Income Tax Regulations (C.R.C., c. 945)

8102. (1) In this section, “excluded property”, of a taxpayer, means a mark-to-market property used in a business of the taxpayer in its taxation year that includes October 31, 1994 where it is reasonable to expect that the property would have been valued at its fair market value for the purpose of computing the taxpayer’s income from the business for the year if

• (a) the Act were read without reference to subsection 142.5(2); and

• (b) the property were held at the end of the year.

(2) For the purpose of subsection 142.5(4) of the Act, the prescribed amount for a taxpayer’s taxation year that includes October 31, 1994 is the amount, if any, by which

• (a) the total of all amounts each of which is the taxpayer’s profit from the disposition in the year, because of subsection 142.5(2) of the Act, of a property other than a capital property or an excluded property

exceeds the total of

• (b) the total of all amounts each of which is the taxpayer’s loss from the disposition in the year, because of subsection 142.5(2) of the Act, of a property other than a capital property or an excluded property, and

• (c) the amount, if any, by which

  • (i) the total of all amounts each of which is the taxpayer’s loss from the disposition in the year of a mark-to-market property (other than a capital property, an excluded property or a property disposed of because of subsection 142.5(2) of the Act)

  exceeds

  • (ii) the total of all amounts each of which is the taxpayer’s profit from the disposition in the year of a mark-to-market property (other than a capital property, an excluded property or a property disposed of because of subsection 142.5(2) of the Act).

8103. (1) In this section, “transition deduction”, of a taxpayer, means the amount deducted under subsection 142.5(4) of the Act in computing the taxpayer’s income for its taxation year that includes October 31, 1994.

(2) Subject to subsections (3), (5) and (7), there is prescribed for the purpose of subsection 142.5(5) of the Act in respect of a taxpayer for a taxation year that ends after October 30, 1994 the amount determined by the formula

(3) If subsection 88(1) of the Act has applied to the winding-up of a taxpayer (in this subsection referred to as the “subsidiary”),

• (a) the value of A in subsection (2) shall be determined in respect of the subsidiary without including any days that are after the day on which the subsidiary’s assets were distributed to its parent on the winding-up; and

• (b) there is prescribed for the purpose of subsection 142.5(5) of the Act in respect of the parent for its taxation year that includes the day referred to in paragraph (a) the total of

  • (i) the amount that would be determined under subsection (2) in respect of the parent for the year if the parent’s transition deduction did not include the subsidiary’s transition deduction, and

  • (ii) the amount that would be determined under subsection (2) in respect of the parent for the year if

    • (A) the value of A in that subsection were determined without including the day referred to in paragraph (a) and any days before that day, and

    • (B) the value of B in that subsection were equal to the subsidiary’s transition deduction.

(4) If subsection 138(11.5) or (11.94) of the Act has applied to the transfer of an insurance business by an insurer, there shall be subtracted, in determining the value of B in subsection (2) in respect of the insurer for a taxation year that ends after the insurer ceased to carry on all or substantially all of the business, the part of the insurer’s transition deduction that is included, because of paragraph 138(11.5)(k) of the Act, in the transition deduction of the person to whom the business was transferred.

(5) If subsection 98(6) of the Act 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”),

• (a) the value of A in subsection (2) shall be determined in respect of the predecessor partnership without including any days that are after the day on which the predecessor partnership’s property was transferred to the new partnership; and

• (b) there is prescribed for the purpose of subsection 142.5(5) of the Act in respect of the new partnership for its taxation year that includes the day referred to in paragraph (a) the total of

  • (i) the amount that would be determined under subsection (2) in respect of the new partnership for the year if its transition deduction did not include the predecessor partnership’s transition deduction, and

  • (ii) the amount that would be determined under subsection (2) in respect of the new partnership for the year if

    • (A) the value of A in that subsection were determined without including the day referred to in paragraph (a) and any days before that day, and

    • (B) the value of B in that subsection were equal to the predecessor partnership’s transition deduction.

(6) If a taxpayer ceases to carry on all or substantially all of a business, otherwise than as a result of a merger to which subsection 87(2) of the Act applies, a winding-up to which subsection 88(1) of the Act applies or a transfer of the business to which subsection 98(6) or 138(11.5) or (11.94) of the Act applies,

• (a) there is prescribed for the purpose of subsection 142.5(5) of the Act in respect of the taxpayer for its taxation year in which the cessation of business occurs, in addition to the amount prescribed by subsection (2), the amount, if any, by which

  • (i) the part of the taxpayer’s transition deduction that can reasonably be attributed to the business

  exceeds

  • (ii) that part of the total of the amounts included under subsection 142.5(5) of the Act in computing the income of the taxpayer for preceding taxation years that can reasonably be considered to be in respect of the amount determined under subparagraph (i); and

• (b) there shall be subtracted, in determining the value of B in subsection (2) in respect of the taxpayer for the year or a subsequent taxation year, the amount determined under subparagraph (a)(i).

(7) If a taxpayer ceases at any time to be a financial institution otherwise than because it ceases to carry on a business,

• (a) there is prescribed for the purpose of subsection 142.5(5) of the Act in respect of the taxpayer for its taxation year that ended immediately before that time, the amount, if any, by which

  • (i) the taxpayer’s transition deduction

  exceeds

  • (ii) the total of the amounts included under subsection 142.5(5) of the Act in computing the taxpayer’s income for preceding taxation years; and

• (b) the amount prescribed for the purpose of subsection 142.5(5) of the Act in respect of the taxpayer for taxation years after the taxation year referred to in paragraph (a) is nil.