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

Act current to 2016-05-12 and last amended on 2015-12-31. Previous Versions

Mark-to-Market Properties

Marginal note:Income treatment for profits and losses
  •  (1) Where, in a taxation year that begins after October 1994, a taxpayer that is a financial institution in the year disposes of a property that is a mark-to-market property for the year,

    • (a) there shall be included in computing the taxpayer’s income for the year the profit, if any, from the disposition; and

    • (b) there shall be deducted in computing the taxpayer’s income for the year the loss, if any, from the disposition.

  • Marginal note:Mark-to-market requirement

    (2) Where a taxpayer that is a financial institution in a taxation year holds, at the end of the year, a mark-to-market property for the year, the taxpayer shall be deemed

    • (a) to have disposed of the property immediately before the end of the year for proceeds equal to its fair market value at the time of disposition, and

    • (b) to have reacquired the property at the end of the year at a cost equal to those proceeds.

  • Marginal note:Mark-to-market debt obligation

    (3) Where a taxpayer is a financial institution in a particular taxation year that begins after October 1994, the following rules apply with respect to a specified debt obligation that is a mark-to-market property of the taxpayer for the particular year:

    • (a) paragraph 12(1)(c) and subsections 12(3) and 20(14) and (21) do not apply to the obligation in computing the taxpayer’s income for the particular year;

    • (b) there shall be included in computing the taxpayer’s income for the particular year an amount received by the taxpayer in the particular year as, on account of, in lieu of payment of, or in satisfaction of, interest on the obligation, to the extent that the interest was not included in computing the taxpayer’s income for a preceding taxation year; and

    • (c) for the purpose of paragraph 142.5(3)(b), where the taxpayer was deemed by subsection 142.5(2) or paragraph 142.6(1)(b) to have disposed of the obligation in a preceding taxation year, no part of an amount included in computing the income of the taxpayer for that preceding year because of the disposition shall be considered to be in respect of interest on the obligation.

  • (4) to (7) [Repealed, 2013, c. 34, s. 288]

  • Marginal note:First deemed disposition of debt obligation

    (8) Where

    • (a) in a particular taxation year that ends after October 30, 1994, a taxpayer disposed of a specified debt obligation that is a mark-to-market property of the taxpayer for the following taxation year, and

    • (b) either

      • (i) the disposition occurred because of subsection 142.5(2) and the particular year includes October 31, 1994, or

      • (ii) the disposition occurred because of paragraph 142.6(1)(b),

    the following rules apply:

    • (c) subsection 20(21) does not apply to the disposition, and

    • (d) where

      • (i) an amount has been deducted under paragraph 20(1)(p) in respect of the obligation in computing the taxpayer’s income for the particular year or a preceding taxation year, and

      • (ii) section 12.4 does not apply to the disposition,

      there shall be included in computing the taxpayer’s income for the particular year the amount, if any, by which

      • (iii) the total of all amounts referred to in subparagraph 142.5(8)(d)(i)

      exceeds

      • (iv) the total of all amounts included under paragraph 12(1)(i) in respect of the obligation in computing the taxpayer’s income for the particular year or a preceding taxation year.

  • Marginal note:Application of subsection (8.2)

    (8.1) Subsection (8.2) applies to a taxpayer for its transition year if

    • (a) subsection (2) deems the taxpayer to have disposed of a particular specified debt obligation immediately before the end of its transition year (in subsection (8.2) referred to as “the particular disposition”); and

    • (b) the particular specified debt obligation was owned by the taxpayer at the end of its base year and was not a mark-to-market property of the taxpayer for its base year.

  • Marginal note:Rules applicable to first deemed disposition of debt obligation

    (8.2) If this subsection applies to a taxpayer for its transition year, the following rules apply to the taxpayer in respect of the particular disposition:

    • (a) subsection 20(21) does not apply to the taxpayer in respect of the particular disposition; and

    • (b) if section 12.4 does not apply to the taxpayer in respect of the particular disposition, there shall be included in computing the taxpayer’s income for its transition year the amount, if any, by which

      • (i) the total of all amounts each of which is

        • (A) an amount deducted under paragraph 20(1)(l) in respect of the particular specified debt obligation of the taxpayer in computing the taxpayer’s income for its base year, or

        • (B) an amount deducted under paragraph 20(1)(p) in respect of the particular specified debt obligation of the taxpayer in computing the taxpayer’s income for a taxation year that preceded its transition year,

      exceeds

      • (ii) the total of all amounts each of which is

        • (A) an amount included under paragraph 12(1)(d) in respect of the particular specified debt obligation of the taxpayer in computing the taxpayer’s income for its transition year, or

        • (B) an amount included under paragraph 12(1)(i) in respect of the particular specified debt obligation of the taxpayer in computing the taxpayer’s income for its transition year or a preceding taxation year.

  • Marginal note:Transition — property acquired on rollover

    (9) Where

    • (a) a taxpayer acquired a property before October 31, 1994 at a cost less than the fair market value of the property at the time of acquisition,

    • (b) the property was transferred, directly or indirectly, to the taxpayer by a person that would never have been a financial institution before the transfer if the definition financial institution in subsection 142.2(1) had always applied,

    • (c) the cost is less than the fair market value because subsection 85(1) applied in respect of the disposition of the property by the person, and

    • (d) subsection 142.5(2) deemed the taxpayer to have disposed of the property in its particular taxation year that includes October 31, 1994,

    the following rules apply:

    • (e) where the taxpayer would, but for this paragraph, have a taxable capital gain for the particular year from the disposition of the property, the part of the taxable capital gain that can reasonably be considered to have arisen while the property was held by a person described in paragraph 142.5(9)(b) shall be deemed to be a taxable capital gain of the taxpayer from the disposition of the property for the taxation year in which the taxpayer disposes of the property otherwise than because of subsection 142.5(2), and not to be a taxable capital gain for the particular year, and

    • (f) where the taxpayer has a profit (other than a capital gain) from the disposition of the property, the part of the profit that can reasonably be considered to have arisen while the property was held by a person described in paragraph 142.5(9)(b) shall be included in computing the taxpayer’s income for the taxation year in which the taxpayer disposes of the property otherwise than because of subsection 142.5(2), and shall not be included in computing the taxpayer’s income for the particular year.

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts. 1995, c. 21, s. 58;
  • 1998, c. 19, s. 166;
  • 2009, c. 2, s. 47;
  • 2013, c. 34, s. 288.
Marginal note:Definitions
  •  (1) The following definitions apply for the purposes of this section and subsections 142.5(8.1) and (8.2).

    base year

    année de base

    base year of a taxpayer means the taxpayer’s taxation year that immediately precedes its transition year. (année de base)

    transition amount

    montant transitoire

    transition amount of a taxpayer for the taxpayer’s transition year is the positive or negative amount determined by the formula

    A – B

    where

    A 
    is the total of all amounts each of which is the fair market value, at the end of the taxpayer’s base year, of a transition property of the taxpayer; and
    B 
    is the total of all amounts each of which is the cost amount to the taxpayer, at the end of the taxpayer’s base year, of a transition property of the taxpayer.

    transition property

    bien transitoire

    transition property of a taxpayer means a property that

    • (a) was a specified debt obligation held by the taxpayer at the end of the taxpayer’s base year;

    • (b) was not a mark-to-market property of the taxpayer for the taxpayer’s base year, but would have been a mark-to-market property of the taxpayer for the taxpayer’s base year if the property had been carried at the property’s fair market value in the taxpayer’s balance sheet as at the end of each taxation year of the taxpayer that ends after the taxpayer last acquired the property (otherwise than by reason of a reacquisition under subsection 142.5(2)) and before the commencement of the taxpayer’s transition year; and

    • (c) was a mark-to-market property of the taxpayer for the transition year of the taxpayer. (bien transitoire)

    transition year

    année transitoire

    transition year of a taxpayer means the taxpayer’s first taxation year that begins after September 2006. (année transitoire)

  • Marginal note:Transition year income inclusion

    (2) If a taxpayer is a financial institution in its transition year, there shall be included in computing the taxpayer’s income for its transition year the absolute value of the negative amount, if any, of the taxpayer’s transition amount.

  • Marginal note:Transition year income deduction

    (3) If a taxpayer is a financial institution in its transition year, there shall be deducted in computing the taxpayer’s income for its transition year the positive amount, if any, of the taxpayer’s transition amount.

  • Marginal note:Transition year income inclusion reversal

    (4) If an amount has been included under subsection (2) in computing a taxpayer’s income for its transition year there shall be deducted in computing the taxpayer’s income for each particular taxation year of the taxpayer that ends after the beginning of the transition year, and in which particular taxation year the taxpayer is a financial institution, the amount determined by the formula

    A × B/1825

    where

    A 
    is the amount included under subsection (2) in computing the taxpayer’s income for the transition year; and
    B 
    is the number of days in the particular taxation year that are before the day that is 1825 days after the first day of the transition year.
  • Marginal note:Transition year income deduction reversal

    (5) If an amount has been deducted under subsection (3) in computing a taxpayer’s income for its transition year, there shall be included in computing the taxpayer’s income, for each particular taxation year of the taxpayer ending after the beginning of the transition year, and in which particular taxation year the taxpayer is a financial institution, the amount determined by the formula

    A × B/1825

    where

    A 
    is the amount deducted under subsection (3) in computing the taxpayer’s income for the transition year; and
    B 
    is the number of days in the particular taxation year that are before the day that is 1825 days after the first day of the transition year.
  • Marginal note:Winding-up

    (6) If a taxpayer has, in a winding-up to which subsection 88(1) has applied, been wound-up into another corporation (referred to in this subsection as the “parent”), and immediately after the winding-up the parent is a financial institution, in applying subsections (4) and (5) in computing the income of the taxpayer and of the parent for particular taxation years that end on or after the first day (referred to in this subsection as the “start day”) on which assets of the taxpayer were distributed to the parent on the winding-up,

    • (a) the parent is, on and after the start day, deemed to be the same corporation as and a continuation of the taxpayer in respect of

      • (i) any amount included under subsection (2) or deducted under subsection (3) by the taxpayer in computing the taxpayer’s income for its transition year,

      • (ii) any amount deducted under subsection (4) or included under subsection (5) in computing the taxpayer’s income for a taxation year of the taxpayer that begins before the start day, and

      • (iii) any amount that would — in the absence of this subsection and if the taxpayer existed and was a financial institution on each day that is the start day or a subsequent day and on which the parent is a financial institution — be required to be deducted or included, in respect of any of those days, under subsection (4) or (5) in computing the taxpayer’s income for its transition year; and

    • (b) the taxpayer is, in respect of each of its particular taxation years, to determine the value for B in the formulas in subsections (4) and (5) without reference to the start day and days after the start day.

  • Marginal note:Amalgamations

    (7) If there is an amalgamation (within the meaning assigned by subsection 87(1)) of a taxpayer with one or more other corporations to form one corporation (referred to in this subsection as the “new corporation”), and immediately after the amalgamation the new corporation is a financial institution, in applying subsections (4) and (5) in computing the income of the new corporation for particular taxation years of the new corporation that begin on or after the day on which the amalgamation occurred, the new corporation is, on and after that day, deemed to be the same corporation as and a continuation of the taxpayer in respect of

    • (a) any amount included under subsection (2) or deducted under subsection (3) in computing the taxpayer’s income for its transition year of the taxpayer;

    • (b) any amount deducted under subsection (4) or included under subsection (5) in computing the taxpayer’s income for a taxation year of the taxpayer that begins before the day on which the amalgamation occurred; and

    • (c) any amount that would — in the absence of this subsection and if the taxpayer existed and was a financial institution on each day that is the day on which the amalgamation occurred or a subsequent day and on which the new corporation is a financial institution — be required to be deducted or included, in respect of any of those days, under subsection (4) or (5) in computing the taxpayer’s income.

  • Marginal note:Application of subsection (9)

    (8) Subsection (9) applies if, at any time, a taxpayer (referred to in this subsection and subsection (9) as the “transferor”) transfers, to a corporation (referred to in this subsection and subsection (9) as the “transferee”) that is related to the transferor, property in respect of a business carried on by the transferor in Canada (referred to in this subsection and subsection (9) as the “transferred business”) and

    • (a) subsection 138(11.5) or (11.94) applies to the transfer; or

    • (b) subsection 85(1) applies to the transfer, the transfer includes all or substantially all of the property and liabilities of the transferred business and, immediately after the transfer, the transferee is a financial institution.

  • Marginal note:Transfer of a business

    (9) If this subsection applies in respect of the transfer, at any time, of property

    • (a) the transferee is, at and after that time, deemed to be the same corporation as and a continuation of the transferor in respect of

      • (i) any amount included under subsection (2) or deducted under subsection (3) in computing the transferor’s income for its transition year that can reasonably be attributed to the transferred business,

      • (ii) any amount deducted under subsection (4) or included under subsection (5) in computing the transferor’s income for a taxation year of the transferor that begins before that time that can reasonably be attributed to the transferred business, and

      • (iii) any amount that would — in the absence of this subsection and if the transferor existed and was a financial institution on each day that includes that time or is a subsequent day and on which the transferee is a financial institution — be required to be deducted or included, in respect of any of those days, under subsection (4) or (5) in computing the transferor’s income that can reasonably be attributed to the transferred business; and

    • (b) in determining, in respect of the day that includes that time or any subsequent day, any amount that is required under subsection (4) or (5) to be deducted or included in computing the transferor’s income for each particular taxation year from the transferred business, the description of A in the formulas in those subsections is deemed to be nil.

  • Marginal note:Continuation of a partnership

    (10) If subsection 98(6) deems a partnership (in this subsection referred to as the “new partnership”) to be a continuation of another partnership (in this subsection referred to as the “predecessor partnership”) and, at the time that is immediately after the predecessor partnership ceases to exist, the new partnership is a financial institution, in applying subsections (4) and (5) in computing the income of the new partnership for particular taxation years of the new partnership that begin on or after the day on which it comes into existence, the new partnership is, on and after that day, deemed to be the same partnership as and a continuation of the predecessor partnership in respect of

    • (a) any amount included under subsection (2) or deducted under subsection (3) in computing the predecessor partnership’s income for its transition year;

    • (b) any amount deducted under subsection (4) or included under subsection (5) in computing the predecessor partnership’s income for a taxation year of the predecessor partnership that begins before the day on which the new partnership comes into existence; and

    • (c) any amount that would — in the absence of this subsection and if the predecessor partnership existed and was a financial institution on each day that is the day on which the new partnership comes into existence or a subsequent day and on which the new partnership is a financial institution — be required to be deducted or included, in respect of any of those days, under subsection (4) or (5) in computing the predecessor partnership’s income.

  • Marginal note:Ceasing to carry on a business

    (11) If at any time, a taxpayer ceases to be a financial institution

    • (a) there shall be deducted, in computing the income of the taxpayer for the taxation year of the taxpayer that includes the time that is immediately before that time, the amount determined by the formula

      A – B

      where

      A 
      is the amount included under subsection (2) in computing the taxpayer’s income for its transition year, and
      B 
      is the total of all amounts each of which is an amount deducted under subsection (4) in computing the income of the taxpayer for a taxation year that began before that time; and
    • (b) there shall be included, in computing the income of the taxpayer for the taxation year of the taxpayer that includes the time that is immediately before that time, the amount determined by the formula

      C – D

      where

      C 
      is the amount deducted under subsection (3) in computing the taxpayer’s income for its transition year, and
      D 
      is the total of all amounts each of which is an amount included under subsection (5) in computing the taxpayer’s income for a taxation year that began before that time.
  • Marginal note:Ceasing to exist

    (12) If at any time a taxpayer ceases to exist (otherwise than as a result of a merger to which subsection 87(2) applies, a winding-up to which subsection 88(1) applies or a continuation to which subsection 98(6) applies), for the purposes of subsection (11), the taxpayer is deemed to have ceased to be a financial institution at the earlier of

    • (a) the time (determined without reference to this subsection) at which the taxpayer ceased to be a financial institution, and

    • (b) the time that is immediately before the end of the last taxation year of the taxpayer that ended at or before the time at which the taxpayer ceased to exist.

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending Acts. 2009, c. 2, s. 48.
 
Date modified: