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

Regulations are current to 2014-08-05 and last amended on 2014-06-19. Previous Versions

Special Rules for Residual Portion of Gain or Loss

Marginal note:Application
  •  (1) This section applies for the purposes of subparagraphs 142.4(4)(c)(ii) and (d)(ii) of the Act.

  • Marginal note:Winding-up

    (2) If subsection 88(1) of the Act has applied to the winding-up of a taxpayer (in this subsection referred to as the “subsidiary”), the following rules apply in respect of the residual portion of a gain or loss of the subsidiary from the disposition of a specified debt obligation to which subsection 142.4(4) of the Act applies:

    • (a) the amount of that residual portion allocated to the taxation year of the subsidiary in which its assets were distributed to its parent on the winding-up shall be determined on the assumption that the taxation year ended when the assets were distributed to its parent;

    • (b) no amount shall be allocated in respect of that residual portion to any taxation year of the subsidiary after its taxation year in which its assets were distributed to its parent; and

    • (c) the amount of that residual portion allocated to the taxation year of the parent in which the subsidiary’s assets were distributed to it shall be determined on the assumption that the taxation year began when the assets were distributed to it.

  • (2.1) [Repealed, SOR/2009-302, s. 12]

  • Marginal note:Transfer of an insurance business

    (3) No amount in respect of the residual portion of a gain or loss of an insurer from the disposition of a specified debt obligation to which subsection 142.4(4) of the Act applies shall be allocated to any taxation year of the insurer that ends after the insurer ceased to carry on all or substantially all of an insurance business, if

    • (a) subsection 138(11.5) or (11.94) of the Act has applied to the transfer of that business; and

    • (b) the person to whom that business was transferred is considered, because of paragraph 138(11.5)(k) of the Act, to be the same person as the insurer in respect of that residual portion.

  • Marginal note:Transfer to new partnership

    (4) 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”), the following rules apply in respect of the residual portion of a gain or loss of the predecessor partnership from the disposition of a specified debt obligation to which subsection 142.4(4) of the Act applies:

    • (a) the amount of that residual portion allocated to the taxation year of the predecessor partnership in which its property was transferred to the new partnership shall be determined on the assumption that the taxation year ended when the property was transferred;

    • (b) no amount shall be allocated in respect of that residual portion to any taxation year of the predecessor partnership after its taxation year in which its property was transferred to the new partnership; and

    • (c) the amount of that residual portion allocated to the taxation year of the new partnership in which the predecessor partnership’s property was transferred to it shall be determined on the assumption that the taxation year began when the property was transferred to it.

  • Marginal note:Ceasing to carry on business

    (5) There shall be allocated to a particular taxation year of a taxpayer the part, if any, of the residual portion of the taxpayer’s gain or loss that is from a disposition of a specified debt obligation to which subsection 142.4(4) of the Act applies and that was not allocated to a preceding taxation year, if

    • (a) at any time in the particular taxation year the 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;

    • (b) the disposition occurred before that time; and

    • (c) the specified debt obligation was property used in the business.

  • Marginal note:Non-resident taxpayer

    (5.1) For the purpose of subsection (5), a non-resident taxpayer is considered to cease to carry on all or substantially all of a business if the taxpayer ceases to carry on, or ceases to carry on in Canada, all or substantially all of the part of the business that was carried on in Canada.

  • Marginal note:Ceasing to be a financial institution

    (6) There shall be allocated to a particular taxation year of a taxpayer the part, if any, of the residual portion of the taxpayer’s gain or loss that is from a disposition of a specified debt obligation to which subsection 142.4(4) of the Act applies and that was not allocated to a preceding taxation year, if

    • (a) the particular taxation year ends immediately before the time at which the taxpayer ceases to be a financial institution, otherwise than because it has ceased to carry on a business; and

    • (b) the disposition occurred before that time.

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending regulations. SOR/2009-222, s. 7;
  • SOR/2009-302, s. 12.