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

Regulations are current to 2015-06-22 and last amended on 2015-06-19. Previous Versions

Marginal note:Transition amount

 For the purpose of subsection 142.4(1) of the Act, “transition amount”, of a taxpayer in respect of the disposition of a specified debt obligation, means,

  • (a) if neither paragraph (b) nor (c) applies, nil;

  • (b) if

    • (i) the taxpayer acquired the obligation before its taxation year that includes February 23, 1994,

    • (ii) neither paragraph 7000(2)(a) nor (b) has applied to the obligation, and

    • (iii) the principal amount of the obligation exceeds the cost of the obligation to the taxpayer (which excess is referred to in this paragraph as the “discount”),

    the amount determined by the formula

    A - B

    where

    A 
    is the total of all amounts each of which is the amount included in respect of the discount in computing the taxpayer’s profit for a taxation year that ended before February 23, 1994, and
    B 
    is the total of all amounts each of which is the amount included in respect of the discount in computing the taxpayer’s income for a taxation year that ended before February 23, 1994; and
  • (c) where

    • (i) the conditions in subparagraphs (b)(i) and (ii) are satisfied, and

    • (ii) the cost of the obligation to the taxpayer exceeds the principal amount of the obligation (which excess is referred to in this paragraph as the “premium”),

    the negative of the amount determined by the formula

    A - B

    where

    A 
    is the total of all amounts each of which is the amount deducted in respect of the premium in computing the taxpayer’s profit for a taxation year that ended before February 23, 1994, and
    B 
    is the total of all amounts each of which is the amount deducted in respect of the premium in computing the taxpayer’s income for a taxation year that ended before February 23, 1994.
  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending regulations. SOR/2009-222, s. 7.

Prescribed Debt Obligations

Marginal note:Application of related election
  •  (1) The following rules apply with respect to an election made under subsection (3) or (4) by a taxpayer:

    • (a) the election applies only if

      • (i) it is in writing,

      • (ii) it specifies the first taxation year (in this subsection referred to as the “initial year”) of the taxpayer to which it is to apply, and

      • (iii) either it is received by the Minister within six months after the end of the initial year, or the Minister has expressly accepted the later filing of the election;

    • (b) subject to paragraph (c), the election applies to dispositions of specified debt obligations in the initial year and subsequent taxation years; and

    • (c) if the Minister has approved, on written application by the taxpayer, the revocation of the election, the election does not apply to dispositions of specified debt obligations in the taxation year specified in the application and in subsequent taxation years.

  • Marginal note:Prescribed specified debt obligation

    (2) For the purpose of subparagraph 142.4(5)(a)(ii) of the Act, a specified debt obligation disposed of by a taxpayer in a taxation year is prescribed in respect of the taxpayer if the amortization date for the obligation is not more than two years after the end of the taxation year.

  • Marginal note:Prescribed specified debt obligation — exception

    (3) Subsection (2) does not apply in respect of a taxpayer for a taxation year if

    • (a) generally accepted accounting principles require that the taxpayer’s gains and losses arising on the disposition of a class of debt obligations be amortized to profit for the purpose of the taxpayer’s financial statements;

    • (b) the taxpayer has elected not to have subsection (2) apply; and

    • (c) the election applies to dispositions in the year.

  • Marginal note:Prescribed specified debt obligation

    (4) For the purpose of subparagraph 142.4(5)(a)(ii) of the Act, a specified debt obligation disposed of by a taxpayer in a taxation year is prescribed in respect of the taxpayer if

    • (a) the taxpayer has elected to have this subsection apply;

    • (b) the election applies to dispositions in the year; and

    • (c) the absolute value of the positive or negative amount determined by the formula (A - B) does not exceed the lesser of $5,000 and the amount, if any, specified in the election, where

      A 
      is the total of all amounts each of which is the residual portion of the taxpayer’s gain from the disposition of the obligation or any other specified debt obligation disposed of in the same transaction, and
      B 
      is the total of all amounts each of which is the residual portion of the taxpayer’s loss from the disposition of the obligation or any other specified debt obligation disposed of in the same transaction.
  • Marginal note:Prescribed specified debt obligation

    (5) For the purpose of subparagraph 142.4(5)(a)(ii) of the Act, a specified debt obligation disposed of by a taxpayer in a taxation year is prescribed in respect of the taxpayer if

    • (a) the disposition resulted in an extinguishment of the obligation, other than an extinguishment that occurred because of a purchase of the obligation by the debtor in the open market;

    • (b) the taxpayer had the right to require the obligation to be settled at any time; or

    • (c) the debtor had the right to settle the obligation at any time.

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