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:Proceeds — mark-to-market property

  (4) For greater certainty, if a taxpayer is a financial institution in a taxation year and disposes of a share that is mark-to-market property of the taxpayer for the year, the taxpayer’s proceeds from the disposition do not include any amount that would otherwise be proceeds from the disposition to the extent that the amount is deemed by subsection 84(2) or (3) to be a dividend received except to the extent the dividend is deemed by subparagraph 88(2)(b)(ii) not to be a dividend.

• (5) to (7) [Repealed, 2013, c. 34, s. 288]

• 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:Application of subsection (8.2)

  (8.1) Subsection (8.2) applies to a taxpayer for its transition year if

  • (a) subsection (2) deems the taxpayer to have disposed of a particular specified debt obligation immediately before the end of its transition year (in subsection (8.2) referred to as “the particular disposition”); and

  • (b) the particular specified debt obligation was owned by the taxpayer at the end of its base year and was not a mark-to-market property of the taxpayer for its base year.

• Marginal note:Rules applicable to first deemed disposition of debt obligation

  (8.2) If this subsection applies to a taxpayer for its transition year, the following rules apply to the taxpayer in respect of the particular disposition:

  • (a) subsection 20(21) does not apply to the taxpayer in respect of the particular disposition; and

  • (b) if section 12.4 does not apply to the taxpayer in respect of the particular disposition, there shall be included in computing the taxpayer’s income for its transition year the amount, if any, by which

    • (i) the total of all amounts each of which is

      • (A) an amount deducted under paragraph 20(1)(l) in respect of the particular specified debt obligation of the taxpayer in computing the taxpayer’s income for its base year, or

      • (B) an amount deducted under paragraph 20(1)(p) in respect of the particular specified debt obligation of the taxpayer in computing the taxpayer’s income for a taxation year that preceded its transition year,

    exceeds

    • (ii) the total of all amounts each of which is

      • (A) an amount included under paragraph 12(1)(d) in respect of the particular specified debt obligation of the taxpayer in computing the taxpayer’s income for its transition year, or

      • (B) an amount included under paragraph 12(1)(i) in respect of the particular specified debt obligation of the taxpayer in computing the taxpayer’s income for its transition 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.