Income Tax Act

Marginal note:Income treatment for profits and losses

• 142.5 (1) Where, in a taxation year that begins after October 1994, a taxpayer that is a financial institution in the year disposes of a property that is a mark-to-market property for the year,

  • (a) there shall be included in computing the taxpayer’s income for the year the profit, if any, from the disposition; and

  • (b) there shall be deducted in computing the taxpayer’s income for the year the loss, if any, from the disposition.

• Marginal note:Mark-to-market requirement

  (2) Where a taxpayer that is a financial institution in a taxation year holds, at the end of the year, a mark-to-market property for the year, the taxpayer shall be deemed

  • (a) to have disposed of the property immediately before the end of the year for proceeds equal to its fair market value at the time of disposition, and

  • (b) to have reacquired the property at the end of the year at a cost equal to those proceeds.

• Marginal note:Mark-to-market debt obligation

  (3) Where a taxpayer is a financial institution in a particular taxation year that begins after October 1994, the following rules apply with respect to a specified debt obligation that is a mark-to-market property of the taxpayer for the particular year:

  • (a) paragraph 12(1)(c) and subsections 12(3) and 20(14) and (21) do not apply to the obligation in computing the taxpayer’s income for the particular year;

  • (b) there shall be included in computing the taxpayer’s income for the particular year an amount received by the taxpayer in the particular year as, on account of, in lieu of payment of, or in satisfaction of, interest on the obligation, to the extent that the interest was not included in computing the taxpayer’s income for a preceding taxation year; and

  • (c) for the purpose of paragraph 142.5(3)(b), where the taxpayer was deemed by subsection 142.5(2) or paragraph 142.6(1)(b) to have disposed of the obligation in a preceding taxation year, no part of an amount included in computing the income of the taxpayer for that preceding year because of the disposition shall be considered to be in respect of interest on the obligation.

• Marginal note:Transition — deduction re non-capital amounts

  (4) There may be deducted in computing the income of a taxpayer for the taxpayer’s taxation year that includes October 31, 1994 such amount as the taxpayer claims not exceeding a prescribed amount in respect of properties (other than capital properties) disposed of by the taxpayer because of subsection 142.5(2).

• Marginal note:Transition — inclusion re non-capital amounts

  (5) Where an amount is deducted under subsection 142.5(4) in computing a taxpayer’s income, there shall be included, in computing the taxpayer’s income for each taxation year that begins before 1999 and ends after October 30, 1994, the total of all amounts prescribed for the year.

• Marginal note:Transition — deduction re net capital gains

  (6) Such amount as a taxpayer elects, not exceeding a prescribed amount in respect of capital properties disposed of by the taxpayer because of subsection 142.5(2), is deemed to be an allowable capital loss of the taxpayer for its taxation year that includes October 31, 1994 from the disposition of property (or, where the taxpayer is non-resident throughout the year, from the disposition of taxable Canadian property).

• Marginal note:Transition — inclusion re net capital gains

  (7) A taxpayer that elects an amount under subsection 142.5(6) is deemed, for each taxation year that begins before 1999 and ends after October 30, 1994, to have a taxable capital gain for the year from the disposition of property (or, where the taxpayer is non-resident throughout the year, from the disposition of taxable Canadian property) equal to the total of all amounts prescribed for the year.

• Marginal note:First deemed disposition of debt obligation

  (8) Where

  • (a) in a particular taxation year that ends after October 30, 1994, a taxpayer disposed of a specified debt obligation that is a mark-to-market property of the taxpayer for the following taxation year, and

  • (b) either

    • (i) the disposition occurred because of subsection 142.5(2) and the particular year includes October 31, 1994, or

    • (ii) the disposition occurred because of paragraph 142.6(1)(b),

  the following rules apply:

  • (c) subsection 20(21) does not apply to the disposition, and

  • (d) where

    • (i) an amount has been deducted under paragraph 20(1)(p) in respect of the obligation in computing the taxpayer’s income for the particular year or a preceding taxation year, and

    • (ii) section 12.4 does not apply to the disposition,

    there shall be included in computing the taxpayer’s income for the particular year the amount, if any, by which

    • (iii) the total of all amounts referred to in subparagraph 142.5(8)(d)(i)

    exceeds

    • (iv) the total of all amounts included under paragraph 12(1)(i) in respect of the obligation in computing the taxpayer’s income for the particular year or a preceding taxation year.

• Marginal note:Transition — property acquired on rollover

  (9) Where

  • (a) a taxpayer acquired a property before October 31, 1994 at a cost less than the fair market value of the property at the time of acquisition,

  • (b) the property was transferred, directly or indirectly, to the taxpayer by a person that would never have been a financial institution before the transfer if the definition financial institution in subsection 142.2(1) had always applied,

  • (c) the cost is less than the fair market value because subsection 85(1) applied in respect of the disposition of the property by the person, and

  • (d) subsection 142.5(2) deemed the taxpayer to have disposed of the property in its particular taxation year that includes October 31, 1994,

  the following rules apply:

  • (e) where the taxpayer would, but for this paragraph, have a taxable capital gain for the particular year from the disposition of the property, the part of the taxable capital gain that can reasonably be considered to have arisen while the property was held by a person described in paragraph 142.5(9)(b) shall be deemed to be a taxable capital gain of the taxpayer from the disposition of the property for the taxation year in which the taxpayer disposes of the property otherwise than because of subsection 142.5(2), and not to be a taxable capital gain for the particular year, and

  • (f) where the taxpayer has a profit (other than a capital gain) from the disposition of the property, the part of the profit that can reasonably be considered to have arisen while the property was held by a person described in paragraph 142.5(9)(b) shall be included in computing the taxpayer’s income for the taxation year in which the taxpayer disposes of the property otherwise than because of subsection 142.5(2), and shall not be included in computing the taxpayer’s income for the particular year.