PART I — Income Tax · DIVISION F — Special Rules Applicable in Certain Circumstances · Insurance Corporations

Qualifying transfer of funds

Not yet annotated · Text current to 2026-06-21 · section last amended 2018-01-01

Current text

For the purposes of this section, a qualifying transfer occurs at a particular time (in this section referred to as the “transfer time”) if

(a)

all of the property that, immediately before the transfer time, was property of a related segregated fund trust has become, at the transfer time, the property of another related segregated fund trust (in this section referred to as the “transferor” and “transferee”, respectively, and collectively as the “funds”);

(b)

every person that had an interest in the transferor immediately before the transfer time (in this section referred to as a “beneficiary”) has ceased to be a beneficiary of the transferor at the transfer time and has received no consideration for the interest other than an interest in the transferee;

(c)

the trustee of the funds is a resident of Canada; and

(d)

the trustee of the funds so elects, by filing a prescribed form with the Minister on or before the election’s due date.

General

(2)

If there has been a qualifying transfer,

(a)

the last taxation years of the funds that began before the transfer time are deemed to have ended at the transfer time and the next taxation year of the transferee is deemed to have begun immediately after the transfer time;

(b)

no amount in respect of a non-capital loss, net capital loss, restricted farm loss, farm loss or limited partnership loss of a fund for a taxation year that began before the transfer time is deductible in computing the taxable income of the funds for a taxation year that begins after the transfer time;

(c)

each beneficiary’s interest in the transferor is deemed to have been disposed of at the transfer time for proceeds of disposition, and each beneficiary’s interest in the transferee received in the qualifying transfer is deemed to have been acquired at a cost, equal to the cost amount to the beneficiary of the interest in the transferor immediately before the transfer time;

(d)

any amount determined under subsection 138.1(6) in respect of a policyholder’s interest in the transferor is deemed

(i)

to have been charged, transferred or paid in respect of the policyholder’s interest in the transferee that is acquired on the qualifying transfer, and

(ii)

to not have been charged, transferred or paid in respect of the policyholder’s interest in the transferor; and

(e)

subsections 138.1(4) and (5) do not apply in respect of any disposition of an interest in the transferor arising on the qualifying transfer.

Transferor – capital gains and losses

(3)

In respect of a qualifying transfer, each property of the transferor held immediately before the transfer time is deemed to have been disposed of by the transferor immediately before the transfer time for proceeds of disposition, and to have been acquired by the transferee at the transfer time for a cost, equal to the lesser of

(a)

the fair market value of the property immediately before the transfer time, and

(b)

the greater of

(i)

the cost amount of the property to the transferor immediately before the transfer time, and

(ii)

the amount that is designated in respect of the property in the election in respect of the qualifying transfer.

Transferee – capital gains and losses

(4)

In respect of a qualifying transfer, each property of the transferee held immediately before the transfer time is deemed to have been disposed of by the transferee immediately before the transfer time for proceeds of disposition, and to have been reacquired by the transferee at the transfer time for a cost, equal to the lesser of

(a)

the fair market value of the property immediately before the transfer time, and

(b)

the greater of

(i)

the cost amount of the property to the transferee immediately before the transfer time, and

(ii)

the amount that is designated in respect of the property in the election in respect of the qualifying transfer.

Loss limitation

(5)

Subsection 138.1(3) does not apply to capital losses of a fund from the disposition of property on a qualifying transfer under subsection (3) or (4) to the extent that the amount of such capital losses exceeds the amount of capital gains of the fund from the disposition of property on the qualifying transfer under subsection (3) or (4), as the case may be.

Due date

(6)

The due date of an election referred to in paragraph (1)(d) is the later of

(a)

the day that is six months after the day that includes the transfer time, and

(b)

a day that the Minister may specify.

Source: Justice Laws Website. Not an official version.

Historic text

This section has not been amended since it was enacted (2017, c. 33, s. 55), so there is no earlier version.

Earlier versions: Justice Laws point-in-time versions of the Act (from 31 August 2004), and CanLII (under “Versions”). On Justice Laws, each version of section 138.2 links to the one before it.

Enacting and amending legislation

2017, c. 33, s. 55

Text before 2004 is found in the annual Statutes of Canada cited above. Application and coming-into-force provisions are not part of the consolidation; see the amending Acts.

Cross-references

This section refers to

s. 138.1

Referred to in

s. 138.1

References are generated from the statutory text and list other sections of the Act only.

Citation

Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.), s. 138.2.