;

• throughout the same period, was a share of the capital stock of a Canadian-controlled private corporation (CCPC) of which more than 50% of the FMV of the assets was composed of:

  • assets used principally in an eligible business actively carried on primarily in Canada by the CCPC or by a corporation related to the CCPC,

  • certain shares or debts of related corporations, or

  • a combination of the previous two categories.

726.6.1

NOTE To be related to a trust, a person or partnership must be: a beneficiary of the trust; a partnership of which the trust is a member; or the person from whom the trust purchased the shares, and who was related to all the beneficiaries of the trust at the time it disposed of the shares.

Real estate investment trust (REIT)

For a given taxation year, a trust that is resident in Canada throughout the year, if:

• the FMV of all non-portfolio property that is qualified property held by the trust is at least equal to 90% of the FMV of all non-portfolio property held by the trust;

• at least 90% of the trust's determined gross revenue for the year is derived from rent from real or immovable property, interest, dispositions of real or immovable property that is capital property, dividends or royalties or from dispositions of eligible resale property;

• at least 75% of the trust's determined gross revenue for the year is derived from rent from real or immovable property, interest payable on debts secured by hypothecs on real or immovable property, or from dispositions of real or immovable property that is capital property;

• the total FMV of certain property (real or immovable property that is capital property, sums of money, bankers' acceptances, deposits with a credit union or eligible resale property) that the trust holds throughout the year must not be less than 75% of the equity value of the trust at that time; and

• the investments in the trust are listed or traded on a stock exchange or other public market.

1129.70

Reasonable return

Amount derived, directly or indirectly, from a related business in respect of the specified individual in a given taxation year that:

• meets the definition of "split income" in respect of the specified individual for the year, except for the following two conditions given in the definition of "excluded amount":

  • if the individual reached age 17 but not age 24 before the year, the amount is a reasonable return in respect of the individual, taking into account only the individual's contributions of arm's-length capital,

  • if the individual reached age 24 before the year, the amount is a reasonable return in respect of the individual;

• is reasonable given the following factors relating to the contributions of the specified individual with respect to the business and those of each source individual:

  • the work performed for the business,

  • the property contributed, directly or indirectly, to the business,

  • the risks assumed in respect of the related business,

  • the total of the amounts paid or payable, directly or indirectly, by any person or partnership to, or for the benefit of, the specified individual or a source individual in respect of the related business, and

  • any other relevant factors.

Related business

As the case may be:

• a business carried on, at any time in the year, by a source individual in respect of the specified individual or by a partnership, a corporation or a trust, if the source individual is actively engaged on a regular basis in the activities of the business;

• a business of a partnership if a source individual in respect of the specified individual has an interest in the partnership, whether directly or indirectly through one or more partnerships;

• a business of a corporation, if a source individual in respect of the specified individual holds shares of the capital stock of the corporation or property that derives, directly or indirectly, all or part of its FMV from shares of the capital stock of the corporation, and the total FMV of the shares or the property is 10% or more of the total FMV of the capital stock of the corporation.

Related individuals

Individuals who are not dealing with each other at arm's length, that is, individuals who are related by blood, marriage, a de facto union or adoption.

19

Resident beneficiary

A person, other than a successor beneficiary or an exempt person, that is resident in Canada and that is the beneficiary of a trust at a given time where the trust has a connected contributor.

Resident contributor

A person who, at a given time, is resident in Canada and is a contributor to a trust.

Resident portion

All of a deemed resident trust's property that is, at a given time:

• property contributed to the trust by a contributor that is a resident contributor at that time, or by a connected contributor, if the trust has a resident beneficiary at that time;

• property that is acquired, no later than at the given time, by a debt contracted by the trust, if:

  • all or part of the debt is secured by property that is included in the trust's resident portion,

  • at the time the debt was contracted, it is reasonable to conclude that the debt will be repaid, at some time, with property included in the trust's resident portion,

  • a person resident in Québec or a partnership of which a person resident in Québec is a member has an obligation, either absolute or contingent, to effect any undertaking (including a guarantee, covenant or agreement) to ensure the repayment, in whole or in part, of the debt, or has provided any other financial assistance in respect of the debt.

Restricted property

Property held by a person or a partnership, such as:

• a share of the capital stock of a closely held corporation (including a right to acquire a share or property substituted for such a share or right), if the share or right was acquired by the person or partnership as part of a transaction or series of transactions under which a specified share of the capital stock of a closely held corporation was acquired:

  • by any person or partnership in exchange for or upon the conversion of a property,

  • for a cost that was less than its FMV at the time of the acquisition;

• a debt or other obligation of a closely held corporation (including a right to acquire a debt or other obligation), if the debt or obligation (or right), or a property that is substituted for such a debt or obligation, became the property of the person or partnership as a part of a transaction or series of transactions under which a specified share of the capital stock of a closely held corporation was acquired:

  • by any person or partnership in exchange for or upon the conversion of a property,

  • for a cost that was less than its FMV at the time of the acquisition.

NOTE Where restricted property is contributed to the trust at a given time, the value of the contribution is deemed to be the greater of the following amounts: the value of the contribution at that time; and the highest FMV of the restricted property, or of property substituted for such property, for the period that begins immediately after that time and ends at the end of the third calendar year that ends after that time.

Rollover rule

A rule stipulating that, in certain cases, the transfer or sale of property has no immediate tax incidence, or that the tax incidence depends on the amount determined as selling price for the transferor.

NOTE In this guide, the rollover rule applies to transactions made in favour of a trust or made by a personal trust in favour of a beneficiary in settlement of the beneficiary's capital interest in the trust.

Safe harbour capital return

Return obtained by a specified individual for a taxation year that does not exceed the result of A × B, where:

A is the highest rate of interest prescribed for a given quarter of the year;

B is the total of the amounts obtained by the formula C × D ÷ E, where:

C is the FMV of property contributed by the specified individual to a related business at the time of the contribution,

D is the number of days in the year that the property (or property substituted for the property) is used in support of the activities of the related business and has not, directly or indirectly, in any manner whatever, been returned to the specified individual, and

E is the number of days in the year.

Selling price (or proceeds of disposition)

Consideration received or deemed received on the sale of property.

NOTE As a rule, the consideration deemed received corresponds to the FMV of the property at the time of the deemed sale, or at the time of its transfer between persons not dealing with each other at arm's length if the property is transferred for no consideration or for a consideration less than its FMV.

251

Settlor (of a trust)

An individual who creates a trust by transferring property from his or her own patrimony to the patrimony of the trust, or an individual whose death results in the opening of a succession or the creation by will of a trust.

SIFT trust wind-up event

The distribution of property before 2013 by a trust in favour of a taxpayer as consideration for the taxpayer's interest in the trust as a beneficiary, if the following conditions are met:

• The trust is:

  • a SIFT wind-up entity,

  • a trust whose sole beneficiary throughout the period beginning on July 14, 2008, and ending at the time of the distribution is another trust that is generally, throughout the same period, a SIFT wind-up entity, or

  • a trust whose sole beneficiary at the time of distribution is another trust if, throughout the period beginning on July 14, 2008, and ending at the time of the distribution, the sole beneficiary is both one of the above-mentioned trusts and a majority-interest beneficiary (see the definition in section 3.3, replacing "50%" by "25%").

• The trust ceases to exist:

  • immediately after the distribution, or

  • immediately after the last of a series of distributions, in the case of a series of SIFT trust wind-up events.

• The property distributed was not acquired by the trust as a result of certain transactions to which the rollover rule applies. For example, an acquisition that occurred after February 2, 2009, by any person other than a SIFT wind-up entity in the case of a qualifying disposition (see section 3.1.2), or of a qualifying exchange resulting from the reorganization of investment institutions.

1

SIFT wind-up corporation

A corporation that, in respect of a SIFT wind-up entity, meets one of the following conditions at a given time:

• The corporation is the sole beneficiary of the SIFT wind-up entity after July 13, 2008, and before the given time (or before January 1, 2013, whichever is earlier).

• The shares of the corporation's capital stock are distributed by the SIFT wind-up entity at or before the given time as part of a SIFT trust wind-up event.

SIFT wind-up entity

An entity that, during the period beginning on October 31, 2006, and ending on July 14, 2008, is:

• a SIFT trust;

• a SIFT partnership;

• a REIT.

1

Source individual

Individual (other than a trust) who, at any time in the year, is resident in Canada and is related to the specified individual.

Specified beneficiary

A person who holds an interest as a beneficiary of the trust, either alone or with other persons not dealing at arm's length with that person. The FMV of the interest must be equal to at least 25% of the FMV of the interests of all of the trust's beneficiaries.

NOTE A person is deemed to hold an interest as a beneficiary of the trust if that person or a person not dealing at arm's length with the person has a right, whether immediate or future, and whether absolute or contingent, to obtain or acquire an interest as a beneficiary of the trust.

Specified immovable

An immovable (including a right in such an immovable or an option on such an immovable) located in Québec that is used mainly to earn gross revenue that constitutes rent.

Specified individual

An individual who:

• was resident in Canada at the end of the taxation year or, if the individual died in the year, was resident in Canada immediately before his or her death;

• did not reach age 18 before the end of the year and has a parent resident in Canada at any time in the year.

Specified trust

For a given taxation year, an inter vivos trust that was not resident in Canada at any time during that year and that was not tax-exempt.

1129.77

Split income

An amount that a trust allocates to a specified individual and that is taxable at the highest marginal rate. Such amounts consist of the following income and capital gains:

• taxable dividends or benefits that the trust receives from a Canadian or foreign private corporation;

• the income that can be reasonably deemed to be derived, directly or indirectly, from:

  • one or more related businesses in respect of the individual in the year,

  • the rental of property, if the person related to the specified individual is actively engaged on a regular basis in the activity of the trust related to the rental of property;

• a capital gain realized on the disposition of shares in favour of a person not dealing at arm's length with a minor, where the minor is subject to tax on split income in respect of dividends paid on the shares (this capital gain is deemed a taxable dividend other than an eligible dividend).

• the amount that is related to a debt obligation of the trust, if the trust is not a mutual fund trust, except for:

  • certain government debt obligations or debt obligations that are guaranteed by the government,

  • a debt obligation that is listed or traded on a public market,

  • a deposit standing to the individual's credit with a branch, located in Canada, of a bank or credit union;

• the amount related to a property if:

  • it is a taxable capital gain or a profit derived from the disposition of the property after 2017 and allocated by a trust, and it is not otherwise included in the split income if the income derived from the property is split income for the specified individual,

  • the property is shares of a corporation (except shares of a class listed on a stock exchange or shares of the capital stock of a mutual fund corporation), a debt obligation (which is not listed or traded on a public market and is not a deposit standing to the individual's credit) or interest in a partnership or a trust (except a mutual fund trust or a trust that is deemed to be in existence by a congregation). If the property is not a share of a corporation, one of the following conditions must be met:

  • • the amount is included in the individual's split income for the year or a previous year,

    • all or part of the FMV immediately before the disposition is attributable to a share of a corporation (except a share of a corporation listed on a stock market or a share of a mutual fund corporation).

766.3.3, 766.5

Spouse

The person to whom an individual is married or with whom the individual has contracted a civil union, or who is the individual's de facto spouse.

2.2.1

Stapled securities

A combination of two or more securities to which the following conditions apply:

• the securities are required to be transferred together, as one security is the other security's reference security;

• one or more of the securities is listed or traded on a stock exchange or other public market;

• the securities are issued:

  • by a single entity that is a corporation, a SIFT partnership or a SIFT trust,

  • by separate entities, where one entity is a subsidiary of the other, and one entity is a corporation, a SIFT partnership or a SIFT trust, or

  • separate entities, one of which is a REIT or a subsidiary of a REIT.

158.16

Subject entity

A corporation, trust or partnership resident in Canada, or a person or partnership not resident in Canada but the principal source of income of which is one or more sources in Canada.

1129.77

Subsidiary (of a given entity)

An entity:

• in which a given entity holds securities that have a total FMV that is greater than 10% of the equity value of the entity; and

• that is a subsidiary of an entity that is a subsidiary of a given entity.

Successor beneficiary

Beneficiary who will be entitled to receive all or a portion of the trust's income or capital further to the death of another beneficiary who is either a contributor or a person related to the contributor.

Tax-liable taxpayer

A person who is, at a given time during a taxation year:

• a resident contributor, a resident beneficiary or an electing contributor of the trust or a joint contributor who made a contribution to the trust (that is, either a person, other than a corporation, that is resident in Québec at the end of the taxation year or a corporation that has an establishment in Québec during the taxation year); or

• a connected contributor of the trust who is either a person (other than a corporation) who made a contribution to the trust and was resident in Québec at a time prior to the given time or a corporation that made a contribution to the trust and had an establishment in Québec at a time prior to the given time.

Testator

A person who made a valid will, and left such a will upon his or her death.

Trust

An entity that results from an act (an onerous or gratuitous contract, or a will), whereby a person transfers property from his or her patrimony to another patrimony that he or she constitutes; the property is appropriated for a particular purpose, and a trustee undertakes to hold and administer it.

NOTE In certain cases, a trust is created by law. A trust may also be created by a judgment, where this is authorized by law.

Trustee

An individual or a trust institution that holds legal title to property on behalf of the beneficiaries of a trust. Also, a legal representative, a liquidator of a succession, an administrator, a mandatary or a receiver (sequestrator) that owns or controls property on behalf of another person.

Upkeep expenses

Expenses incurred for the maintenance and improvement of immovable property.

Will

A unilateral and revocable juridical act, drawn up in one of the forms provided for by law, which declares the intentions of the testator respecting the disposition and administration of his or her property after death.