VIII, s. 30]
Marginal note:Artificial transactions
(11)Notwithstanding any other provision of this Act, sections 74.1 to 74.4 do not apply to a transfer or loan of property where it may reasonably be concluded that one of the main reasons for the transfer or loan was to reduce the amount of tax that would, but for this subsection, be payable under this Part on the income and gains derived from the property or from property substituted therefor.
Marginal note:Where ss. 74.1 to 74.3 do not apply
(12)Sections 74.1, 74.2 and 74.3 do not apply in respect of a transfer by an individual of property
(a)as a payment of a premium under a registered retirement savings plan under which the individual’s spouse or common-law partner is, immediately after the transfer, the annuitant (within the meaning of subsection 146(1)) to the extent that the premium is deductible in computing the income of the individual for a taxation year;
(a.1)[Repealed, 2011, c. 24, s. 17]
(a.2)as a payment of a contribution under a registered disability savings plan;
(b)as or on account of an amount paid by the individual to another individual who is the individual’s spouse or common-law partner or a person who was under 18 years of age in a taxation year and who
(i)does not deal with the individual at arm’s length, or
(ii)is the niece or nephew of the individual,
that is deductible in computing the individual’s income for the year and is required to be included in computing the income of the other individual;
(c)to the individual’s spouse or common-law partner,
(i)while the property, or property substituted for it, is held under a TFSA of which the spouse or common-law partner is the holder, and
(ii)to the extent that the spouse or common-law partner does not, at the time of the contribution of the property under the TFSA, have an excess TFSA amount (as defined in subsection 207.01(1)); or
(d)as a payment of a contribution under a FHSA.
Marginal note:Exception from attribution rules
(13)Subsections 74.1(1) and (2), 74.3(1) and 75(2) of this Act and section 74 of theIncome Tax Act, chapter 148 of the Revised Statutes of Canada, 1952, do not apply to any amount that is included in computing a specified individual’s split income for a taxation year.
Marginal note:Trusts
75(2)If a trust, that is resident in Canada and that was created in any manner whatever since 1934, holds property on condition
(a)that it or property substituted therefor may
(i)revert to the person from whom the property or property for which it was substituted was directly or indirectly received (in this subsection referred to as “the person”), or
(ii)pass to persons to be determined by the person at a time subsequent to the creation of the trust, or
(b)that, during the existence of the person, the property shall not be disposed of except with the person’s consent or in accordance with the person’s direction,
any income or loss from the property or from property substituted for the property, and any taxable capital gain or allowable capital loss from the disposition of the property or of property substituted for the property, shall, during the existence of the person while the person is resident in Canada, be deemed to be income or a loss, as the case may be, or a taxable capital gain or allowable capital loss, as the case may be, of the person.
Marginal note:Exceptions
(3)Subsection 75(2) does not apply to property held in a taxation year
(a)by a trust governed by a deferred profit sharing plan, an employee benefit plan, an employees profit sharing plan, a FHSA, a pooled registered pension plan, a registered disability savings plan, a registered education savings plan, a registered pension plan, a registered retirement income fund, a registered retirement savings plan, a registered supplementary unemployment benefit plan, a retirement compensation arrangement or a TFSA;
(b)by an employee life and health trust, an employee trust, a private foundation that is a registered charity, a related segregated fund trust (within the meaning assigned by paragraph 138.1(1)(a)), a trust described by paragraph (a.1) of the definitiontrustin subsection 108(1), or a trust described by paragraph 149(1)(y);
(c)by a qualifying environmental trust; or
(c.1) to (c.3)[Repealed, 2013, c. 40, s. 35]
(d)by a trust if
(i)the trust acquired the property, or other property for which the property is a substitute, from a particular individual,
(ii)the particular individual acquired the property or the other property, as the case may be, in respect of another individual as a consequence of the operation of subsection 122.61(1) or under section 4 of theUniversal Child Care Benefit Act, and
(iii)the trust has nobeneficiaries(as defined in subsection 108(1)) who may for any reason receive directly from the trust any of the income or capital of the trust other than individuals in respect of whom the particular individual acquired property as a consequence of the operation of a provision described in subparagraph (ii).
Marginal note:Gain or loss deemed that of transferor
75.1(1)Where
(a)subsection 73(3) or (4) applied to the transfer of property (in this subsection referred to as “transferred property”) by a taxpayer to a child of the taxpayer,
(b)the transfer was made at less than the fair market value of the transferred property immediately before the time of the transfer, and
(c)in a taxation year, the transferee disposed of the transferred property and did not, before the end of that year, attain the age of 18 years,
the following rules apply:
(d)the amount, if any, by which
(i)the total of the transferee’s taxable capital gains for the year from dispositions of transferred property
exceeds
(ii)the total of the transferee’s allowable capital losses for the year from dispositions of transferred property,
shall during the lifetime of the transferor while the transferor is resident in Canada, be deemed to be a taxable capital gain of the transferor for the year from the disposition of property,
(e)the amount, if any, by which the total determined under subparagraph 75.1(1)(d)(ii) exceeds the total determined under subparagraph 75.1(1)(d)(i) shall, during the lifetime of the transferor while the transferor is resident in Canada, be deemed to be an allowable capital loss of the transferor for the year from the disposition of property, and
(f)any taxable capital gain or allowable capital loss taken into account in computing an amount described in paragraph 75.1(1)(d) or the amount described in paragraph 75.1(1)(e) shall, except for the purposes of those paragraphs, to the extent that the amount so described is deemed by virtue of this subsection to be a taxable capital gain or an allowable capital loss of the transferor, be deemed not to be a taxable capital gain or an allowable capital loss, as the case may be, of the transferee.
Definition ofchild
(2)For the purposes of this section,childof a taxpayer includes a child of the taxpayer’s child and a child of the taxpayer’s child’s child.
Marginal note:Rules applicable with respect to “qualifying trust annuity”
75.2If an amount paid to acquire a qualifying trust annuity with respect to a taxpayer was deductible under paragraph 60(l) in computing the taxpayer’s income,
(a)any amount that is paid out of or under the annuity at any particular time after 2005 and before the death of the taxpayer is deemed to have been received out of or under the annuity at the particular time by the taxpayer, and not to have been received by any other taxpayer; and
(b)if the taxpayer dies after 2005
(i)an amount equal to the fair market value of the annuity at the time of the taxpayer’s death is deemed to have been received, immediately before the taxpayer’s death, by the taxpayer out of or under the annuity, and
(ii)for the purpose of subsection 70(5), the annuity is to be disregarded in determining the fair market value (immediately before the taxpayer’s death) of the taxpayer’s interest in the trust that is the annuitant under the annuity.
Marginal note:Security in satisfaction of income debt
76(1)Where a person receives a security or other right or a certificate of indebtedness or other evidence of indebtedness wholly or partially as payment of, in lieu of payment of or in satisfaction of, a debt that is then payable, the amount of which debt would be included in computing the person’s income if it were paid, the value of the security, right or indebtedness or the applicable portion thereof shall, notwithstanding the form or legal effect of the transaction, be included in computing the person’s income for the taxation year in which it is received.
Marginal note:Idem
(2)Where a security or other right or a certificate of indebtedness or other evidence of indebtedness is received by a person wholly or partially as payment of, in lieu of payment of or in satisfaction of, a debt before the debt is payable, but is not itself payable or redeemable before the day on which the debt is payable, it shall, for the purpose of subsection 76(1), be deemed to be received by the person holding it at that time when the debt becomes payable.
Marginal note:Section enacted for greater certainty
(3)This section is enacted for greater certainty and shall not be construed as limiting the generality of the other provisions of this Part by which amounts are required to be included in computing income.
Marginal note:Debt deemed not to be income debt
(4)Where a cash purchase ticket or other form of settlement prescribed pursuant to theCanada Grain Actor by the Minister is issued to a taxpayer in respect of grain delivered in a taxation year of a taxpayer to a primary elevator or process elevator and the ticket or other form of settlement entitles the holder thereof to payment by the operator of the elevator of the purchase price, without interest, stated in the ticket for the grain at a date that is after the end of that taxation year, the amount of the purchase price stated in the ticket or other form of settlement shall, notwithstanding any other provision of this section, be included in computing the income of the taxpayer to whom the ticket or other form of settlement was issued for the taxpayer’s taxation year immediately following the taxation year in which the grain was delivered and not for the taxation year in which the grain was delivered.
Marginal note:Definitions of certain expressions
(5)In subsection (4), the expressionscash purchase ticket,operator,primary elevatorandprocess elevatorhave the meanings assigned by theCanada Grain Act, andgrainmeans wheat, oats, barley, rye, flaxseed, rapeseed and canola produced in Canada.
Marginal note:Non-resident moving debt from Canadian business
76.1(1)If at any time a debt obligation of a non-resident taxpayer that is denominated in a foreign currency ceases to be an obligation of the taxpayer in respect of a business or part of a business carried on by the taxpayer in Canada immediately before that time (other than an obligation in respect of which the taxpayer ceased to be indebted at that time), for the purpose of determining the amount of any income, loss, capital gain or capital loss due to the fluctuation in the value of the foreign currency relative to Canadian currency, the taxpayer is deemed to have settled the debt obligation immediately before that time at the amount outstanding on account of its principal amount.
Marginal note:Non-resident assuming debt
(2)If at any time a debt obligation of a non-resident taxpayer that is denominated in a foreign currency becomes an obligation of the taxpayer in respect of a business or part of a business that the taxpayer carries on in Canada after that time (other than an obligation in respect of which the taxpayer became indebted at that time), the amount of any income, loss, capital gain or capital loss in respect of the obligation due to the fluctuation in the value of the foreign currency relative to Canadian currency shall be determined based on the amount of the obligation in Canadian currency at that time.
77[Repealed, 1995, c. 21, s. 52]
Marginal note:Unpaid amounts
78(1)Where an amount in respect of a deductible outlay or expense that was owing by a taxpayer to a person with whom the taxpayer was not dealing at arm’s length at the time the outlay or expense was incurred and at the end of the second taxation year following the taxation year in which the outlay or expense was incurred, is unpaid at the end of that second taxation year, either
(a)the amount so unpaid shall be included in computing the taxpayer’s income for the third taxation year following the taxation year in which the outlay or expense was incurred, or
(b)where the taxpayer and that person have filed an agreement in prescribed form on or before the day on or before which the taxpayer is required by section 150 to file the taxpayer’s return of income for the third succeeding taxation year, for the purposes of this Act the following rules apply:
(i)the amount so unpaid shall be deemed to have been paid by the taxpayer and received by that person on the first day of that third taxation year, and section 153, except subsection 153(3), is applicable to the extent that it would apply if that amount were being paid to that person by the taxpayer, and
(ii)that person shall be deemed to have made a loan to the taxpayer on the first day of that third taxation year in an amount equal to the amount so unpaid minus the amount, if any, deducted or withheld therefrom by the taxpayer on account of that person’s tax for that third taxation year.
Marginal note:Idem
(2)Where an amount in respect of a deductible outlay or expense that was owing by a taxpayer that is a corporation to a person with whom the taxpayer was not dealing at arm’s length is unpaid at the time when the taxpayer is wound up, and the taxpayer is wound up before the end of the second taxation year following the taxation year in which the outlay or expense was incurred, the amount so unpaid shall be included in computing the taxpayer’s income for the taxation year in which it was wound up.
Marginal note:Late filing
(3)Where, in respect of an amount described in subsection 78(1) that was owing by a taxpayer to a person, an agreement in a form prescribed for the purposes of this section is filed after the day on or before which the agreement is required to be filed for the purposes of paragraph 78(1)(b), both paragraphs 78(1)(a) and (b) apply in respect of the said amount, except that paragraph 78(1)(a) shall be read and construed as requiring 25% only of the said amount to be included in computing the taxpayer’s income.
Marginal note:Unpaid remuneration and other amounts
(4)Where an amount in respect of a taxpayer’s expense that is a superannuation or pension benefit, a retiring allowance, salary, wages or other remuneration (other than reasonable vacation or holiday pay or a deferred amount under a salary deferral arrangement) in respect of an office or employment is unpaid on the day that is 180 days after the end of the taxation year in which the expense was incurred, for the purposes of this Act other than this subsection, the amount shall be deemed not to have been incurred as an expense in the year and shall be deemed to be incurred as an expense in the taxation year in which the amount is paid.
Marginal note:Where s. (1) does not apply
(5)Subsection 78(1) does not apply in any case where subsection (4) applies.
Marginal note:Definitions
79(1)In this section,
creditorof a particular person includes a person to whom the particular person is obligated to pay an amount under a mortgage, hypothecary claim or similar obligation and, where property was sold to the particular person under a conditional sales agreement, the seller of the property (or any assignee with respect to the agreement) is deemed to be a creditor of the particular person in respect of that property; (créancier)
debtincludes an obligation to pay an amount under a mortgage, hypothecary claim or similar obligation or under a conditional sales agreement; (dette)
personincludes a partnership; (personne)
propertydoes not include
(a)money, or
(b)indebtedness owed by or guaranteed by the government of a country, or a province, state, or other political subdivision of that country; (bien)
specified amountat any time of a debt owed or assumed by a person means
(a)the unpaid principal amount of the debt at that time, and
(b)unpaid interest accrued to that time on the debt. (montant déterminé)
Marginal note:Surrender of property
(2)For the purposes of this section, a property is surrendered at any time by a person to another person where the beneficial ownership of the property is acquired or reacquired at that time from the person by the other person and the acquisition or reacquisition of the property was in consequence of the person’s failure to pay all or part of one or more specified amounts of debts owed by the person to the other person immediately before that time.
Marginal note:Proceeds of disposition for debtor
(3)Where a particular property is surrendered at any time by a person (in this subsection referred to as the “debtor”) to a creditor of the debtor, the debtor’s proceeds of disposition of the particular property shall be deemed to be the amount determined by the formula
(A + B + C + D + E - F) × G/H
where
(a)any property surrendered at that time by the debtor to the creditor was security for
(i)the particular debt, and
(ii)another debt that is owed by the debtor immediately before that time to the creditor, and
(b)the other debt is subordinate to the particular debt in respect of that property;
(a)where a specified amount of a debt owed by the debtor immediately before that time to a person (other than the creditor) ceases, as a consequence of the surrender at that time of properties by the debtor to the creditor, to be secured by all properties owned by the debtor immediately before that time, the lesser of
(i)the amount, if any, by which the total of all such specified amounts exceeds the portion of that total included in any of the amounts determined for B or C as a consequence of properties being surrendered at that time by the debtor to the creditor, and
(ii)the amount, if any, by which the total cost amount to the debtor of all properties surrendered at that time by the debtor to the creditor exceeds the total amount that would, but for this description and the description of F, be determined under this subsection as a consequence of the surrender, and
(b)in any other case, nil;
(a)where the particular property is surrendered at that time by the debtor in circumstances in which paragraph 69(1)(b) would, but for this subsection, apply and the fair market value of all properties surrendered at that time by the debtor to the creditor exceeds the amount that would, but for this description and the description of F, be determined under this subsection as a consequence of the surrender, that excess, and
(b)in any other case, nil;
(a)the portion of a particular specified amount of a particular debt included in the amount determined for A, B, C or D in computing the debtor’s proceeds of disposition of the particular property, and
(b)the total of
(i)all amounts included under paragraph 6(1)(a) or subsection 15(1) in computing the income of any person because the particular debt was settled, or deemed by subsection 80.01(8) to have been settled, at or before the end of the taxation year that includes that time,
(ii)all amounts renounced under subsection 66(10), (10.1), (10.2) or (10.3) by the debtor in respect of the particular debt,
(iii)all amounts each of which is a forgiven amount (within the meaning assigned by subsection 80(1)) in respect of the debt at a previous time that the particular debt was deemed by subsection 80.01(8) to have been settled,
(iv)where the particular debt is an excluded obligation (within the meaning assigned by subsection 80(1)), the particular specified amount, and
(v)the lesser of
(A)the unpaid interest accrued to that time on the particular debt, and
(B)the total of
(I)the amount, if any, by which the total of all amounts included because of section 80.4 in computing the debtor’s income for the taxation year that includes that time or for a preceding taxation year in respect of interest on the particular debt exceeds the total of all amounts paid before that time on account of interest on the particular debt, and
(II)such portion of that unpaid interest as would, if it were paid, be included in the amount determined under paragraph 28(1)(e) in respect of the debtor;
Marginal note:Subsequent payment by debtor
(4)An amount paid at any time by a person as, on account of or in satisfaction of, a specified amount of a debt that can reasonably be considered to have been included in the amount determined for A, C or D in subsection 79(3) in respect of a property surrendered before that time by the person shall be deemed to be a repayment of assistance, at that time in respect of the property, to which
(a)subsection 39(13) applies, where the property was capital property (other than depreciable property) of the person immediately before its surrender;
(b)paragraph 20(1)(hh.1) applies, where the cost of the property to the person was an eligible capital expenditure at the time the property was acquired;
(c)the description of E in the definitioncumulative Canadian exploration expensein subsection 66.1(6), the description of D in the definitioncumulative Canadian development expensein subsection 66.2(5) or the description of D in the definitioncumulative Canadian oil and gas property expensein subsection 66.4(5), as the case may be, applies, where the cost of the property to the person was a Canadian exploration expense, a Canadian development expense or a Canadian oil and gas property expense; or
(d)paragraph 20(1)(hh) applies, in any other case.
Marginal note:Subsequent application with respect to employee or shareholder debt
(5)Any amount included under paragraph 6(1)(a) or subsection 15(1) in computing a person’s income for a taxation year that can reasonably be considered to have been included in the amount determined for A, C or D in subsection 79(3) as a consequence of properties being surrendered before the year by the person shall be deemed to be a repayment by the person, immediately before the end of the year, of assistance to which subsection 79(4) applies.
Marginal note:Surrender of property not payment or repayment by debtor
(6)Where a specified amount of a debt is included in the amount determined at any time for A, B, C or D in subsection 79(3) in respect of a property surrendered at that time by a person to a creditor of the person, for the purpose of computing the person’s income, no amount shall be considered to have been paid or repaid by the person as a consequence of the acquisition or reacquisition of the surrendered property by the creditor.
Marginal note:Foreign exchange
(7)Where a debt is denominated in a currency (other than Canadian currency), any amount determined for A, B, C or D in subsection 79(3) in respect of the debt shall be determined with reference to the relative value of that currency and Canadian currency at the time the debt was issued.
Marginal note:Definitions
79.1(1)In this section,
creditorhas the meaning assigned by subsection 79(1); (créancier)
debthas the meaning assigned by subsection 79(1); (dette)
personhas the meaning assigned by subsection 79(1); (personne)
propertyhas the meaning assigned by subsection 79(1); (bien)
specified amounthas the meaning assigned by subsection 79(1); (montant déterminé)
specified costto a person of a debt owing to the person means
(a)where the debt is capital property of the person, the adjusted cost base to the person of the debt, and
(b)in any other case, the amount, if any, by which
(i)the cost amount to the person of the debt
exceeds
(ii)such portion of that cost amount as would be deductible in computing the person’s income (otherwise than in respect of the principal amount of the debt) if the debt were established by the person to have become a bad debt or to have become uncollectable. (coût déterminé)
Marginal note:Seizure of property
(2)Subject to subsection (2.1) and for the purpose of this section, a property is seized at any time by a person in respect of a debt where
(a)the beneficial ownership of the property is acquired or reacquired at that time by the person; and
(b)the acquisition or reacquisition of the property is in consequence of another person’s failure to pay to the person all or part of the specified amount of the debt.
Marginal note:Exception
(2.1)For the purpose of this section, foreign resource property is deemed not to be seized at any time from
(a)an individual or a corporation, if the individual or corporation is non-resident at that time; or
(b)a partnership (other than a partnership each member of which is resident in Canada at that time).
Marginal note:Creditor’s capital gains reserves
(3)Where a property is seized at any time in a particular taxation year by a creditor in respect of a debt, for the purpose of computing the income of the creditor for the particular year, the amount claimed by the creditor under subparagraph 40(1)(a)(iii) or 44(1)(e)(iii) in computing the creditor’s gain for the preceding taxation year from any disposition before the particular year of the property shall be deemed to be the amount, if any, by which the amount so claimed exceeds the total of all amounts each of which is an amount determined under paragraph 79.1(6)(a) or 79.1(6)(b) in respect of the seizure.
Marginal note:Creditor’s inventory reserves
(4)Where a property is seized at any time in a particular taxation year by a creditor in respect of a debt, for the purpose of computing the income of the creditor for the particular year, the amount deducted under paragraph 20(1)(n) in computing the income of the creditor for the preceding taxation year in respect of any disposition of the property before the particular year shall be deemed to be the amount, if any, by which the amount so deducted exceeds the total of all amounts each of which is an amount determined under paragraph 79.1(6)(a) or 79.1(6)(b) in respect of the seizure.
Marginal note:Adjustment where disposition and reacquisition of capital property in same year
(5)Where a property is seized at any time in a taxation year by a creditor in respect of one or more debts and the property was capital property of the creditor that was disposed of by the creditor at a previous time in the year, the proceeds of disposition of the property to the creditor at the previous time shall be deemed to be the lesser of the amount of the proceeds (determined without reference to this subsection) and the amount that is the greater of
(a)the amount, if any, by which the amount of such proceeds (determined without reference to this subsection) exceeds such portion of the proceeds as is represented by the specified amounts of those debts immediately before that time, and
(b)the cost amount to the creditor of the property immediately before the previous time.
Marginal note:Cost of seized properties for creditor
(6)Where a particular property is seized at any time in a taxation year by a creditor in respect of one or more debts, the cost to the creditor of the particular property shall be deemed to be the amount, if any, by which the total of
(a)that proportion of the total specified costs immediately before that time to the creditor of those debts that
(i)the fair market value of the particular property immediately before that time
is of
(ii)the fair market value of all properties immediately before that time that were seized by the creditor at that time in respect of those debts, and
(b)all amounts each of which is an outlay or expense made or incurred, or a specified amount at that time of a debt that is assumed, by the creditor at or before that time to protect the creditor’s interest, or for civil law the creditor’s right, in the particular property, except to the extent the outlay or expense
(i)was included in the cost to the creditor of property other than the particular property,
(ii)was included before that time in computing, for the purposes of this Act, any balance of undeducted outlays, expenses or other amounts of the creditor, or
(iii)was deductible in computing the creditor’s income for the year or a preceding taxation year
exceeds
(c)the amount, if any, claimed or deducted under paragraph 20(1)(n) or subparagraph 40(1)(a)(iii) or 44(1)(e)(iii), as the case may be, in respect of the particular property in computing the creditor’s income or capital gain for the preceding taxation year or the amount by which the proceeds of disposition of the creditor of the particular property are reduced because of subsection 79.1(5) in respect of a disposition of the particular property by the creditor occurring before that time and in the year.
Marginal note:Treatment of debt
(7)Where a property is seized at any time in a taxation year by a creditor in respect of a particular debt,
(a)the creditor shall be deemed to have disposed of the particular debt at that time;
(b)the amount received on account of the particular debt as a consequence of the seizure shall be deemed
(i)to be received at that time, and
(ii)to be equal to
(A)where the particular debt is capital property, the adjusted cost base to the creditor of the particular debt, and
(B)in any other case, the cost amount to the creditor of the particular debt;
(c)where any portion of the particular debt is outstanding immediately after that time, the creditor shall be deemed to have reacquired that portion immediately after that time at a cost equal to
(i)where the particular debt is capital property, nil, and
(ii)in any other case, the amount, if any, by which
(A)the cost amount to the creditor of the particular debt
exceeds
(B)the specified cost to the creditor of the particular debt; and
(d)where no portion of the particular debt is outstanding immediately after that time and the particular debt is not capital property, the creditor may deduct as a bad debt in computing the creditor’s income for the year the amount described in subparagraph 79.1(7)(c)(ii) in respect of the seizure.
Marginal note:Claims for debts
(8)Where a property is seized at any time in a taxation year by a creditor in respect of a debt, no amount in respect of the debt
(a)is deductible in computing the creditor’s income for the year or a subsequent taxation year as a bad, doubtful or impaired debt; or
(b)shall be included after that time in computing, for the purposes of this Act, any balance of undeducted outlays, expenses or other amounts of the creditor as a bad, doubtful or impaired debt.
Marginal note:Definitions
80(1)In this section,
commercial debt obligationissued by a debtor means a debt obligation issued by the debtor
(a)where interest was paid or payable by the debtor in respect of it pursuant to a legal obligation, or
(b)if interest had been paid or payable by the debtor in respect of it pursuant to a legal obligation,
an amount in respect of the interest was or would have been deductible in computing the debtor’s income, taxable income or taxable income earned in Canada, as the case may be, if this Act were read without reference to subsections 15.1(2) and 15.2(2), paragraph 18(1)(g), subsections 18(2), 18(3.1) and 18(4) and section 21; (créance commerciale)
commercial obligationissued by a debtor means
(a)a commercial debt obligation issued by the debtor, or
(b)a distress preferred share issued by the debtor; (dette commerciale)
debtorincludes any corporation that has issued a distress preferred share and any partnership; (débiteur)
directed personat any time in respect of a debtor means
(a)a taxable Canadian corporation or an eligible Canadian partnership by which the debtor is controlled at that time, or
(b)a taxable Canadian corporation or an eligible Canadian partnership that is controlled at that time by
(i)the debtor,
(ii)the debtor and one or more persons related to the debtor, or
(iii)a person or group of persons by which the debtor is controlled at that time; (personne désignée)
distress preferred shareissued by a corporation means, at any time, a share issued after February 21, 1994 (other than a share issued pursuant to an agreement in writing entered into on or before that date) by the corporation that is a share described in paragraph (e) of the definitionterm preferred sharein subsection 248(1) that would be a term preferred share at that time if that definition were read without reference to paragraphs (e) and (f); (action privilégiée de renflouement)
eligible Canadian partnershipat any time means a Canadian partnership none of the members of which is, at that time,
(a)a non-resident owned investment corporation,
(b)a person exempt, because of subsection 149(1), from tax under this Part on all or part of the person’s taxable income,
(c)a partnership, other than an eligible Canadian partnership, or
(d)a trust, other than a trust in which no non-resident person and no person described in paragraph (a), (b) or (c) is beneficially interested; (société de personnes canadienne admissible)
excluded obligationmeans an obligation issued by a debtor where
(a)the proceeds from the issue of the obligation
(i)were included in computing the debtor’s income or, but for the expression “other than a prescribed amount” in paragraph 12(1)(x), would have been so included,
(ii)were deducted in computing, for the purposes of this Act, any balance of undeducted outlays, expenses or other amounts, or
(iii)were deducted in computing the capital cost or cost amount to the debtor of any property of the debtor,
(b)an amount paid by the debtor in satisfaction of the entire principal amount of the obligation would be included in the amount determined under paragraph 28(1)(e) or section 30 in respect of the debtor,
(c)section 78 applies to the obligation, or
(d)the principal amount of the obligation would, if this Act were read without reference to sections 79 and 80 and the obligation were settled without any amount being paid in satisfaction of its principal amount, be included in computing the debtor’s income because of the settlement of the obligation; (dette exclue)
excluded propertymeans property of a non-resident debtor that is treaty-protected property or that is not taxable Canadian property; (bien exclu)
excluded securityissued by a corporation to a person as consideration for the settlement of a debt means
(a)a distress preferred share issued by the corporation to the person, or
(b)a share issued by the corporation to the person under the terms of the debt, where the debt was a bond, debenture or note listed on a designated stock exchange in Canada and the terms for the conversion to the share were not established or substantially modified after the later of February 22, 1994 and the time that the bond, debenture or note was issued; (valeur mobilière exclue)
forgiven amountat any time in respect of a commercial obligation issued by a debtor is the amount determined by the formula
A - B
where
(a)the amount, if any, paid at that time in satisfaction of the principal amount of the obligation,
(b)the amount, if any, included under paragraph 6(1)(a) or subsection 15(1) in computing the income of any person because of the settlement of the obligation at that time,
(c)the amount, if any, deducted at that time under paragraph 18(9.3)(f) in computing the forgiven amount in respect of the obligation,
(d)the capital gain, if any, of the debtor resulting from the application of subsection 39(3) to the purchase at that time of the obligation by the debtor,
(e)such portion of the principal amount of the obligation as relates to an amount renounced under subsection 66(10), 66(10.1), 66(10.2) or 66(10.3) by the debtor,
(f)any portion of the principal amount of the obligation that is included in the amount determined for A, B, C or in subsection 79(3) in respect of the debtor for the taxation year of the debtor that includes that time or for a preceding taxation year,
(g)the total of all amounts each of which is a forgiven amount at a previous time that the obligation was deemed by subsection 80.01(8) or 80.01(9) to have been settled,
(h)such portion of the principal amount of the obligation as can reasonably be considered to have been included under section 80.4 in computing the debtor’s income for a taxation year that includes that time or for a preceding taxation year,
(i)where the debtor is a bankrupt at that time, the principal amount of the obligation,
(j)such portion of the principal amount of the obligation as represents the principal amount of an excluded obligation,
(k)where the debtor is a partnership and the obligation was, since the later of the creation of the partnership or the issue of the obligation, always payable to a member of the partnership actively engaged, on a regular, continuous and substantial basis, in those activities of the partnership that are other than the financing of the partnership business, the principal amount of the obligation, and
(l)the amount, if any, given at or before that time by the debtor to another person as consideration for the assumption by the other person of the obligation; (montant remis)
personincludes a partnership; (personne)
relevant loss balance, at a particular time for a commercial obligation and in respect of a debtor’s non-capital loss, farm loss, restricted farm loss or net capital loss, as the case may be, for a particular taxation year, is
(a)subject to paragraph (b), the amount of such loss that would be deductible in computing the debtor’s taxable income or taxable income earned in Canada, as the case may be, for the taxation year that includes that time if
(i)the debtor had sufficient incomes from all sources and sufficient taxable capital gains,
(ii)subsections (3) and (4) did not apply to reduce such loss at or after that time, and
(iii)paragraph 111(4)(a) and subsection 111(5) did not apply to the debtor, and
(b)nil if the debtor is a taxpayer that was at a previous time subject to a loss restriction event and the particular year ended before the previous time, unless
(i)the obligation was issued by the debtor before, and not in contemplation of, the loss restriction event, or
(ii)all or substantially all of the proceeds from the issue of the obligation were used to satisfy the principal amount of another obligation to which subparagraph (i) or this subparagraph would apply if the other obligation were still outstanding; (solde de pertes applicable)
successor poolat any time for a commercial obligation and in respect of an amount determined in relation to a debtor means the portion of that amount that would be deductible under subsection 66.7(2), (2.3), (3), (4) or (5), as the case may be, in computing the debtor’s income for the taxation year that includes that time, if
(a)the debtor had sufficient incomes from all sources,
(b)subsection (8) did not apply to reduce the amount so determined at that time,
(c)the year ended immediately after that time, and
(d)paragraphs 66.7(2.3)(a), (4)(a) and (5)(a) were read without reference to the expressions “30% of”, “30% of” and “10% of”, respectively,
except that the successor pool at that time for the obligation is deemed to be nil unless
(e)the obligation was issued by the debtor before, and not in contemplation of, the event described in paragraph (8)(a) that gives rise to the deductibility under subsection 66.7(2), (2.3), (3), (4) or (5), as the case may be, of all or part of that amount in computing the debtor’s income, or
(f)all or substantially all of the proceeds from the issue of the obligation were used to satisfy the principal amount of another obligation to which paragraph (e) or this paragraph would apply if the other obligation were still outstanding; (compte de société remplaçante)
unrecognized loss, at a particular time, in respect of an obligation issued by a debtor, from the disposition of a property, is the amount that would, but for subparagraph 40(2)(g)(ii), be a capital loss from the disposition by the debtor at or before the particular time of a debt or other right to receive an amount, except that if the debtor is a taxpayer that is subject to a loss restriction event before the particular time and after the time of the disposition, the unrecognized loss at the particular time in respect of the obligation is nil unless
(a)the obligation was issued by the debtor before, and not in contemplation of, the loss restriction event, or
(b)all or substantially all of the proceeds from the issue of the obligation were used to satisfy the principal amount of another obligation to which paragraph 80(1)(a) or this paragraph would apply if the other obligation were still outstanding. (perte non constatée)
Marginal note:Application of debt forgiveness rules
(2)For the purposes of this section,
(a)an obligation issued by a debtor is settled at any time where the obligation is settled or extinguished at that time (otherwise than by way of a bequest or inheritance or as consideration for the issue of a share described in paragraph (b) of the definitionexcluded securityin subsection 80(1));
(b)an amount of interest payable by a debtor in respect of an obligation issued by the debtor shall be deemed to be an obligation issued by the debtor that
(i)has a principal amount, and
(ii)was issued by the debtor for an amount,
equal to the portion of the amount of such interest that was deductible or would, but for subsection 18(2) or 18(3.1) or section 21, have been deductible in computing the debtor’s income for a taxation year;
(c)subsections (3) to (5) and (8) to (13) apply in numerical order to the forgiven amount in respect of a commercial obligation;
(d)the applicable fraction of the unapplied portion of a forgiven amount at any time in respect of an obligation issued by the debtor is in respect of a loss for any other taxation year, the fraction required to be used under section 38 for that year;
(e)where an applicable fraction (as determined under paragraph 80(2)(d)) of the unapplied portion of a forgiven amount is applied under subsection 80(4) to reduce at any time a loss for a taxation year, the portion of the forgiven amount so applied shall, except for the purpose of reducing the loss, be deemed to be the quotient obtained when the amount of the reduction is divided by the applicable fraction;
(f)[Repealed, 2016, c. 12, s. 23]
(g)where a corporation issues a share (other than an excluded security) to a person as consideration for the settlement of a debt issued by the corporation and payable to the person, the amount paid in satisfaction of the debt because of the issue of the share is deemed to be equal to the fair market value of the share at the time it was issued;
(g.1)where a debt issued by a corporation and payable to a person is settled at any time, the amount, if any, that can reasonably be considered to be the increase, as a consequence of the settlement of the debt, in the fair market value of shares of the capital stock of the corporation owned by the person (other than any shares acquired by the person as consideration for the settlement of the debt) is deemed to be an amount paid at that time in satisfaction of the debt;
(h)where any part of the consideration given by a debtor to another person for the settlement at any time of a particular commercial debt obligation issued by the debtor and payable to the other person consists of a new commercial debt obligation issued by the debtor to the other person
(i)an amount equal to the principal amount of the new obligation shall be deemed to be paid by the debtor at that time, because of the issue of the new obligation, in satisfaction of the principal amount of the particular obligation, and
(ii)the new obligation shall be deemed to have been issued for an amount equal to the amount, if any, by which
(A)the principal amount of the new obligation
exceeds
(B)the amount, if any, by which the principal amount of the new obligation exceeds the amount for which the particular obligation was issued;
(i)where 2 or more commercial obligations issued by a debtor are settled at the same time, those obligations shall be treated as if they were settled at different times in the order designated by the debtor in a prescribed form filed with the debtor’s return of income under this Part for the debtor’s taxation year that includes that time or, if the debtor does not so designate any such order, in the order designated by the Minister;
(j)for the purpose of determining, at any time, whether 2 persons are related to each other or whether any person is controlled by any other person, it shall be assumed that
(i)each partnership and each trust is a corporation having a capital stock of a single class of voting shares divided into 100 issued shares,
(ii)each member of a partnership and each beneficiary under a trust owned at that time the number of issued shares of that class that is equal to the proportion of 100 that
(A)the fair market value at that time of the member’s interest in the partnership or the beneficiary’s interest in the trust, as the case may be
is of
(B)the fair market value at that time of all members’ interests in the partnership or all beneficiaries’ interests in the trust, as the case may be, and
(iii)where a beneficiary’s share of the income or capital of a trust depends on the exercise by any person of, or the failure by any person to exercise, any discretionary power, the fair market value at any time of the beneficiary’s interest in the trust is equal to
(A)where the beneficiary is not entitled to receive or otherwise obtain the use of any of the income or capital of the trust before the death after that time of one or more other beneficiaries under the trust, nil, and
(B)in any other case, the total fair market value at that time of all beneficiaries’ interests under the trust;
(k)where an obligation is denominated in a currency (other than Canadian currency), the forgiven amount at any time in respect of the obligation shall be determined with reference to the relative value of that currency and Canadian currency at the time the obligation was issued;
(l)where an amount is paid in satisfaction of the principal amount of a particular commercial obligation issued by a debtor and, as a consequence of the payment, the debtor is legally obliged to pay that amount to another person, the obligation to pay that amount to the other person shall be deemed to be a commercial obligation that was issued by the debtor at the same time and in the same circumstances as the particular obligation;
(m)for greater certainty, the amount that can be applied under this section to reduce another amount may not exceed that other amount;
(n)except for the purposes of this paragraph, where
(i)a commercial debt obligation issued by a debtor is settled at any time,
(ii)the debtor is at that time a member of a partnership, and
(iii)the obligation was, under the agreement governing the obligation, treated immediately before that time as a debt owed by the partnership,
the obligation shall be considered to have been issued by the partnership and not by the debtor;
(o)notwithstanding paragraph (n), if a commercial debt obligation, for which a particular person is liable with one or more other persons, is settled at any time in respect of the particular person but not in respect of all of the other persons, the portion of the obligation that can reasonably be considered to be the particular person’s share of the obligation shall be considered to have been issued by the particular person and settled at that time and not at any subsequent time;
(p)a commercial debt obligation issued by an individual that is outstanding at the time of the individual’s death and settled at a subsequent time shall, if the estate of the individual was liable for the obligation immediately before the subsequent time, be deemed to have been issued by the estate at the same time and in the same circumstances as the obligation was issued by the individual; and
(q)where a commercial debt obligation issued by an individual would, but for this paragraph, be settled at any time in the period ending 6 months after the death of an individual (or within such longer period as is acceptable to the Minister and the estate of the individual) and the estate of the individual was liable immediately before that time for the obligation
(i)the obligation shall be deemed to have been settled at the beginning of the day on which the individual died and not at that time,
(ii)any amount paid at that time by the estate in satisfaction of the principal amount of the obligation shall be deemed to have been paid at the beginning of the day on which the individual died,
(iii)any amount given by the estate at or before that time to another person as consideration for assumption by the other person of the obligation shall be deemed to have been given at the beginning of the day on which the individual died, and
(iv)paragraph 80(2)(b) shall not apply in respect of the settlement to interest that accrues within that period,
except that this paragraph does not apply in circumstances in which any amount is because of the settlement included under paragraph 6(1)(a) or subsection 15(1) in computing the income of any person or in which section 79 applies in respect of the obligation.
Marginal note:Reductions of non-capital losses
(3)Where a commercial obligation issued by a debtor is settled at any time, the forgiven amount at that time in respect of the obligation shall be applied to reduce at that time, in the following order,
(a)the debtor’s non-capital loss for each taxation year that ended before that time to the extent that the amount so applied
(i)does not exceed the amount (in subsection 80(4) referred to as the debtor’s “ordinary non-capital loss at that time for the year”) that would be the relevant loss balance at that time for the obligation and in respect of the debtor’s non-capital loss for the year if the description of E in the definitionnon-capital lossin subsection 111(8) were read without reference to the expression “the taxpayer’s allowable business investment loss for the year”, and
(ii)does not, because of this subsection, reduce the debtor’s non-capital loss for a preceding taxation year;
(b)the debtor’s farm loss for each taxation year that ended before that time, to the extent that the amount so applied
(i)does not exceed the amount that is the relevant loss balance at that time for the obligation and in respect of the debtor’s farm loss for the year, and
(ii)does not, because of this subsection, reduce the debtor’s farm loss for a preceding taxation year; and
(c)the debtor’s restricted farm loss for each taxation year that ended before that time, to the extent that the amount so applied
(i)does not exceed the amount that is the relevant loss balance at that time for the obligation and in respect of the debtor’s restricted farm loss for the year, and
(ii)does not, because of this subsection, reduce the debtor’s restricted farm loss for a preceding taxation year.
Marginal note:Reductions of capital losses
(4)Where a commercial obligation issued by a debtor is settled at any time, the applicable fraction of the remaining unapplied portion of a forgiven amount at that time in respect of the obligation shall be applied to reduce at that time, in the following order,
(a)the debtor’s non-capital loss for each taxation year that ended before that time to the extent that the amount so applied
(i)does not exceed the amount, if any, by which
(A)the relevant loss balance at that time for the obligation and in respect of the debtor’s non-capital loss for the year
exceeds
(B)the debtor’s ordinary non-capital loss (within the meaning assigned by subparagraph 80(3)(a)(i)) at that time for the year, and
(ii)does not, because of this subsection, reduce the debtor’s non-capital loss for a preceding taxation year; and
(b)the debtor’s net capital loss for each taxation year that ended before that time, to the extent that the amount so applied
(i)does not exceed the relevant loss balance at that time for the obligation and in respect of the debtor’s net capital loss for the year, and
(ii)does not, because of this subsection, reduce the debtor’s net capital loss for a preceding taxation year.
Marginal note:Reductions with respect to depreciable property
(5)Where a commercial obligation issued by a debtor is settled at any time, the remaining unapplied portion of the forgiven amount at that time in respect of the obligation shall be applied, in such manner as is designated by the debtor in a prescribed form filed with the debtor’s return of income under this Part for the taxation year that includes that time, to reduce immediately after that time the following amounts:
(a)the capital cost to the debtor of a depreciable property that is owned by the debtor immediately after that time; and
(b)the undepreciated capital cost to the debtor of depreciable property of a prescribed class immediately after that time.
Marginal note:Restriction with respect to depreciable property
(6)Where a commercial obligation issued by a debtor is settled at any time,
(a)an amount may be applied under subsection 80(5) to reduce, immediately after that time, the capital cost to the debtor of a depreciable property of a prescribed class only to the extent that
(i)the undepreciated capital cost to the debtor of depreciable property of that class at that time
exceeds
(ii)the total of all other reductions immediately after that time to that undepreciated capital cost; and
(b)an amount may be applied under subsection 80(5) to reduce, immediately after that time, the capital cost to the debtor of a depreciable property (other than a depreciable property of a prescribed class) only to the extent that
(i)the capital cost to the debtor of the property at that time
exceeds
(ii)the amount that was allowed to the debtor before that time under Part XVII of theIncome Tax Regulationsin respect of the property.
(7)[Repealed, 2016, c. 12, s. 23]
Marginal note:Reductions of resource expenditures
(8)Where a commercial obligation issued by a debtor is settled at any time, the remaining unapplied portion of the forgiven amount at that time in respect of the obligation shall be applied (to the extent designated in a prescribed form filed with the debtor’s return of income under this Part for the taxation year that includes that time) to reduce immediately after that time the following amounts:
(a)where the debtor is a corporation resident in Canada throughout that year, each particular amount that would be determined in respect of the debtor under paragraph 66.7(2)(a), (2.3)(a), (3)(a), (4)(a) or (5)(a) if paragraphs 66.7(2.3)(a), (4)(a) and (5)(a) were read without reference to the expressions “30% of”, “30% of” and “10% of”, respectively, as a consequence of the acquisition of control of the debtor by a person or group of persons, the debtor ceasing to be exempt from tax under this Part on its taxable income or the acquisition of properties by the debtor by way of an amalgamation or merger, where the amount so applied does not exceed the successor pool immediately after that time for the obligation and in respect of the particular amount;
(b)the cumulative Canadian exploration expense (within the meaning assigned by subsection 66.1(6)) of the debtor;
(c)the cumulative Canadian development expense (within the meaning assigned by subsection 66.2(5)) of the debtor;
(d)the cumulative Canadian oil and gas property expense (within the meaning assigned by subsection 66.4(5)) of the debtor;
(e)the total determined under paragraph 66(4)(a) in respect of the debtor, where
(i)the debtor is resident in Canada throughout that year, and
(ii)the amount so applied does not exceed such portion of the total of the debtor’s foreign exploration and development expenses (within the meaning assigned by subsection 66(15)) as were incurred by the debtor before that time and would be deductible under subsection 66(4) in computing the debtor’s income for that year if the debtor had sufficient income described in subparagraph 66(4)(b)(ii) and if that year ended at that time; and
(f)the cumulative foreign resource expense (within the meaning assigned by subsection 66.21(1)) of the debtor in respect of a country.
Marginal note:Reductions of adjusted cost bases of capital properties
(9)If a commercial obligation issued by a debtor is settled at any time and amounts have been designated under subsections (5) and (8) to the maximum extent permitted in respect of the settlement, subject to subsection (18)
(a)the remaining unapplied portion of the forgiven amount at that time in respect of the obligation shall be applied (to the extent designated in a prescribed form filed with the debtor’s return of income under this Part for the taxation year that includes that time) to reduce immediately after that time the adjusted cost bases to the debtor of capital properties (other than shares of the capital stock of corporations of which the debtor is a specified shareholder at that time, debts issued by corporations of which the debtor is a specified shareholder at that time, interests in partnerships that are related to the debtor at that time, depreciable property that is not of a prescribed class, personal-use properties and excluded properties) that are owned by the debtor immediately after that time;
(b)an amount may be applied under this subsection to reduce, immediately after that time, the capital cost to the debtor of a depreciable property of a prescribed class only to the extent that
(i)the capital cost immediately after that time to the debtor of the property (determined without reference to the settlement of the obligation at that time)
exceeds
(ii)its capital cost immediately after that time to the debtor for the purposes of paragraphs 8(1)(j) and 8(1)(p), sections 13 and 20 and any regulations made for the purpose of paragraph 20(1)(a) (determined without reference to the settlement of the obligation at that time); and
(c)for the purposes of paragraphs 8(1)(j) and 8(1)(p), sections 13 and 20 and any regulations made for the purpose of paragraph 20(1)(a), no amount shall be considered to have been applied under this subsection.
Marginal note:Reduction of adjusted cost bases of certain shares and debts
(10)If a commercial obligation issued by a debtor is settled at any time in a taxation year and amounts have been designated by the debtor under subsections (5), (8) and (9) to the maximum extent permitted in respect of the settlement, subject to subsection (18) the remaining unapplied portion of that forgiven amount shall be applied (to the extent that it is designated in a prescribed form filed with the debtor’s return of income under this Part for the year) to reduce immediately after that time the adjusted cost bases to the debtor of capital properties, owned by the debtor immediately after that time, that are shares of the capital stock of corporations of which the debtor is a specified shareholder at that time and debts issued by corporations of which the debtor is a specified shareholder at that time (other than shares of the capital stock of corporations related to the debtor at that time, debts issued by corporations related to the debtor at that time and excluded properties).
Marginal note:Reduction of adjusted cost bases of certain shares, debts and partnership interests
(11)If a commercial obligation issued by a debtor is settled at any time in a taxation year and amounts have been designated by the debtor under subsections (5), (8), (9) and (10) to the maximum extent permitted in respect of the settlement, subject to subsection (18) the remaining unapplied portion of that forgiven amount shall be applied (to the extent that it is designated in a prescribed form filed with the debtor’s return of income under this Part for the year) to reduce immediately after that time the adjusted cost bases to the debtor of
(a)shares and debts that are capital properties (other than excluded properties and properties the adjusted cost bases of which are reduced at that time under subsection 80(9) or 80(10)) of the debtor immediately after that time; and
(b)interests in partnerships that are related to the debtor at that time that are capital properties (other than excluded properties) of the debtor immediately after that time.
Marginal note:Capital gain where current year capital loss
(12)If a commercial obligation issued by a debtor (other than a partnership) is settled at any time in a taxation year and amounts have been designated by the debtor under subsections (5), (8) and (9) to the maximum extent permitted in respect of the settlement,
(a)the debtor shall be deemed to have a capital gain for the year from the disposition of capital property (or, where the debtor is non-resident at the end of the year, taxable Canadian property), equal to the lesser of
(i)the remaining unapplied portion of the forgiven amount at that time in respect of the obligation, and
(ii)the amount, if any, by which the total of
(A)all of the debtor’s capital losses from the dispositions of properties (other than listed personal properties and excluded properties), and
(B)twice the amount that would, because of subsection 88(1.2), be deductible under paragraph 111(1)(b) in computing the debtor’s taxable income for the year, if the debtor had sufficient income and taxable capital gains for the year,
exceeds the total of
(C)all of the debtor’s capital gains for the year from the dispositions of such properties (determined without reference to this subsection), and
(D)all amounts each of which is an amount deemed by this subsection to be a capital gain of the debtor for the year as a consequence of the application of this subsection to other commercial obligations settled before that time; and
(b)the forgiven amount at that time in respect of the obligation shall be considered to have been applied under this subsection to the extent of the amount deemed by this subsection to be a capital gain of the debtor for the year as a consequence of the application of this subsection to the settlement of the obligation at that time.
Marginal note:Income inclusion
(13)Where a commercial obligation issued by a debtor is settled at any time in a taxation year, there shall be added, in computing the debtor’s income for the year from the source in connection with which the obligation was issued, the amount determined by the formula
(A + B - C - D) × E
where
(a)the total of all amounts designated under subsection 80(11) by the debtor in respect of the settlement of the obligation at that time, and
(b)the residual balance at that time in respect of the settlement of the obligation,
(a)if the debtor has designated amounts under subsections (5), (8), (9) and (10) to the maximum extent permitted in respect of the settlement, the amount, if any, by which
(i)the total of all amounts each of which is an unrecognized loss at that time, in respect of the obligation, from the disposition of a property
exceeds
(ii)twice the total of all amounts each of which is an amount by which the amount determined before that time under this subsection in respect of a settlement of an obligation issued by the debtor has been reduced because of an amount determined under this paragraph, and
(b)in any other case, nil, and
(a)where the debtor is a partnership, 1, and
(b)in any other case, 1/2.
Marginal note:Residual balance
(14)For the purpose of subsection 80(13), the residual balance at any time in a taxation year in respect of the settlement of a particular commercial obligation issued by a debtor is the amount, if any, by which
(a)the gross tax attributes of directed persons at that time in respect of the debtor
exceeds the total of
(b)the value of A in subsection 80(13) in respect of the settlement of the particular obligation at that time,
(c)all amounts each of which is
(i)the amount, if any, by which the value of A in subsection 80(13) in respect of a settlement before that time and in the year of a commercial obligation issued by the debtor exceeds the value of C in that subsection in respect of the settlement,
(ii)the value of A in subsection 80(13) in respect of a settlement of a commercial obligation that is deemed by paragraph 80.04(4)(e) to have been issued by a directed person in respect of the debtor because of the filing of an agreement under section 80.04 in respect of a settlement before that time and in the year of a commercial obligation issued by the debtor, or
(iii)the amount specified in an agreement (other than an agreement with a directed person in respect of the debtor) filed under section 80.04 in respect of the settlement before that time and in the year of a commercial obligation issued by the debtor, and
(d)all amounts each of which is an amount in respect of a settlement at a particular time before that time and in the year of a commercial obligation issued by the debtor equal to the least of
(i)the total of all amounts designated under subsection 80(11) in respect of the settlement,
(ii)the residual balance of the debtor at the particular time, and
(iii)the amount, if any, by which the sum of the values of A and B in subsection 80(13) in respect of the settlement exceeds the value of C in that subsection in respect of the settlement.
Marginal note:Gross tax attributes
(14.1)The gross tax attributes of directed persons at any time in respect of a debtor means the total of all amounts each of which is an amount that would be applied under any of subsections 80(3) to 80(10) and 80(12) in respect of a settlement of a separate commercial obligation (in this subsection referred to as a “notional obligation”) issued by directed persons at that time in respect of the debtor if the following assumptions were made:
(a)a notional obligation was issued immediately before that time by each of those directed persons and was settled at that time;
(b)the forgiven amount at that time in respect of each of those notional obligations was equal to the total of all amounts each of which is a forgiven amount at or before that time and in the year in respect of a commercial obligation issued by the debtor;
(c)amounts were designated under subsections (5), (8), (9) and (10) by each of those directed persons to the maximum extent permitted in respect of the settlement of each of those notional obligations; and
(d)no amounts were designated under subsection 80(11) by any of those directed persons in respect of the settlement of any of the notional obligations.
Marginal note:Members of partnerships
(15)Where a commercial debt obligation issued by a partnership (in this subsection referred to as the “partnership obligation”) is settled at any time in a fiscal period of the partnership that ends in a taxation year of a member of the partnership,
(a)the member may deduct, in computing the member’s income for the year, such amount as the member claims not exceeding the relevant limit in respect of the partnership obligation;
(b)for the purpose of paragraph (a), the relevant limit in respect of the partnership obligation is the amount that would be included in computing the member’s income for the year as a consequence of the application of subsection (13) and section 96 to the settlement of the partnership obligation if the partnership had designated amounts under subsections (5), (8), (9) and (10) to the maximum extent permitted in respect of each obligation settled in that fiscal period and if income arising from the application of subsection (13) were from a source of income separate from any other sources of partnership income; and
(c)for the purposes of this section and section 80.04,
(i)the member shall be deemed to have issued a commercial debt obligation that was settled at the end of that fiscal period,
(ii)the amount deducted under paragraph 80(15)(a) in respect of the partnership obligation in computing the member’s income shall be treated as if it were the forgiven amount at the end of that fiscal period in respect of the obligation referred to in subparagraph 80(15)(c)(i),
(iii)subject to subparagraph 80(15)(c)(iv), the obligation referred to in subparagraph 80(15)(c)(i) shall be deemed to have been issued at the same time at which, and in the same circumstances in which, the partnership obligation was issued,
(iv)if the member is a taxpayer that was subject to a loss restriction event at a particular time that is before the end of that fiscal period and before the taxpayer became a member of the partnership, and the partnership obligation was issued before the particular time,
(A)subject to the application of this subparagraph to the taxpayer after the particular time and before the end of that fiscal period, the obligation referred to in subparagraph (i) is deemed to have been issued by the member after the particular time, and
(B)subparagraph (b)(ii) of the definitionrelevant loss balancein subsection (1), paragraph (f) of the definitionsuccessor poolin that subsection and paragraph (b) of the definitionunrecognized lossin that subsection do not apply in respect of the loss restriction event, and
(v)the source in connection with which the obligation referred to in subparagraph 80(15)(c)(i) was issued shall be deemed to be the source in connection with which the partnership obligation was issued.
Marginal note:Designations by Minister
(16)Where a commercial obligation issued by a debtor is settled at any time in a taxation year and, as a consequence of the settlement an amount would, but for this subsection, be deducted under section 61.2 or 61.3 in computing the debtor’s income for the year and the debtor has not designated amounts under subsections 80(5) to 80(11) to the maximum extent possible in respect of the settlement,
(a)the Minister may designate amounts under subsections 80(5) to 80(11) to the extent that the debtor would have been permitted to designate those amounts; and
(b)the amounts designated by the Minister shall, except for the purpose of this subsection, be deemed to have been designated by the debtor as required by subsections 80(5) to 80(11).
(17)[Repealed, 1998, c. 19, s. 111]
Marginal note:Partnership designations
(18)Where a commercial obligation issued by a partnership is settled at any time after December 20, 1994, the amount designated under subsection 80(9), 80(10) or 80(11) in respect of the settlement by the partnership to reduce the adjusted cost base of a capital property acquired shall not exceed the amount, if any, by which the adjusted cost base at that time to the partnership of the property exceeds the fair market value at that time of the property.
Marginal note:Definitions
80.01(1)In this section,
commercial debt obligationhas the meaning assigned by subsection 80(1); (créance commerciale)
commercial obligationhas the meaning assigned by subsection 80(1); (dette commerciale)
debtorhas the meaning assigned by subsection 80(1); (débiteur)
distress preferred sharehas the meaning assigned by subsection 80(1); (action privilégiée de renflouement)
forgiven amounthas the meaning assigned by subsection 80(1) except that, where an amount would be included in computing a person’s income under paragraph 6(1)(a) or subsection 15(1) as a consequence of the settlement of an obligation if the obligation were settled without any payment being made in satisfaction of its principal amount,forgiven amountin respect of that obligation has the meaning assigned by subsection 6(15.1) or 15(1.21), as the case may be; (montant remis)
personhas the meaning assigned by subsection 80(1); (personne)
specified costat any time to a person of an obligation means,
(a)where the obligation is capital property of the person at that time, the adjusted cost base at that time to the person of the obligation, and
(b)in any other case, the cost amount to the person of the obligation. (coût déterminé)
Marginal note:Application
(2)For the purposes of this section,
(a)paragraphs 80(2)(a), 80(2)(b), 80(2)(j), 80(2)(l) and 80(2)(n) apply; and
(b)a person has a significant interest in a corporation at any time if the person owned at that time
(i)shares of the capital stock of the corporation that would give the person 25% or more of the votes that could be cast under all circumstances at an annual meeting of shareholders of the corporation, or
(ii)shares of the capital stock of the corporation having a fair market value of 25% or more of the fair market value of all the issued shares of the capital stock of the corporation
and, for the purposes of this paragraph, a person shall be deemed to own at any time each share of the capital stock of a corporation that is owned, otherwise than because of this paragraph, at that time by another person with whom the person does not deal at arm’s length.
Marginal note:Deemed settlement on amalgamation
(3)Where a commercial obligation or another obligation (in this subsection referred to as the “indebtedness”) of a debtor that is a corporation to pay an amount to another corporation (in this subsection referred to as the “creditor”) is settled on an amalgamation of the debtor and the creditor, the indebtedness shall be deemed to have been settled immediately before the time that is immediately before the amalgamation by a payment made by the debtor and received by the creditor of an amount equal to the amount that would have been the creditor’s cost amount of the indebtedness at that time if
(a)the definitioncost amountin subsection 248(1) were read without reference to paragraph (e) of that definition; and
(b)that cost amount included amounts added in computing the creditor’s income in respect of the portion of the indebtedness representing unpaid interest, to the extent those amounts have not been deducted in computing the creditor’s income as bad debts in respect of that unpaid interest.
Marginal note:Deemed settlement on winding-up
(4)Where there is a winding-up of a subsidiary to which the rules in subsection 88(1) apply and
(a)a debt or other obligation (in this subsection referred to as the “subsidiary’s obligation”) of the subsidiary to pay an amount to the parent, or
(b)a debt or other obligation (in this subsection referred to as the “parent’s obligation”) of the parent to pay an amount to the subsidiary
is, as a consequence of the winding-up, settled at a particular time without any payment of an amount or by the payment of an amount that is less than the principal amount of the subsidiary’s obligation or the parent’s obligation, as the case may be,
(c)where that payment is less than the amount that would have been the cost amount to the parent or subsidiary of the subsidiary’s obligation or the parent’s obligation immediately before the particular time if the definitioncost amountin subsection 248(1) were read without reference to paragraph (e) of that definition and the parent so elects in a prescribed form on or before the day on or before which the parent is required to file a return of income pursuant to section 150 for the taxation year that includes the particular time, the amount paid at that time in satisfaction of the principal amount of the subsidiary’s obligation or the parent’s obligation shall be deemed to be equal to the amount that would be the cost amount to the parent or the subsidiary, as the case may be, of the subsidiary’s obligation or the parent’s obligation immediately before the particular time if
(i)the definitioncost amountin subsection 248(1) were read without reference to paragraph (e) of that definition, and
(ii)that cost amount included amounts added in computing the parent’s income or the subsidiary’s income in respect of the portion of the indebtedness representing unpaid interest, to the extent that the parent or the subsidiary has not deducted any amounts as bad debts in respect of that unpaid interest, and
(d)for the purposes of applying section 80 to the subsidiary’s obligation, where property is distributed at any time in circumstances to which paragraph 88(1)(a) or 88(1)(b) applies and the subsidiary’s obligation is settled as a consequence of the distribution, the subsidiary’s obligation shall be deemed to have been settled immediately before the time that is immediately before the time of the distribution and not at any later time.
Marginal note:Deemed settlement on winding-up
(5)Where there is a winding-up of a subsidiary to which the rules in subsection 88(1) apply and, as a consequence of the winding-up, a distress preferred share issued by the subsidiary and owned by the parent (or a distress preferred share issued by the parent and owned by the subsidiary) is settled at any time without any payment of an amount or by the payment of an amount that is less than the principal amount of the share,
(a)where the payment was less than the adjusted cost base of the share to the parent or the subsidiary, as the case may be, immediately before that time, for the purposes of applying the provisions of this Act to the issuer of the share, the amount paid at that time in satisfaction of the principal amount of the share shall be deemed to be equal to its adjusted cost base to the parent or to the subsidiary, as the case may be; and
(b)for the purposes of applying section 80 to the share, where property is distributed at any time in circumstances to which paragraph 88(1)(a) or 88(1)(b) applies and the share is settled as a consequence of the distribution, the share shall be deemed to have been settled immediately before the time that is immediately before the time of the distribution and not at any later time.
Marginal note:Deemed settlement on SIFT trust wind-up event
(5.1)If a trust that is a SIFT wind-up entity is the only beneficiary under another trust (in this subsection referred to as the “subsidiary trust”), and a capital property that is a debt or other obligation (in this subsection referred to as the “subsidiary trust’s obligation”) of the subsidiary trust to pay an amount to the SIFT wind-up entity is, as a consequence of a distribution from the subsidiary trust that is a SIFT trust wind-up event, settled at a particular time without any payment of an amount or by the payment of an amount that is less than the principal amount of the subsidiary trust’s obligation
(a)paragraph (b) applies if
(i)the payment is less than the amount that would have been the adjusted cost base to the SIFT wind-up entity of the subsidiary trust’s obligation immediately before the particular time, and
(ii)the SIFT wind-up entity elects, in prescribed form on or before the SIFT wind-up entity’s filing-due date for the taxation year that includes the particular time, to have paragraph (b) apply;
(b)if this paragraph applies, the amount paid at the particular time in satisfaction of the principal amount of the subsidiary trust’s obligation is deemed to be equal to the amount that would be the adjusted cost base to the SIFT wind-up entity of the subsidiary trust’s obligation immediately before the particular time if that adjusted cost base included amounts added in computing the SIFT wind-up entity’s income in respect of the portion of the indebtedness representing unpaid interest, to the extent that the SIFT wind-up entity has not deducted any amounts as bad debts in respect of that unpaid interest; and
(c)for the purposes of applying section 80 to the subsidiary trust’s obligation, the subsidiary trust’s obligation is deemed to have been settled immediately before the time that is immediately before the distribution.
Marginal note:Specified obligation in relation to debt parking
(6)For the purpose of subsection (7), an obligation issued by a debtor is, at a particular time, a specified obligation of the debtor where
(a)at any previous time (other than a time before the last time, if any, the obligation became a parked obligation before the particular time),
(i)a person who owned the obligation
(A)dealt at arm’s length with the debtor, and
(B)where the debtor is a corporation, did not have a significant interest in the debtor, or
(ii)the obligation was acquired by the holder of the obligation from another person who was, at the time of that acquisition, not related to the holder or related to the holder only because of paragraph 251(5)(b); or
(b)the obligation is deemed by subsection 50(1) to be reacquired at the particular time.
Marginal note:Parked obligation
(7)For the purposes of this subsection and subsections (6), (8) and (10),
(a)an obligation issued by a debtor is a “parked obligation” at any time where at that time
(i)the obligation is a specified obligation of the debtor, and
(ii)the holder of the obligation
(A)does not deal at arm’s length with the debtor, or
(B)where the debtor is a corporation and the holder acquired the obligation after July 12, 1994 (otherwise than pursuant to an agreement in writing entered into on or before July 12, 1994), has a significant interest in the debtor; and
(b)an obligation that is, at any time, acquired or reacquired in circumstances to which subparagraph (6)(a)(ii) or paragraph (6)(b) applies shall, if the obligation is a parked obligation immediately after that time, be deemed to have become a parked obligation at that time.
Marginal note:Deemed settlement after debt parking
(8)Where at any particular time after February 21, 1994 a commercial debt obligation that was issued by a debtor becomes a parked obligation (otherwise than pursuant to an agreement in writing entered into before February 22, 1994) and the specified cost at the particular time to the holder of the obligation is less than 80% of the principal amount of the obligation, for the purpose of applying the provisions of this Act to the debtor
(a)the obligation shall be deemed to have been settled at the particular time; and
(b)the forgiven amount at the particular time in respect of the obligation shall be determined as if the debtor had paid an amount at the particular time in satisfaction of the principal amount of the obligation equal to that specified cost.
Marginal note:Statute-barred debt
(9)Where at any particular time after February 21, 1994 a commercial debt obligation issued by a debtor that is payable to a person (other than a person with whom the debtor is related at the particular time) becomes unenforceable in a court of competent jurisdiction because of a statutory limitation period and the obligation would, but for this subsection, not have been settled or extinguished at the particular time, for the purpose of applying the provisions of this Act to the debtor, the obligation shall be deemed to have been settled at the particular time.
Marginal note:Subsequent payments in satisfaction of debt
(10)Where a commercial debt obligation issued by a debtor is first deemed by subsection (8) or (9) to have been settled at a particular time, at a subsequent time a payment is made by the debtor of an amount in satisfaction of the principal amount of the obligation and it cannot reasonably be considered that one of the reasons the obligation became a parked obligation or became unenforceable, as the case may be, before the subsequent time was to have this subsection apply to the payment, in computing the debtor’s income for the taxation year (in this subsection referred to as the “subsequent year”) that includes the subsequent time from the source in connection with which the obligation was issued, there may be deducted the amount determined by the formula
0.5(A - B) - C
where
(a)the principal amount of the obligation
exceeds the total of
(b)all amounts each of which is a forgiven amount at any time
(i)in the period that began at the particular time and ended immediately before the subsequent time, and
(ii)at which a particular portion of the obligation is deemed by subsection (8) or (9) to be settled
in respect of the particular portion, and
(c)all amounts paid in satisfaction of the principal amount of the obligation in the period that began at the particular time and ended immediately before the subsequent time, and
(a)all amounts deducted under section 61.3 in computing the debtor’s income for the subsequent year or a preceding taxation year,
(b)all amounts added because of subsection 80(13) in computing the debtor’s income for the subsequent year or a preceding taxation year in respect of a settlement under subsection (8) or (9) in a period during which the debtor was exempt from tax under this Part on its taxable income, and
(c)all amounts added because of subsection 80(13) in computing the debtor’s income for the subsequent year or a preceding taxation year in respect of a settlement under subsection (8) or (9) in a period during which the debtor was non-resident (other than any of those amounts added in computing the debtor’s taxable income or taxable income earned in Canada)
exceeds the total of
(d)the amount, if any, deducted because of paragraph 37(1)(f.1) in determining the balance determined under subsection 37(1) in respect of the debtor immediately after the subsequent year, and
(e)all amounts by which the amount deductible under this subsection in respect of a payment made by the debtor before the subsequent time in computing the debtor’s income for the subsequent year or a preceding year has been reduced because of this description.
Marginal note:Foreign currency gains and losses
(11)Where an obligation issued by a debtor is denominated in a currency (other than the Canadian currency) and the obligation is deemed by subsection (8) or (9) to have been settled, those subsections do not apply for the purpose of determining any gain or loss of the debtor on the settlement that is attributable to a fluctuation in the value of the currency relative to the value of Canadian currency.
Marginal note:Definitions
80.02(1)In this section,commercial debt obligation,commercial obligation,distress preferred shareandpersonhave the meanings assigned by subsection 80(1).
Marginal note:General rules for distress preferred shares
(2)For the purpose of applying the provisions of this Act to an issuer of a distress preferred share,
(a)the principal amount, at any time, of the share shall be deemed to be the amount (determined at that time) for which the share was issued;
(b)the amount for which the share was issued shall, at any time, be deemed to be the amount, if any, by which the total of
(i)the amount for which the share was issued, determined without reference to this paragraph, and
(ii)all amounts by which the paid-up capital in respect of the share increased after the share was issued and before that time
exceeds
(iii)the total of all amounts each of which is an amount paid before that time on a reduction of the paid-up capital in respect of the share, except to the extent that the amount is deemed by section 84 to have been paid as a dividend;
(c)the share shall be deemed to be settled at such time as it is redeemed, acquired or cancelled by the issuer; and
(d)a payment in satisfaction of the principal amount of the share is any payment made on a reduction of the paid-up capital in respect of the share to the extent that the payment would be proceeds of disposition of the share within the meaning that would be assigned by the definitionproceeds of dispositionin section 54 if that definition were read without reference to paragraph (j).
Marginal note:Substitution of distress preferred share for debt
(3)Where any part of the consideration given by a corporation to another person for the settlement or extinguishment at any time of a commercial debt obligation that was issued by the corporation and owned immediately before that time by the other person consists of a distress preferred share issued by the corporation to the other person,
(a)for the purposes of section 80, the amount paid at that time in satisfaction of the principal amount of the obligation because of the issue of that share shall be deemed to be equal to the lesser of
(i)the principal amount of the obligation, and
(ii)the amount by which the paid-up capital in respect of the class of shares that include that share increases because of the issue of that share; and
(b)for the purpose of subparagraph (2)(b)(i), the amount for which the share was issued shall be deemed to be equal to the amount deemed by paragraph (a) to have been paid at that time.
Marginal note:Substitution of commercial debt obligation for distress preferred share
(4)Where any part of the consideration given by a corporation to another person for the settlement at any time of a distress preferred share that was issued by the corporation and owned immediately before that time by the other person consists of a commercial debt obligation issued by the corporation to the other person, for the purposes of section 80
(a)the amount paid at that time in satisfaction of the principal amount of the share because of the issue of that obligation shall be deemed to be equal to the principal amount of the obligation; and
(b)the amount for which the obligation was issued shall be deemed to be equal to its principal amount.
Marginal note:Substitution of distress preferred share for other distress preferred share
(5)Where any part of the consideration given by a corporation to another person for the settlement at any time of a particular distress preferred share that was issued by the corporation and owned immediately before that time by the other person consists of another distress preferred share issued by the corporation to the other person, for the purposes of section 80
(a)the amount paid at that time in satisfaction of the principal amount of the particular share because of the issue of the other share shall be deemed to be equal to the amount by which the paid-up capital in respect of the class of shares that includes the other share increases because of the issue of the other share; and
(b)for the purpose of subparagraph (2)(b)(i), the amount for which the other share was issued shall be deemed to be equal to the amount deemed by paragraph (a) to have been paid at that time.
Marginal note:Substitution of non-commercial obligation for distress preferred share
(6)Where any part of the consideration given by a corporation to another person for the settlement at any time of a distress preferred share that was issued by the corporation and owned immediately before that time by the other person consists of another share (other than a distress preferred share) or an obligation (other than a commercial obligation) issued by the corporation to the other person, for the purposes of section 80, the amount paid at that time in satisfaction of the principal amount of the distress preferred share because of the issue of the other share or obligation shall be deemed to be equal to the fair market value of the other share or obligation, as the case may be, at that time.
Marginal note:Deemed settlement on expiry of term
(7)Where at any time a distress preferred share becomes a share that is not a distress preferred share, for the purposes of section 80
(a)the share shall be deemed to have been settled immediately before that time; and
(b)a payment equal to the fair market value of the share at that time shall be deemed to have been made immediately before that time in satisfaction of the principal amount of the share.
Marginal note:Definitions
80.03(1)In this section,commercial debt obligation,commercial obligation,distress preferred share,forgiven amountandpersonhave the meanings assigned by subsection 80(1).
Marginal note:Deferred recognition of debtor’s gain on settlement of debt
(2)Where at any time in a taxation year a person (in this subsection referred to as the “transferor”) surrenders a particular capital property (other than a distress preferred share) that is a share, a capital interest in a trust or an interest in a partnership, the person shall be deemed to have a capital gain from the disposition at that time of another capital property (or, where the particular property is a taxable Canadian property, another taxable Canadian property) equal to the amount, if any, by which
(a)the total of all amounts deducted under paragraph 53(2)(g.1) in computing the adjusted cost base to the transferor of the particular property immediately before that time
exceeds the total of
(b)the amount that would be the transferor’s capital gain for the year from the disposition of the particular property if this Act were read without reference to subsection 100(2), and
(c)where, at the end of the year, the transferor is resident in Canada or is a non-resident person who carries on business in Canada through a fixed place of business, the amount designated under subsection (7) by the transferor in respect of the disposition, at that time or immediately after that time, of the particular property.
Marginal note:Surrender of capital property
(3)For the purpose of subsection (2), a person shall be considered to have surrendered a property at any time only where
(a)in the case of a share of the capital stock of a particular corporation,
(i)the person is a corporation that disposed of the share at that time and the proceeds of disposition of the share are determined under paragraph 88(1)(b), or
(ii)the person is a corporation that owned the share at that time and, immediately after that time, amalgamates or merges with the particular corporation;
(b)in the case of a capital interest in a trust, the person disposed of the interest at that time and the proceeds of disposition are determined under paragraph 107(2)(c); and
(c)in the case of an interest in a partnership, the person disposed of the interest at that time and the proceeds of disposition are determined under paragraph 98(3)(a) or (5)(a).
(4) to (6)[Repealed, 1998, c. 19, s. 112]
Marginal note:Alternative treatment
(7)Where at any time in a taxation year a person disposes of a property, for the purposes of subsection (2) and section 80
(a)the person may designate an amount in a prescribed form filed with the person’s return of income under this Part for the year; and
(b)where an amount is designated by the person under paragraph (a) in respect of the disposition,
(i)the person shall be deemed to have issued a commercial debt obligation at that time that is settled immediately after that time,
(ii)the lesser of the amount so designated and the amount that would, but for this subsection, be a capital gain determined in respect of the disposition because of subsection (2) shall be treated as if it were the forgiven amount at the time of the settlement in respect of the obligation referred to in subparagraph (i),
(iii)the source in connection with which the obligation referred to in subparagraph (i) was issued shall be deemed to be the business, if any, carried on by the person at the end of the year, and
(iv)where the person does not carry on a business at the end of the year, the person shall be deemed to carry on an active business at the end of the year and the source in connection with which the obligation referred to in subparagraph (i) was issued shall be deemed to be the business deemed by this subparagraph to be carried on.
Marginal note:Lifetime capital gains exemption
(8)If, as a consequence of the disposition at any time by an individual of a property that is a qualified farm or fishing property of the individual or a qualified small business corporation share of the individual (as defined in subsection 110.6(1)), the individual is deemed by subsection (2) to have a capital gain at that time from the disposition of another property, for the purposes of sections 3, 74.3 and 111, as they apply for the purposes of section 110.6, the other property is deemed to be a qualified farm or fishing property of the individual or a qualified small business corporation share of the individual, as the case may be.
Marginal note:Definitions
80.04(1)In this section,commercial debt obligation,commercial obligation,debtor,directed person,eligible Canadian partnership,forgiven amountandpersonhave the meanings assigned by subsection 80(1).
Marginal note:Eligible transferee
(2)For the purpose of this section, aneligible transfereeof a debtor at any time is a directed person at that time in respect of the debtor or a taxable Canadian corporation or eligible Canadian partnership related (otherwise than because of a right referred to in paragraph 251(5)(b)) at that time to the debtor.
Marginal note:Application
(3)Paragraphs 80(2)(a), 80(2)(b), 80(2)(j), 80(2)(l) and 80(2)(n) apply for the purpose of this section.
Marginal note:Agreement respecting transfer of forgiven amount
(4)Where
(a)a particular commercial obligation (other than an obligation deemed by paragraph (e) to have been issued) issued by a debtor is settled at a particular time,
(b)amounts have been designated by the debtor under subsections 80(5) to 80(10) to the maximum extent permitted in respect of the settlement of the particular obligation at the particular time,
(c)the debtor and an eligible transferee of the debtor at the particular time file under this section an agreement between them in respect of that settlement, and
(d)an amount is specified in that agreement
the following rules apply:
(e)except for the purposes of subsection 80(11), the transferee shall be deemed to have issued a commercial debt obligation that was settled at the particular time,
(f)the specified amount shall be deemed to be the forgiven amount at the particular time in respect of the obligation referred to in paragraph (e),
(g)subject to paragraph (h), the obligation referred to in paragraph (e) shall be deemed to have been issued at the same time (in paragraph (h) referred to as the “time of issue”) at which, and in the same circumstances in which, the particular obligation was issued,
(h)if the transferee is a taxpayer that is subject to a loss restriction event after the time of issue and the transferee and the debtor were, if the transferee is a corporation, not related to each other  —  or, if the transferee is a trust, not affiliated with each other  —  immediately before the loss restriction event,
(i)the obligation referred to in paragraph (e) is deemed to have been issued after the loss restriction event, and
(ii)subparagraph (b)(ii) of the definitionrelevant loss balancein subsection 80(1), paragraph (f) of the definitionsuccessor poolin that subsection and paragraph (b) of the definitionunrecognized lossin that subsection do not apply in respect of the loss restriction event,
(i)the source in connection with which the obligation referred to in paragraph (e) was issued shall be deemed to be the source in connection with which the particular obligation was issued, and
(j)for the purposes of sections 61.3 and 61.4, the amount included under subsection 80(13) in computing the income of the eligible transferee in respect of the settlement of the obligation referred to in paragraph (e) or deducted under paragraph 80(15)(a) in respect of such income shall be deemed to be nil.
Marginal note:Consideration for agreement
(5)For the purposes of this Part, where property is acquired at any time by an eligible transferee as consideration for entering into an agreement with a debtor that is filed under this section
(a)where the property was owned by the debtor immediately before that time,
(i)the debtor shall be deemed to have disposed of the property at that time for proceeds equal to the fair market value of the property at that time, and
(ii)no amount may be deducted in computing the debtor’s income as a consequence of the transfer of the property, except any amount arising as a consequence of the application of subparagraph (i);
(b)the cost at which the property was acquired by the eligible transferee at that time shall be deemed to be equal to the fair market value of the property at that time; and
(c)the eligible transferee shall not be required to add an amount in computing income solely because of the acquisition at that time of the property;
(d)[Repealed, 1998, c. 19, s. 113(1)]
Marginal note:No benefit conferred
(5.1)For the purposes of this Part, where a debtor and an eligible transferee enter into an agreement that is filed under this section, no benefit shall be considered to have been conferred on the debtor as a consequence of the agreement.
Marginal note:Manner of filing agreement
(6)Subject to subsection (7), a particular agreement between a debtor and an eligible transferee in respect of an obligation issued by the debtor that was settled at any time shall be deemed not to have been filed under this section
(a)where it is not filed with the Minister in a prescribed form
(i)on or before the later of
(A)the day on or before which the debtor’s return of income under this Part is required to be filed for the taxation year or fiscal period, as the case may be, that includes that time (or would be required to be filed if tax under this Part were payable by the debtor for the year), and
(B)the day on or before which the transferee’s return of income under this Part is required to be filed for the taxation year or fiscal period, as the case may be, that includes that time, or
(ii)on or before the later of
(A)the expiry of the 90-day period commencing on the day of mailing of an assessment of tax payable under this Part or a notification that no tax is payable under this Part, as the case may be, for a taxation year or fiscal period described in clause (i)(A) or (B), as the case may be, and
(B)if the debtor is an individual (other than a trust) or a graduated rate estate, the day that is one year after the taxpayer’s filing-due date for the year;
(b)where it is not accompanied by,
(i)where the debtor is a corporation and its directors are legally entitled to administer its affairs, a certified copy of their resolution authorizing the agreement to be made,
(ii)where the debtor is a corporation and its directors are not legally entitled to administer its affairs, a certified copy of the document by which the person legally entitled to administer its affairs authorized the agreement to be made,
(iii)where the transferee is a corporation and its directors are legally entitled to administer its affairs, a certified copy of their resolution authorizing the agreement to be made, and
(iv)where the transferee is a corporation and its directors are not legally entitled to administer its affairs, a certified copy of the document by which the person legally entitled to administer its affairs authorized the agreement to be made; or
(c)if an agreement amending the particular agreement has been filed in accordance with this section, except where subsection (8) applies to the particular agreement.
Marginal note:Filing by partnership
(7)For the purpose of subsection (6), where an obligation is settled at any time in a fiscal period of a partnership, it shall be assumed that
(a)the partnership is required to file a return of income under this Part for the fiscal period on or before the latest day on or before which any member of the partnership during the fiscal period is required to file a return of income under this Part for the taxation year in which that fiscal period ends (or would be required to file such a return of income if tax under this Part were payable by the member for that year); and
(b)the partnership may serve a notice of objection described in subparagraph (6)(a)(ii) within each period within which any member of the partnership during the fiscal period may serve a notice of objection to tax payable under this Part for a taxation year in which that fiscal period ends.
Marginal note:Related corporations
(8)Where at any time a corporation becomes related to another corporation and it can reasonably be considered that the main purpose of the corporation becoming related to the other corporation is to enable the corporations to file an agreement under this section, the amount specified in the agreement shall be deemed to be nil for the purpose of the description of C in subsection 80(13).
Marginal note:Assessment of taxpayers in respect of agreement
(9)The Minister shall, notwithstanding subsections 152(4) to 152(5), assess or reassess the tax, interest and penalties payable under this Act by any taxpayer in order to take into account an agreement filed under this section.
Marginal note:Liability of debtor
(10)Without affecting the liability of any person under any other provision of this Act, where a debtor and an eligible transferee file an agreement between them under this section in respect of an obligation issued by the debtor that was settled at any time, the debtor is, to the extent of 30% of the amount specified in the agreement, liable to pay
(a)where the transferee is a corporation, all taxes payable under this Act by it for taxation years that end in the period that begins at that time and ends 4 calendar years after that time;
(b)where the transferee is a partnership, the total of all amounts each of which is the tax payable under this Act by a person for a taxation year
(i)that begins or ends in that period, and
(ii)that includes the end of a fiscal period of the partnership during which the person was a member of the partnership; and
(c)interest and penalties in respect of such taxes.
Marginal note:Joint and several, or solidary, liability
(11)If taxes, interest and penalties are payable under this Act by a person for a taxation year and those taxes, interest and penalties are payable by a debtor because of subsection (10), the debtor and the person are jointly and severally, or solidarily, liable to pay those amounts.
Marginal note:Assessments in respect of liability
(12)Where a debtor and an eligible transferee file an agreement between them under this section in respect of an obligation issued by the debtor that was settled at a particular time,
(a)where the debtor is an individual or a corporation, the Minister may at any subsequent time assess the debtor in respect of taxes, interest and penalties for which the debtor is liable because of subsection (10); and
(b)where the debtor is a partnership, the Minister may at any subsequent time assess any person who has been a member of the partnership in respect of taxes, interest and penalties for which the partnership is liable because of subsection (10), to the extent that those amounts relate to taxation years of the transferee (or, where the transferee is another partnership, members of the other partnership) that end at or after
(i)where the person was not a member of the partnership at the particular time, the first subsequent time the person becomes a member of the partnership, and
(ii)in any other case, the particular time.
Marginal note:Application of Division I
(13)The provisions of Division I apply to an assessment under subsection (12) as though it had been made under section 152.
Marginal note:Partnership members
(14)For the purposes of paragraphs (10)(b) and (12)(b) and this subsection, where at any time a member of a particular partnership is another partnership, each member of the other partnership shall be deemed to be a member of the particular partnership at that time.
Marginal note:Expropriation assets acquired as compensation for, or as consideration for sale of, foreign property taken by or sold to foreign issuer
80.1(1)Where in a taxation year ending coincidentally with or after December 31, 1971 a taxpayer resident in Canada has acquired any bonds, debentures, mortgages, hypothecary claims, notes or similar obligations (in this section referred to as “expropriation assets”) issued by the government of a country other than Canada or issued by a person resident in a country other than Canada and guaranteed by the government of that country,
(a)as compensation for
(i)shares owned by the taxpayer of the capital stock of a foreign affiliate of the taxpayer that carried on business in that country, or
(ii)all or substantially all of the property used by the taxpayer in carrying on business in that country,
(which shares or property, as the case may be, are referred to in this section as “foreign property”), taken, after June 18, 1971, from the taxpayer by the issuer under the authority of a law of that country, or
(b)as consideration for the sale of foreign property sold, after June 18, 1971, by the taxpayer to the issuer, if
(i)the sale was, by a law of that country, expressly required to be made, or
(ii)the sale was made after notice or other manifestation of an intention to take the foreign property,
if the taxpayer has so elected, in prescribed form and within prescribed time, in respect of all of the expropriation assets so acquired by the taxpayer, the following rule applies, namely, an amount in respect of each such expropriation asset, equal to
(c)the principal amount of the asset, or
(d)where the taxpayer has designated in the taxpayer’s election an amount in respect of the asset that is less than the principal amount thereof, the amount so designated,
shall be deemed to be
(e)the cost to the taxpayer of the asset, and
(f)for the purpose of computing the taxpayer’s proceeds of disposition of the foreign property so taken or sold, the amount received by the taxpayer by virtue of the taxpayer’s acquisition of the asset,
except that in no case may the taxpayer designate an amount in respect of any expropriation asset so that the taxpayer’s proceeds of disposition of the foreign property so taken or sold (computed having regard to the provisions of paragraph 80.1(1)(f)) are less than the cost amount to the taxpayer of the foreign property immediately before it was so taken or sold.
Marginal note:Election re interest received or to be received on expropriation assets acquired by taxpayer
(2)Where a taxpayer has elected in prescribed form and within prescribed time in respect of all amounts (each of which is referred to in this section as an “interest amount”) received or to be received by the taxpayer as or on account of interest on all expropriation assets acquired by the taxpayer as compensation for, or as consideration for the sale of, foreign property taken by or sold to any particular issuer as described in subsection 80.1(1), the following rules apply in respect of each such asset so acquired by the taxpayer:
(a)in computing the taxpayer’s income for a taxation year from the asset, there may be deducted, in respect of each interest amount received by the taxpayer in the year on the asset, the lesser of the interest amount and the total of
(i)the amount required by paragraph 80.1(2)(b) to be added, by virtue of the receipt by the taxpayer of the interest amount, in computing the adjusted cost base to the taxpayer of the asset, and
(ii)the greater of
(A)the adjusted cost base to the taxpayer of the asset immediately before the interest amount was so received by the taxpayer, and
(B)the adjusted principal amount to the taxpayer of the asset immediately before the interest amount was so received by the taxpayer,
and there shall be included, in respect of each amount (in this paragraph referred to as a “capital amount”) received by the taxpayer in the year as, on account or in lieu of payment of, or in satisfaction of,
(iii)any proceeds of disposition of the asset, or
(iv)the principal amount of the asset,
the amount, if any, by which the capital amount exceeds the greater of the adjusted cost base to the taxpayer of the asset immediately before the capital amount was received by the taxpayer and its adjusted principal amount to the taxpayer at that time;
(b)in computing, at any particular time, the adjusted cost base to the taxpayer of the asset, there shall be added, in respect of each interest amount received by the taxpayer on the asset before the particular time, an amount equal to the lesser of
(i)any income or profits tax paid by the taxpayer to the government of a country other than Canada in respect of the interest amount, and
(ii)that proportion of the tax referred to in subparagraph 80.1(2)(b)(i) that the adjusted cost base to the taxpayer of the asset immediately before the interest amount was received by the taxpayer is of the amount, if any, by which the interest amount exceeds the tax referred to in that subparagraph,
and there shall be deducted
(iii)each interest amount received by the taxpayer on the asset before the particular time, and
(iv)each amount received by the taxpayer before the particular time on account of the principal amount of the asset;
(c)the receipt by the taxpayer of an amount described in subparagraph 80.1(2)(b)(iv) in respect of the asset shall be deemed not to be a partial disposition thereof; and
(d)for the purposes of section 126, notwithstanding the definitionnon-business-income taxin subsection 126(7), thenon-business-income taxpaid by a taxpayer does not include any tax, or any portion thereof, the amount of which is required by paragraph 80.1(2)(b) to be added in computing the adjusted cost base to the taxpayer of the asset.
Marginal note:Where interest amount and capital amount received at same time
(3)For the purposes of subsection 80.1(2), where an interest amount on an expropriation asset and a capital amount with respect to that asset are received by a taxpayer at the same time, the interest amount shall be deemed to have been received by the taxpayer immediately before the capital amount.
Marginal note:Assets acquired from foreign affiliate of taxpayer as dividend in kind or as benefit to shareholder
(4)Where a foreign affiliate of a taxpayer resident in Canada would, on the assumption that the foreign affiliate were resident in Canada and its only foreign affiliates were corporations that were foreign affiliates of the taxpayer, be entitled to make an election under subsection 80.1(1) in respect of assets acquired by it that would, on that assumption, be expropriation assets of the foreign affiliate, and all or any of those assets are subsequently acquired by the taxpayer from the foreign affiliate as a dividend payable in kind, or as a benefit received from the foreign affiliate that would otherwise be required by subsection 15(1) to be included in computing the income of the taxpayer, if the taxpayer has so elected, in prescribed form and within prescribed time, in respect of all assets so acquired by the taxpayer from the foreign affiliate, the following rules apply in respect of each asset so acquired by the taxpayer:
(a)an amount equal to
(i)the principal amount of the asset, or
(ii)where the taxpayer has designated in the taxpayer’s election an amount in respect of the asset that is less than the principal amount thereof, the amount so designated,
shall be deemed to be,
(iii)notwithstanding subsection 52(2), the cost to the taxpayer of the asset, and
(iv)the amount of the dividend or benefit, as the case may be, received by the taxpayer by virtue of the acquisition by the taxpayer of the asset;
(b)where the asset was so acquired as such a benefit and the taxpayer has designated in the election a class of shares as described in this paragraph in respect of the asset, the amount of the benefit shall be deemed
(i)to have been received by the taxpayer as a dividend from the foreign affiliate in respect of such class of shares of the capital stock thereof as the taxpayer has designated in the election, and
(ii)not to be an amount required by subsection 15(1) to be included in computing the taxpayer’s income;
(c)in computing the taxable income of the taxpayer for the taxation year in which the taxpayer acquired the asset, there may be deducted from the taxpayer’s income for the year the amount, if any, by which the amount received by the taxpayer as a dividend by virtue of the acquisition by the taxpayer of the asset exceeds the total of amounts deductible in respect of the dividend under sections 91 and 113 in computing the taxpayer’s income or taxable income, as the case may be, for the year;
(d)there shall be deducted in computing the adjusted cost base to the taxpayer of each share of the capital stock of the foreign affiliate that is a share of a class in respect of which an amount was received by the taxpayer as a dividend by virtue of the acquisition by the taxpayer of the asset, the quotient obtained by dividing the amount, if any, deducted by the taxpayer under paragraph (c) in respect of the dividend by the number of shares of that class owned by the taxpayer immediately before that amount was received by the taxpayer as a dividend;
(e)any capital loss of the taxpayer from the disposition, after the time when the asset was so acquired by the taxpayer, of a share of the capital stock of the foreign affiliate shall be deemed to be nil; and
(f)where the taxpayer has so elected in prescribed form and within prescribed time, subsection (2) applies as if the asset were an expropriation asset acquired by the taxpayer as compensation for foreign property taken by a particular issuer as described in subsection (1).
Marginal note:Assets acquired from foreign affiliate of taxpayer as consideration for settlement, etc., of debt
(5)Where a foreign affiliate of a taxpayer resident in Canada would, on the assumption that the foreign affiliate were resident in Canada and its only foreign affiliates were corporations that were foreign affiliates of the taxpayer, be entitled to make an election under subsection 80.1(1) in respect of assets acquired by it that would, on that assumption, be expropriation assets of the foreign affiliate, and all or any of those assets are subsequently acquired by the taxpayer from the foreign affiliate as consideration for the settlement or extinguishment of a capital property of the taxpayer that was a debt payable by the foreign affiliate to the taxpayer or any other obligation of the foreign affiliate to pay an amount to the taxpayer (which debt or other obligation is referred to in this subsection as the “obligation”), if the taxpayer has so elected, in prescribed form and within prescribed time, in respect of all of the assets so acquired by the taxpayer from the foreign affiliate, the following rules apply in respect of each such asset so acquired by the taxpayer:
(a)paragraph 80.1(4)(a) applies in respect of the asset as if subparagraph 80.1(4)(a)(iv) were read as follows:
“(iv)the taxpayer’s proceeds of the disposition of the obligation settled or extinguished by virtue of the acquisition by the taxpayer of the asset;”;
(b)where the taxpayer has designated in the taxpayer’s election a class of shares as described in this paragraph in respect of the asset,
(i)the amount, if any, by which the cost to the taxpayer of the asset (computed having regard to paragraph (a) and paragraph (4)(a)) exceeds the amount of the obligation settled or extinguished by virtue of the acquisition by the taxpayer of the asset shall be deemed to have been received by the taxpayer as a dividend from the foreign affiliate in respect of such class of shares of the capital stock thereof as the taxpayer has designated in the election, and
(ii)the taxpayer’s gain, if any, from the disposition of the obligation shall be deemed to be nil;
(c)the taxpayer’s loss, if any, from the disposition of the obligation shall be deemed to be nil; and
(d)paragraphs (4)(c) to (f) apply in respect of the asset.
Marginal note:Assets acquired from foreign affiliate of taxpayer on winding-up, etc.
(6)Where a foreign affiliate of a taxpayer resident in Canada would, on the assumption that the foreign affiliate were resident in Canada and its only foreign affiliates were corporations that were foreign affiliates of the taxpayer, be entitled to make an election under subsection 80.1(1) in respect of assets acquired by it that would, on that assumption, be expropriation assets of the foreign affiliate, and all or any of those assets are subsequently acquired by the taxpayer from the foreign affiliate,
(a)on the winding-up, discontinuance or reorganization of the business of the foreign affiliate, or
(b)as consideration for the redemption, cancellation or acquisition by the foreign affiliate of shares of its capital stock,
if the taxpayer has so elected, in prescribed form and within prescribed time,
(c)in respect of all of the assets so acquired by the taxpayer from the foreign affiliate, subsection (1) applies in respect of each such asset, or
(d)in respect of all amounts received or to be received by the taxpayer as or on account of interest on all of the assets so acquired by the taxpayer from the foreign affiliate, subsection (2) applies in respect of each such asset,
as if the assets were expropriation assets acquired by the taxpayer as consideration for the sale of foreign property that consisted of shares of the capital stock of the foreign affiliate owned by the taxpayer immediately before the assets were so acquired and that was sold to a particular issuer as described in subsection (1).
Definition ofadjusted principal amount
(7)In this section,adjusted principal amountto a taxpayer of an expropriation asset at any particular time means the amount, if any, by which
(a)the total of the principal amount of the asset and, in respect of each interest amount received by the taxpayer on the asset before the particular time, the lesser of the tax referred to in subparagraph (2)(b)(i) in respect of that interest amount and the proportion determined under subparagraph (2)(b)(ii) in respect thereof,
exceeds
(b)the total of each amount received by the taxpayer before the particular time as an interest amount on the asset and each amount received by the taxpayer before the particular time as, on account or in lieu of payment of, or in satisfaction of, the principal amount of the asset.
Marginal note:Currency in which adjusted principal amount to be computed or expressed
(8)For the purposes of this section, the adjusted principal amount, at any particular time, of an expropriation asset or of any asset assumed for the purposes of this section to be an expropriation asset shall be computed in the currency in which the principal amount of the asset is, under the terms thereof, payable, except that for greater certainty, for the purposes of paragraph (2)(a), the adjusted principal amount at any particular time of such an asset is its adjusted principal amount at that time computed as provided in this subsection but expressed in Canadian currency.
Marginal note:Election in respect of two or more expropriation assets acquired by taxpayer
(9)For the purposes of Subdivision C and subsection (2), and in applying subsections (7) and (8) for those purposes, where two or more expropriation assets that were
(a)issued by the government of a country other than Canada, or
(b)issued by a person resident in a country other than Canada and guaranteed by the government of that country
at the same time, or as compensation for, or consideration for the sale of, the same foreign property, have been acquired by a taxpayer and the taxpayer has so elected, in prescribed form and within prescribed time, in respect of all of the expropriation assets that were so issued or guaranteed by the government of that country and acquired by the taxpayer before the making of the election, all of those expropriation assets shall be considered to be a single expropriation asset that was issued or guaranteed by the government of that country and acquired by the taxpayer.
Marginal note:Application
80.2(1)Subsections (2) to (13) apply if
(a)in a taxation year, a taxpayer, under the terms of a contract, pays to a person (referred to in this section as the “recipient”) an amount (referred to in this section as the “specified amount”) that may reasonably be considered to be received by the recipient as a reimbursement of, or a contribution or an allowance in respect of, an amount (referred to in this section as the “original amount”)
(i)that was described by paragraph 18(1)(m) and was paid or payable by the recipient, or
(ii)that was, in respect of the recipient, an amount described by paragraph 12(1)(o);
(b)the original amount is paid or became payable or receivable in a taxation year or fiscal period of the recipient that begins before 2007; and
(c)the taxpayer is resident in Canada or carries on business in Canada when the specified amount is paid.
Marginal note:Rules relating to time of payment
(2)If the specified amount is paid in a taxation year of the taxpayer that begins before 2008, the eligible portion of the specified amount, referred to in subsection (11), is deemed to be a payment described by paragraph 18(1)(m)