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

Marginal note:Rules applicable with respect to “qualifying trust annuity”

75.2 If an amount paid to acquire a qualifying trust annuity with respect to a taxpayer was deductible under paragraph 60(l) in computing the taxpayer’s income,

• (a) any amount that is paid out of or under the annuity at any particular time after 2005 and before the death of the taxpayer is deemed to have been received out of or under the annuity at the particular time by the taxpayer, and not to have been received by any other taxpayer; and

• (b) if the taxpayer dies after 2005

  • (i) an amount equal to the fair market value of the annuity at the time of the taxpayer’s death is deemed to have been received, immediately before the taxpayer’s death, by the taxpayer out of or under the annuity, and

  • (ii) for the purpose of subsection 70(5), the annuity is to be disregarded in determining the fair market value (immediately before the taxpayer’s death) of the taxpayer’s interest in the trust that is the annuitant under the annuity.

Marginal note:Security in satisfaction of income debt

• 76 (1) Where a person receives a security or other right or a certificate of indebtedness or other evidence of indebtedness wholly or partially as payment of, in lieu of payment of or in satisfaction of, a debt that is then payable, the amount of which debt would be included in computing the person’s income if it were paid, the value of the security, right or indebtedness or the applicable portion thereof shall, notwithstanding the form or legal effect of the transaction, be included in computing the person’s income for the taxation year in which it is received.

• Marginal note:Idem

  (2) Where a security or other right or a certificate of indebtedness or other evidence of indebtedness is received by a person wholly or partially as payment of, in lieu of payment of or in satisfaction of, a debt before the debt is payable, but is not itself payable or redeemable before the day on which the debt is payable, it shall, for the purpose of subsection 76(1), be deemed to be received by the person holding it at that time when the debt becomes payable.

• Marginal note:Section enacted for greater certainty

  (3) This section is enacted for greater certainty and shall not be construed as limiting the generality of the other provisions of this Part by which amounts are required to be included in computing income.

• Marginal note:Debt deemed not to be income debt

  (4) Where a cash purchase ticket or other form of settlement prescribed pursuant to the Canada Grain Act or by the Minister is issued to a taxpayer in respect of grain delivered in a taxation year of a taxpayer to a primary elevator or process elevator and the ticket or other form of settlement entitles the holder thereof to payment by the operator of the elevator of the purchase price, without interest, stated in the ticket for the grain at a date that is after the end of that taxation year, the amount of the purchase price stated in the ticket or other form of settlement shall, notwithstanding any other provision of this section, be included in computing the income of the taxpayer to whom the ticket or other form of settlement was issued for the taxpayer’s taxation year immediately following the taxation year in which the grain was delivered and not for the taxation year in which the grain was delivered.

• Marginal note:Definitions of certain expressions

  (5) In subsection (4), the expressions cash purchase ticket, operator, primary elevator and process elevator have the meanings assigned by the Canada Grain Act, and grain means wheat, oats, barley, rye, flaxseed, rapeseed and canola produced in Canada.

Marginal note:Non-resident moving debt from Canadian business

• 76.1 (1) If at any time a debt obligation of a non-resident taxpayer that is denominated in a foreign currency ceases to be an obligation of the taxpayer in respect of a business or part of a business carried on by the taxpayer in Canada immediately before that time (other than an obligation in respect of which the taxpayer ceased to be indebted at that time), for the purpose of determining the amount of any income, loss, capital gain or capital loss due to the fluctuation in the value of the foreign currency relative to Canadian currency, the taxpayer is deemed to have settled the debt obligation immediately before that time at the amount outstanding on account of its principal amount.

• Marginal note:Non-resident assuming debt

  (2) If at any time a debt obligation of a non-resident taxpayer that is denominated in a foreign currency becomes an obligation of the taxpayer in respect of a business or part of a business that the taxpayer carries on in Canada after that time (other than an obligation in respect of which the taxpayer became indebted at that time), the amount of any income, loss, capital gain or capital loss in respect of the obligation due to the fluctuation in the value of the foreign currency relative to Canadian currency shall be determined based on the amount of the obligation in Canadian currency at that time.

77 [Repealed, 1995, c. 21, s. 52]

Marginal note:Unpaid amounts

• 78 (1) Where an amount in respect of a deductible outlay or expense that was owing by a taxpayer to a person with whom the taxpayer was not dealing at arm’s length at the time the outlay or expense was incurred and at the end of the second taxation year following the taxation year in which the outlay or expense was incurred, is unpaid at the end of that second taxation year, either

  • (a) the amount so unpaid shall be included in computing the taxpayer’s income for the third taxation year following the taxation year in which the outlay or expense was incurred, or

  • (b) where the taxpayer and that person have filed an agreement in prescribed form on or before the day on or before which the taxpayer is required by section 150 to file the taxpayer’s return of income for the third succeeding taxation year, for the purposes of this Act the following rules apply:

    • (i) the amount so unpaid shall be deemed to have been paid by the taxpayer and received by that person on the first day of that third taxation year, and section 153, except subsection 153(3), is applicable to the extent that it would apply if that amount were being paid to that person by the taxpayer, and

    • (ii) that person shall be deemed to have made a loan to the taxpayer on the first day of that third taxation year in an amount equal to the amount so unpaid minus the amount, if any, deducted or withheld therefrom by the taxpayer on account of that person’s tax for that third taxation year.

• Marginal note:Idem

  (2) Where an amount in respect of a deductible outlay or expense that was owing by a taxpayer that is a corporation to a person with whom the taxpayer was not dealing at arm’s length is unpaid at the time when the taxpayer is wound up, and the taxpayer is wound up before the end of the second taxation year following the taxation year in which the outlay or expense was incurred, the amount so unpaid shall be included in computing the taxpayer’s income for the taxation year in which it was wound up.

• Marginal note:Late filing

  (3) Where, in respect of an amount described in subsection 78(1) that was owing by a taxpayer to a person, an agreement in a form prescribed for the purposes of this section is filed after the day on or before which the agreement is required to be filed for the purposes of paragraph 78(1)(b), both paragraphs 78(1)(a) and (b) apply in respect of the said amount, except that paragraph 78(1)(a) shall be read and construed as requiring 25% only of the said amount to be included in computing the taxpayer’s income.

• Marginal note:Unpaid remuneration and other amounts

  (4) Where an amount in respect of a taxpayer’s expense that is a superannuation or pension benefit, a retiring allowance, salary, wages or other remuneration (other than reasonable vacation or holiday pay or a deferred amount under a salary deferral arrangement) in respect of an office or employment is unpaid on the day that is 180 days after the end of the taxation year in which the expense was incurred, for the purposes of this Act other than this subsection, the amount shall be deemed not to have been incurred as an expense in the year and shall be deemed to be incurred as an expense in the taxation year in which the amount is paid.

• Marginal note:Where s. (1) does not apply

  (5) Subsection 78(1) does not apply in any case where subsection (4) applies.

Marginal note:Definitions

• 79 (1) In this section,

  creditor

  creditor of a particular person includes a person to whom the particular person is obligated to pay an amount under a mortgage, hypothecary claim or similar obligation and, where property was sold to the particular person under a conditional sales agreement, the seller of the property (or any assignee with respect to the agreement) is deemed to be a creditor of the particular person in respect of that property; (créancier)

  debt

  debt includes an obligation to pay an amount under a mortgage, hypothecary claim or similar obligation or under a conditional sales agreement; (dette)

  person

  person includes a partnership; (personne)

  property

  property does not include

  • (a) money, or

  • (b) indebtedness owed by or guaranteed by the government of a country, or a province, state, or other political subdivision of that country; (bien)

  specified amount

  specified amount at any time of a debt owed or assumed by a person means

  • (a) the unpaid principal amount of the debt at that time, and

  • (b) unpaid interest accrued to that time on the debt. (montant déterminé)

• Marginal note:Surrender of property

  (2) For the purposes of this section, a property is surrendered at any time by a person to another person where the beneficial ownership of the property is acquired or reacquired at that time from the person by the other person and the acquisition or reacquisition of the property was in consequence of the person’s failure to pay all or part of one or more specified amounts of debts owed by the person to the other person immediately before that time.

• Marginal note:Proceeds of disposition for debtor

  (3) Where a particular property is surrendered at any time by a person (in this subsection referred to as the “debtor”) to a creditor of the debtor, the debtor’s proceeds of disposition of the particular property shall be deemed to be the amount determined by the formula

  (A + B + C + D + E - F) × G/H

  where

  A

  is the total of all specified amounts of debts of the debtor that are in respect of properties surrendered at that time by the debtor to the creditor and that are owing immediately before that time to the creditor;

  B

  is the total of all amounts each of which is a specified amount of a debt that is owed by the debtor immediately before that time to a person (other than the creditor), to the extent that the amount ceases to be owing by the debtor as a consequence of properties being surrendered at that time by the debtor to the creditor;

  C

  is the total of all amounts each of which is a specified amount of a particular debt that is owed by the debtor immediately before that time to a person (other than a specified amount included in the amount determined for A or B as a consequence of properties being surrendered at that time by the debtor to the creditor), where

  • (a) any property surrendered at that time by the debtor to the creditor was security for

    • (i) the particular debt, and

    • (ii) another debt that is owed by the debtor immediately before that time to the creditor, and

  • (b) the other debt is subordinate to the particular debt in respect of that property;

  D

  is

  • (a) where a specified amount of a debt owed by the debtor immediately before that time to a person (other than the creditor) ceases, as a consequence of the surrender at that time of properties by the debtor to the creditor, to be secured by all properties owned by the debtor immediately before that time, the lesser of

    • (i) the amount, if any, by which the total of all such specified amounts exceeds the portion of that total included in any of the amounts determined for B or C as a consequence of properties being surrendered at that time by the debtor to the creditor, and

    • (ii) the amount, if any, by which the total cost amount to the debtor of all properties surrendered at that time by the debtor to the creditor exceeds the total amount that would, but for this description and the description of F, be determined under this subsection as a consequence of the surrender, and

  • (b) in any other case, nil;

  E

  is

  • (a) where the particular property is surrendered at that time by the debtor in circumstances in which paragraph 69(1)(b) would, but for this subsection, apply and the fair market value of all properties surrendered at that time by the debtor to the creditor exceeds the amount that would, but for this description and the description of F, be determined under this subsection as a consequence of the surrender, that excess, and

  • (b) in any other case, nil;

  F

  is the total of all amounts each of which is the lesser of

  • (a) the portion of a particular specified amount of a particular debt included in the amount determined for A, B, C or D in computing the debtor’s proceeds of disposition of the particular property, and

  • (b) the total of

    • (i) all amounts included under paragraph 6(1)(a) or subsection 15(1) in computing the income of any person because the particular debt was settled, or deemed by subsection 80.01(8) to have been settled, at or before the end of the taxation year that includes that time,

    • (ii) all amounts renounced under subsection 66(10), (10.1), (10.2) or (10.3) by the debtor in respect of the particular debt,

    • (iii) all amounts each of which is a forgiven amount (within the meaning assigned by subsection 80(1)) in respect of the debt at a previous time that the particular debt was deemed by subsection 80.01(8) to have been settled,

    • (iv) where the particular debt is an excluded obligation (within the meaning assigned by subsection 80(1)), the particular specified amount, and

    • (v) the lesser of

      • (A) the unpaid interest accrued to that time on the particular debt, and

      • (B) the total of

        • (I) the amount, if any, by which the total of all amounts included because of section 80.4 in computing the debtor’s income for the taxation year that includes that time or for a preceding taxation year in respect of interest on the particular debt exceeds the total of all amounts paid before that time on account of interest on the particular debt, and

        • (II) such portion of that unpaid interest as would, if it were paid, be included in the amount determined under paragraph 28(1)(e) in respect of the debtor;

  G

  is the fair market value at that time of the particular property; and

  H

  is the fair market value at that time of all properties surrendered by the debtor to the creditor at that time.

• Marginal note:Subsequent payment by debtor

  (4) An amount paid at any time by a person as, on account of or in satisfaction of, a specified amount of a debt that can reasonably be considered to have been included in the amount determined for A, C or D in subsection 79(3) in respect of a property surrendered before that time by the person shall be deemed to be a repayment of assistance, at that time in respect of the property, to which

  • (a) subsection 39(13) applies, where the property was capital property (other than depreciable property) of the person immediately before its surrender;

  • (b) paragraph 20(1)(hh.1) applies, where the cost of the property to the person was an eligible capital expenditure at the time the property was acquired;

  • (c) the description of E in the definition cumulative Canadian exploration expense in subsection 66.1(6), the description of D in the definition cumulative Canadian development expense in subsection 66.2(5) or the description of D in the definition cumulative Canadian oil and gas property expense in subsection 66.4(5), as the case may be, applies, where the cost of the property to the person was a Canadian exploration expense, a Canadian development expense or a Canadian oil and gas property expense; or

  • (d) paragraph 20(1)(hh) applies, in any other case.

• Marginal note:Subsequent application with respect to employee or shareholder debt

  (5) Any amount included under paragraph 6(1)(a) or subsection 15(1) in computing a person’s income for a taxation year that can reasonably be considered to have been included in the amount determined for A, C or D in subsection 79(3) as a consequence of properties being surrendered before the year by the person shall be deemed to be a repayment by the person, immediately before the end of the year, of assistance to which subsection 79(4) applies.

• Marginal note:Surrender of property not payment or repayment by debtor

  (6) Where a specified amount of a debt is included in the amount determined at any time for A, B, C or D in subsection 79(3) in respect of a property surrendered at that time by a person to a creditor of the person, for the purpose of computing the person’s income, no amount shall be considered to have been paid or repaid by the person as a consequence of the acquisition or reacquisition of the surrendered property by the creditor.

• Marginal note:Foreign exchange

  (7) Where a debt is denominated in a currency (other than Canadian currency), any amount determined for A, B, C or D in subsection 79(3) in respect of the debt shall be determined with reference to the relative value of that currency and Canadian currency at the time the debt was issued.