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

Regulations are current to 2016-04-12 and last amended on 2016-02-26. Previous Versions

PART LXIXPrescribed Offshore Investment Fund Properties

 For the purpose of paragraph 94.1(2)(a) of the Act, an offshore investment fund property (within the meaning assigned by subsection 94.1(1) of the Act) of a taxpayer that

  • (a) was acquired by him by way of bequest or inheritance from a deceased person who, throughout the five years immediately preceding his death, was not resident in Canada,

  • (b) had not been acquired by the deceased from a person resident in Canada, and

  • (c) is not property substituted for property acquired by the deceased from a person resident in Canada

is a prescribed offshore investment fund property of the taxpayer.

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending regulations. SOR/86-488, s. 10.

 [Repealed, SOR/85-696, s. 18]

PART LXXAccrued Interest on Debt Obligations

  •  (1) For the purpose of subsection 12(9) of the Act, each of the following debt obligations (other than a debt obligation that is an indexed debt obligation) in respect of which a taxpayer has at any time acquired an interest is a prescribed debt obligation:

    • (a) a particular debt obligation in respect of which no interest is stipulated to be payable in respect of its principal amount,

    • (b) a particular debt obligation in respect of which the proportion of the payments of principal to which the taxpayer is entitled is not equal to the proportion of the payments of interest to which he is entitled,

    • (c) a particular debt obligation, other than one described in paragraph (a) or (b), in respect of which it can be determined, at the time the taxpayer acquired the interest therein, that the maximum amount of interest payable thereon in a year ending after that time is less than the maximum amount of interest payable thereon in a subsequent year, and

    • (d) a particular debt obligation, other than one described in paragraph (a), (b) or (c), in respect of which the amount of interest to be paid in respect of any taxation year is, under the terms and conditions of the obligation, dependent on a contingency existing after the year,

    and, for the purposes of this subsection, a debt obligation includes, for greater certainty, all of the issuer’s obligations to pay principal and interest under that obligation.

  • (2) For the purposes of subsection 12(9) of the Act, the amount determined in prescribed manner that is deemed to accrue to a taxpayer as interest on a prescribed debt obligation in each taxation year during which he holds an interest in the obligation is,

    • (a) in the case of a prescribed debt obligation described in paragraph (1)(a), the amount of interest that would be determined in respect thereof if interest thereon for that year were computed on a compound interest basis using the maximum of all rates each of which is a rate computed

      • (i) in respect of each possible circumstance under which an interest of the taxpayer in the obligation could mature or be surrendered or retracted, and

      • (ii) using assumptions concerning the interest rate and compounding period that will result in a present value, at the date of purchase of the interest, of all the maximum payments thereunder, equal to the cost thereof to the taxpayer;

    • (b) in the case of a prescribed debt obligation described in paragraph (1)(b), the aggregate of all amounts each of which is the amount of interest that would be determined in respect of his interest in a payment under the obligation if interest thereon for that year were computed on a compound interest basis using the specified cost of his interest therein and the specified interest rate in respect of his total interest in the obligation, and for the purposes of this paragraph,

      • (i) the specified cost of his interest in a payment under the obligation is its present value at the date of purchase computed using the specified interest rate, and

      • (ii) the specified interest rate is the maximum of all rates each of which is a rate computed

        • (A) in respect of each possible circumstance under which an interest of the taxpayer in the obligation could mature or be surrendered or retracted, and

        • (B) using assumptions concerning the interest rate and compounding period that will result in a present value, at the date of purchase of the interest, of all the maximum payments to the taxpayer in respect of his total interest in the obligation, equal to the cost of that interest to the taxpayer;

    • (c) in the case of a prescribed debt obligation described in paragraph (1)(c), other than an obligation in respect of which paragraph (c.1) applies, the greater of

      • (i) the maximum amount of interest thereon in respect of the year, and

      • (ii) the maximum amount of interest that would be determined in respect thereof if interest thereon for that year were computed on a compound interest basis using the maximum of all rates each of which is a rate computed

        • (A) in respect of each possible circumstance under which an interest of the taxpayer in the obligation could mature or be surrendered or retracted, and

        • (B) using assumptions concerning the interest rate and compounding period that will result in a present value, at the date of issue of the obligation, of all the maximum payments thereunder, equal to its principal amount;

    • (c.1) in the case of a prescribed debt obligation described in paragraph (1)(c) for which

      • (i) the rate of interest stipulated to be payable in respect of each period throughout which the obligation is outstanding is fixed at the date of issue of the obligation, and

      • (ii) the stipulated rate of interest applicable at each time is not less than each stipulated rate of interest applicable before that time,

      the amount of interest that would be determined in respect of the year if interest on the obligation for that year were computed on a compound interest basis using the maximum of all rates each of which is the compound interest rate that, for a particular assumption with respect to when the taxpayer’s interest in the obligation will mature or be surrendered or retracted, results in a present value (at the date the taxpayer acquires the interest in the obligation) of all payments under the obligation after the acquisition by the taxpayer of the taxpayer’s interest in the obligation equal to the principal amount of the obligation at the date of acquisition; and

    • (d) in the case of a prescribed debt obligation described in paragraph (1)(d), the maximum amount of interest thereon that could be payable thereunder in respect of that year.

  • (3) For the purpose of this section, any bonus or premium payable under a debt obligation is considered to be an amount of interest payable under the obligation.

  • (4) For the purposes of this section, where

    • (a) a taxpayer has an interest in a debt obligation (in this subsection referred to as the “first interest”) under which there is a conversion privilege or an option to extend its term upon maturity, and

    • (b) at the time the obligation was issued (or, if later, at the time the conversion privilege or option was added or modified), circumstances could reasonably be foreseen under which the holder of the obligation would, by exercising the conversion privilege or option, acquire an interest in a debt obligation with a principal amount less than its fair market value at the time of acquisition,

    the subsequent interest in any debt obligation acquired by the taxpayer by exercising the conversion privilege or option shall be considered to be a continuation of the first interest.

  • (5) For the purposes of making the computations referred to in paragraphs (2)(a), (b), (c) and (c.1), the compounding period shall not exceed one year and any interest rate used shall be constant from the time of acquisition or issue, as the case may be, until the time of maturity, surrender or retraction.

  • (6) For the purpose of the definition investment contract in subsection 12(11) of the Act, a registered retirement savings plan or a registered retirement income fund, other than a plan or fund to which a trust is a party, is a prescribed contract throughout a calendar year where an annuitant (as defined in subsection 146(1) or 146.3(1) of the Act, as the case may be) under the plan or fund is alive at any time in the year or was alive at any time in the preceding calendar year.

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending regulations. SOR/83-864, s. 1;
  • SOR/85-696, s. 19;
  • SOR/86-1092, s. 17(F);
  • SOR/96-225, s. 1;
  • SOR/96-227, s. 1;
  • SOR/96-435, s. 3;
  • SOR/2001-295, s. 4(F).

Indexed Debt Obligations

  •  (1) For the purpose of subparagraph 16(6)(a)(i) of the Act, where at any time in a taxation year a taxpayer holds an interest in an indexed debt obligation, there is prescribed as interest receivable and received by the taxpayer in the year in respect of the obligation the total of

    • (a) the amount, if any, by which

      • (i) the total of all amounts each of which is the amount by which the amount payable in respect of the taxpayer’s interest in an indexed payment under the obligation (other than a payment that is an excluded payment with respect to the taxpayer for the year) has, because of a change in the purchasing power of money, increased over an inflation adjustment period of the obligation that ends in the year

      exceeds the total of

      • (ii) that portion of the total, if any, determined under subparagraph (i) that is required, otherwise than by subsection 16(6) of the Act, to be included in computing the taxpayer’s income for the year or a preceding taxation year, and

      • (iii) the total of all amounts each of which is the amount by which the amount payable in respect of the taxpayer’s interest in an indexed payment under the obligation (other than a payment that is an excluded payment with respect to the taxpayer for the year) has, by reason of a change in the purchasing power of money, decreased over an inflation adjustment period of the obligation that ends in the year, and

    • (b) where the non-indexed debt obligation associated with the indexed debt obligation is an obligation that is described in any of paragraphs 7000(1)(a) to (d), the amount of interest that would be determined under subsection 7000(2) to accrue to the taxpayer in respect of the non-indexed debt obligation in the particular period that

      • (i) begins at the beginning of the first inflation adjustment period of the indexed debt obligation in respect of the taxpayer that ends in the year, and

      • (ii) ends at the end of the last inflation adjustment period of the indexed debt obligation in respect of the taxpayer that ends in the year

      if the particular period were a taxation year of the taxpayer and the taxpayer’s interest in the indexed debt obligation were an interest in the non-indexed debt obligation.

  • (2) For the purposes of subparagraph 16(6)(a)(ii) of the Act, where at any time in a taxation year a taxpayer holds an interest in an indexed debt obligation, there is prescribed as interest payable and paid by the taxpayer in the year in respect of the obligation the amount, if any, by which

    • (a) the total of the amounts, if any, determined under subparagraphs (1)(a)(ii) and (iii) for the year in respect of the taxpayer’s interest in the obligation

    exceeds

    • (b) the amount, if any, determined under subparagraph (1)(a)(i) for the year in respect of the taxpayer’s interest in the obligation.

  • (3) For the purposes of subparagraph 16(6)(b)(i) of the Act, where at any time in a taxation year an indexed debt obligation is an obligation of a taxpayer, there is prescribed as interest payable in respect of the year by the taxpayer in respect of the obligation the amount, if any, that would be determined under paragraph (1)(a) in respect of the taxpayer for the year if, at each time at which the obligation is an obligation of the taxpayer, the taxpayer were the holder of the obligation and not the debtor under the obligation.

  • (4) For the purposes of subparagraph 16(6)(b)(ii) of the Act, where at any time in a taxation year an indexed debt obligation is an obligation of a taxpayer, there is prescribed as interest receivable and received by the taxpayer in the year in respect of the obligation the amount, if any, that would be determined under subsection (2) in respect of the taxpayer for the year if, at each time at which the obligation is an obligation of the taxpayer, the taxpayer were the holder of the obligation and not the debtor under the obligation.

  • (5) For the purpose of determining the amount by which an indexed payment under an indexed debt obligation has increased or decreased over a period because of a change in the purchasing power of money, the amount of the indexed payment at any time shall be determined using the method for computing the amount of the payment at the time it is to be made, adjusted in a reasonable manner to take into account the earlier date of computation.

  • (6) For the purposes of this section, the non-indexed debt obligation associated with an indexed debt obligation is the debt obligation that would result if the indexed debt obligation were amended to eliminate all adjustments determined by reference to changes in the purchasing power of money.

  • (7) In this section,

    excluded payment

    excluded payment with respect to a taxpayer for a taxation year means an indexed payment under an indexed debt obligation where

    • (a) the non-indexed debt obligation associated with the indexed debt obligation provides for the payment, at least annually, of interest at a single fixed rate, and

    • (b) the indexed payment corresponds to one of the interest payments referred to in paragraph (a),

    but does not include payments under an indexed debt obligation where, at any time in the year, the taxpayer’s proportionate interest in a payment to be made under the obligation after that time differs from the taxpayer’s proportionate interest in any other payment to be made under the obligation after that time; (paiement exclu)

    indexed payment

    indexed payment means, in relation to an indexed debt obligation, an amount payable under the obligation that is determined by reference to the purchasing power of money; (paiement indexé)

    inflation adjustment period

    inflation adjustment period of an indexed debt obligation means, in relation to a taxpayer,

    • (a) where the taxpayer acquires and disposes of the taxpayer’s interest in the obligation in the same regular adjustment period of the obligation, the period that begins when the taxpayer acquires the interest in the obligation and ends when the taxpayer disposes of the interest, and

    • (b) in any other case, each of the following consecutive periods:

      • (i) the period that begins when the taxpayer acquires the taxpayer’s interest in the obligation and ends at the end of the regular adjustment period of the obligation in which the taxpayer acquires the interest in the obligation,

      • (ii) each succeeding regular adjustment period of the obligation throughout which the taxpayer holds the interest in the obligation, and

      • (iii) where the taxpayer does not dispose of the interest in the obligation at the end of a regular adjustment period of the obligation, the period that begins immediately after the last period referred to in subparagraphs (i) and (ii) and that ends when the taxpayer disposes of the interest in the obligation; (période de redressement pour inflation)

    regular adjustment period

    regular adjustment period of an indexed debt obligation means

    • (a) where the terms or conditions of the obligation provide that, while the obligation is outstanding, indexed payments are to be made at regular intervals not exceeding 12 months in length, each of the following periods:

      • (i) the period that begins when the obligation is issued and ends when the first indexed payment is required to be made, and

      • (ii) each succeeding period beginning when an indexed payment is required to be made and ending when the next indexed payment is required to be made,

    • (b) where paragraph (a) does not apply and the obligation is outstanding for less than 12 months, the period that begins when the obligation is issued and ends when the obligation ceases to be outstanding, and

    • (c) in any other case, each of the following periods:

      • (i) the 12-month period that begins when the obligation is issued,

      • (ii) each succeeding 12-month period throughout which the obligation is outstanding, and

      • (iii) where the obligation ceases to be outstanding at a time other than the end of a 12-month period referred to in subparagraph (i) or (ii), the period that commences immediately after the last period referred to in those subparagraphs and that ends when the obligation ceases to be outstanding. (période de redressement normale)

  • NOTE: Application provisions are not included in the consolidated text;
  • see relevant amending regulations. SOR/96-435, s. 4.
 
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