Income Tax Act
Marginal note:Definitions
80 (1) In this section,
- commercial debt obligation
commercial debt obligation issued by a debtor means a debt obligation issued by the debtor
(a) where interest was paid or payable by the debtor in respect of it pursuant to a legal obligation, or
(b) if interest had been paid or payable by the debtor in respect of it pursuant to a legal obligation,
an amount in respect of the interest was or would have been deductible in computing the debtor’s income, taxable income or taxable income earned in Canada, as the case may be, if this Act were read without reference to paragraph 18(1)(g), subsections 18(2), (3.1) and (4) and section 21; (créance commerciale)
- commercial obligation
commercial obligation issued by a debtor means
(a) a commercial debt obligation issued by the debtor, or
(b) a distress preferred share issued by the debtor; (dette commerciale)
- debtor
debtor includes any corporation that has issued a distress preferred share and any partnership; (débiteur)
- directed person
directed person at any time in respect of a debtor means
(a) a taxable Canadian corporation or an eligible Canadian partnership by which the debtor is controlled at that time, or
(b) a taxable Canadian corporation or an eligible Canadian partnership that is controlled at that time by
(i) the debtor,
(ii) the debtor and one or more persons related to the debtor, or
(iii) a person or group of persons by which the debtor is controlled at that time; (personne désignée)
- distress preferred share
distress preferred share issued by a corporation means, at any time, a share issued after February 21, 1994 (other than a share issued pursuant to an agreement in writing entered into on or before that date) by the corporation that is a share described in paragraph (e) of the definition term preferred share in subsection 248(1) that would be a term preferred share at that time if that definition were read without reference to paragraphs (e) and (f); (action privilégiée de renflouement)
- eligible Canadian partnership
eligible Canadian partnership at any time means a Canadian partnership none of the members of which is, at that time,
(a) a non-resident owned investment corporation,
(b) a person exempt, because of subsection 149(1), from tax under this Part on all or part of the person’s taxable income,
(c) a partnership, other than an eligible Canadian partnership, or
(d) a trust, other than a trust in which no non-resident person and no person described in paragraph (a), (b) or (c) is beneficially interested; (société de personnes canadienne admissible)
- excluded obligation
excluded obligation means an obligation issued by a debtor where
(a) the proceeds from the issue of the obligation
(i) were included in computing the debtor’s income or, but for the expression “other than a prescribed amount” in paragraph 12(1)(x), would have been so included,
(ii) were deducted in computing, for the purposes of this Act, any balance of undeducted outlays, expenses or other amounts, or
(iii) were deducted in computing the capital cost or cost amount to the debtor of any property of the debtor,
(b) an amount paid by the debtor in satisfaction of the entire principal amount of the obligation would be included in the amount determined under paragraph 28(1)(e) or section 30 in respect of the debtor,
(c) section 78 applies to the obligation, or
(d) the principal amount of the obligation would, if this Act were read without reference to sections 79 and 80 and the obligation were settled without any amount being paid in satisfaction of its principal amount, be included in computing the debtor’s income because of the settlement of the obligation; (dette exclue)
- excluded property
excluded property means property of a non-resident debtor that is treaty-protected property or that is not taxable Canadian property; (bien exclu)
- excluded security
excluded security issued by a corporation to a person as consideration for the settlement of a debt means
(a) a distress preferred share issued by the corporation to the person, or
(b) a share issued by the corporation to the person under the terms of the debt, where the debt was a bond, debenture or note listed on a designated stock exchange in Canada and the terms for the conversion to the share were not established or substantially modified after the later of February 22, 1994 and the time that the bond, debenture or note was issued; (valeur mobilière exclue)
- forgiven amount
forgiven amount at any time in respect of a commercial obligation issued by a debtor is the amount determined by the formula
A - B
where
- A
- is the lesser of the amount for which the obligation was issued and the principal amount of the obligation, and
- B
- is the total of
(a) the amount, if any, paid at that time in satisfaction of the principal amount of the obligation,
(b) the amount, if any, included under paragraph 6(1)(a) or subsection 15(1) in computing the income of any person because of the settlement of the obligation at that time,
(c) the amount, if any, deducted at that time under paragraph 18(9.3)(f) in computing the forgiven amount in respect of the obligation,
(d) the capital gain, if any, of the debtor resulting from the application of subsection 39(3) to the purchase at that time of the obligation by the debtor,
(e) such portion of the principal amount of the obligation as relates to an amount renounced under subsection 66(10), 66(10.1), 66(10.2) or 66(10.3) by the debtor,
(f) any portion of the principal amount of the obligation that is included in the amount determined for A, B, C or in subsection 79(3) in respect of the debtor for the taxation year of the debtor that includes that time or for a preceding taxation year,
(g) the total of all amounts each of which is a forgiven amount at a previous time that the obligation was deemed by subsection 80.01(8) or 80.01(9) to have been settled,
(h) such portion of the principal amount of the obligation as can reasonably be considered to have been included under section 80.4 in computing the debtor’s income for a taxation year that includes that time or for a preceding taxation year,
(i) where the debtor is a bankrupt at that time, the principal amount of the obligation,
(j) such portion of the principal amount of the obligation as represents the principal amount of an excluded obligation,
(k) where the debtor is a partnership and the obligation was, since the later of the creation of the partnership or the issue of the obligation, always payable to a member of the partnership actively engaged, on a regular, continuous and substantial basis, in those activities of the partnership that are other than the financing of the partnership business, the principal amount of the obligation, and
(l) the amount, if any, given at or before that time by the debtor to another person as consideration for the assumption by the other person of the obligation; (montant remis)
- person
person includes a partnership; (personne)
- relevant loss balance
relevant loss balance, at a particular time for a commercial obligation and in respect of a debtor’s non-capital loss, farm loss, restricted farm loss or net capital loss, as the case may be, for a particular taxation year, is
(a) subject to paragraph (b), the amount of such loss that would be deductible in computing the debtor’s taxable income or taxable income earned in Canada, as the case may be, for the taxation year that includes that time if
(i) the debtor had sufficient incomes from all sources and sufficient taxable capital gains,
(ii) subsections (3) and (4) did not apply to reduce such loss at or after that time, and
(iii) paragraph 111(4)(a) and subsection 111(5) did not apply to the debtor, and
(b) nil if the debtor is a taxpayer that was at a previous time subject to a loss restriction event and the particular year ended before the previous time, unless
(i) the obligation was issued by the debtor before, and not in contemplation of, the loss restriction event, or
(ii) all or substantially all of the proceeds from the issue of the obligation were used to satisfy the principal amount of another obligation to which subparagraph (i) or this subparagraph would apply if the other obligation were still outstanding; (solde de pertes applicable)
- successor pool
successor pool at any time for a commercial obligation and in respect of an amount determined in relation to a debtor means the portion of that amount that would be deductible under subsection 66.7(2), (2.3), (3), (4) or (5), as the case may be, in computing the debtor’s income for the taxation year that includes that time, if
(a) the debtor had sufficient incomes from all sources,
(b) subsection (8) did not apply to reduce the amount so determined at that time,
(c) the year ended immediately after that time, and
(d) paragraphs 66.7(2.3)(a), (4)(a) and (5)(a) were read without reference to the expressions “30% of”, “30% of” and “10% of”, respectively,
except that the successor pool at that time for the obligation is deemed to be nil unless
(e) the obligation was issued by the debtor before, and not in contemplation of, the event described in paragraph (8)(a) that gives rise to the deductibility under subsection 66.7(2), (2.3), (3), (4) or (5), as the case may be, of all or part of that amount in computing the debtor’s income, or
(f) all or substantially all of the proceeds from the issue of the obligation were used to satisfy the principal amount of another obligation to which paragraph (e) or this paragraph would apply if the other obligation were still outstanding; (compte de société remplaçante)
- unrecognized loss
unrecognized loss, at a particular time, in respect of an obligation issued by a debtor, from the disposition of a property, is the amount that would, but for subparagraph 40(2)(g)(ii), be a capital loss from the disposition by the debtor at or before the particular time of a debt or other right to receive an amount, except that if the debtor is a taxpayer that is subject to a loss restriction event before the particular time and after the time of the disposition, the unrecognized loss at the particular time in respect of the obligation is nil unless
(a) the obligation was issued by the debtor before, and not in contemplation of, the loss restriction event, or
(b) all or substantially all of the proceeds from the issue of the obligation were used to satisfy the principal amount of another obligation to which paragraph 80(1)(a) or this paragraph would apply if the other obligation were still outstanding. (perte non constatée)
Marginal note:Application of debt forgiveness rules
(2) For the purposes of this section,
(a) an obligation issued by a debtor is settled at any time where the obligation is settled or extinguished at that time (otherwise than by way of a bequest or inheritance or as consideration for the issue of a share described in paragraph (b) of the definition excluded security in subsection 80(1));
(b) an amount of interest payable by a debtor in respect of an obligation issued by the debtor shall be deemed to be an obligation issued by the debtor that
(i) has a principal amount, and
(ii) was issued by the debtor for an amount,
equal to the portion of the amount of such interest that was deductible or would, but for subsection 18(2) or 18(3.1) or section 21, have been deductible in computing the debtor’s income for a taxation year;
(c) subsections (3) to (5) and (8) to (13) apply in numerical order to the forgiven amount in respect of a commercial obligation;
(d) the applicable fraction of the unapplied portion of a forgiven amount at any time in respect of an obligation issued by the debtor is in respect of a loss for any other taxation year, the fraction required to be used under section 38 for that year;
(e) where an applicable fraction (as determined under paragraph 80(2)(d)) of the unapplied portion of a forgiven amount is applied under subsection 80(4) to reduce at any time a loss for a taxation year, the portion of the forgiven amount so applied shall, except for the purpose of reducing the loss, be deemed to be the quotient obtained when the amount of the reduction is divided by the applicable fraction;
(f) [Repealed, 2016, c. 12, s. 23]
(g) where a corporation issues a share (other than an excluded security) to a person as consideration for the settlement of a debt issued by the corporation and payable to the person, the amount paid in satisfaction of the debt because of the issue of the share is deemed to be equal to the fair market value of the share at the time it was issued;
(g.1) where a debt issued by a corporation and payable to a person is settled at any time, the amount, if any, that can reasonably be considered to be the increase, as a consequence of the settlement of the debt, in the fair market value of shares of the capital stock of the corporation owned by the person (other than any shares acquired by the person as consideration for the settlement of the debt) is deemed to be an amount paid at that time in satisfaction of the debt;
(h) where any part of the consideration given by a debtor to another person for the settlement at any time of a particular commercial debt obligation issued by the debtor and payable to the other person consists of a new commercial debt obligation issued by the debtor to the other person
(i) an amount equal to the principal amount of the new obligation shall be deemed to be paid by the debtor at that time, because of the issue of the new obligation, in satisfaction of the principal amount of the particular obligation, and
(ii) the new obligation shall be deemed to have been issued for an amount equal to the amount, if any, by which
(A) the principal amount of the new obligation
exceeds
(B) the amount, if any, by which the principal amount of the new obligation exceeds the amount for which the particular obligation was issued;
(i) where 2 or more commercial obligations issued by a debtor are settled at the same time, those obligations shall be treated as if they were settled at different times in the order designated by the debtor in a prescribed form filed with the debtor’s return of income under this Part for the debtor’s taxation year that includes that time or, if the debtor does not so designate any such order, in the order designated by the Minister;
(j) for the purpose of determining, at any time, whether 2 persons are related to each other or whether any person is controlled by any other person, it shall be assumed that
(i) each partnership and each trust is a corporation having a capital stock of a single class of voting shares divided into 100 issued shares,
(ii) each member of a partnership and each beneficiary under a trust owned at that time the number of issued shares of that class that is equal to the proportion of 100 that
(A) the fair market value at that time of the member’s interest in the partnership or the beneficiary’s interest in the trust, as the case may be
is of
(B) the fair market value at that time of all members’ interests in the partnership or all beneficiaries’ interests in the trust, as the case may be, and
(iii) where a beneficiary’s share of the income or capital of a trust depends on the exercise by any person of, or the failure by any person to exercise, any discretionary power, the fair market value at any time of the beneficiary’s interest in the trust is equal to
(A) where the beneficiary is not entitled to receive or otherwise obtain the use of any of the income or capital of the trust before the death after that time of one or more other beneficiaries under the trust, nil, and
(B) in any other case, the total fair market value at that time of all beneficiaries’ interests under the trust;
(k) where an obligation is denominated in a currency (other than Canadian currency), the forgiven amount at any time in respect of the obligation shall be determined with reference to the relative value of that currency and Canadian currency at the time the obligation was issued;
(l) where an amount is paid in satisfaction of the principal amount of a particular commercial obligation issued by a debtor and, as a consequence of the payment, the debtor is legally obliged to pay that amount to another person, the obligation to pay that amount to the other person shall be deemed to be a commercial obligation that was issued by the debtor at the same time and in the same circumstances as the particular obligation;
(m) for greater certainty, the amount that can be applied under this section to reduce another amount may not exceed that other amount;
(n) except for the purposes of this paragraph, where
(i) a commercial debt obligation issued by a debtor is settled at any time,
(ii) the debtor is at that time a member of a partnership, and
(iii) the obligation was, under the agreement governing the obligation, treated immediately before that time as a debt owed by the partnership,
the obligation shall be considered to have been issued by the partnership and not by the debtor;
(o) notwithstanding paragraph (n), if a commercial debt obligation, for which a particular person is liable with one or more other persons, is settled at any time in respect of the particular person but not in respect of all of the other persons, the portion of the obligation that can reasonably be considered to be the particular person’s share of the obligation shall be considered to have been issued by the particular person and settled at that time and not at any subsequent time;
(p) a commercial debt obligation issued by an individual that is outstanding at the time of the individual’s death and settled at a subsequent time shall, if the estate of the individual was liable for the obligation immediately before the subsequent time, be deemed to have been issued by the estate at the same time and in the same circumstances as the obligation was issued by the individual; and
(q) where a commercial debt obligation issued by an individual would, but for this paragraph, be settled at any time in the period ending 6 months after the death of an individual (or within such longer period as is acceptable to the Minister and the estate of the individual) and the estate of the individual was liable immediately before that time for the obligation
(i) the obligation shall be deemed to have been settled at the beginning of the day on which the individual died and not at that time,
(ii) any amount paid at that time by the estate in satisfaction of the principal amount of the obligation shall be deemed to have been paid at the beginning of the day on which the individual died,
(iii) any amount given by the estate at or before that time to another person as consideration for assumption by the other person of the obligation shall be deemed to have been given at the beginning of the day on which the individual died, and
(iv) paragraph 80(2)(b) shall not apply in respect of the settlement to interest that accrues within that period,
except that this paragraph does not apply in circumstances in which any amount is because of the settlement included under paragraph 6(1)(a) or subsection 15(1) in computing the income of any person or in which section 79 applies in respect of the obligation.
Marginal note:Reductions of non-capital losses
(3) Where a commercial obligation issued by a debtor is settled at any time, the forgiven amount at that time in respect of the obligation shall be applied to reduce at that time, in the following order,
(a) the debtor’s non-capital loss for each taxation year that ended before that time to the extent that the amount so applied
(i) does not exceed the amount (in subsection 80(4) referred to as the debtor’s “ordinary non-capital loss at that time for the year”) that would be the relevant loss balance at that time for the obligation and in respect of the debtor’s non-capital loss for the year if the description of E in the definition non-capital loss in subsection 111(8) were read without reference to the expression “the taxpayer’s allowable business investment loss for the year”, and
(ii) does not, because of this subsection, reduce the debtor’s non-capital loss for a preceding taxation year;
(b) the debtor’s farm loss for each taxation year that ended before that time, to the extent that the amount so applied
(i) does not exceed the amount that is the relevant loss balance at that time for the obligation and in respect of the debtor’s farm loss for the year, and
(ii) does not, because of this subsection, reduce the debtor’s farm loss for a preceding taxation year; and
(c) the debtor’s restricted farm loss for each taxation year that ended before that time, to the extent that the amount so applied
(i) does not exceed the amount that is the relevant loss balance at that time for the obligation and in respect of the debtor’s restricted farm loss for the year, and
(ii) does not, because of this subsection, reduce the debtor’s restricted farm loss for a preceding taxation year.
Marginal note:Reductions of capital losses
(4) Where a commercial obligation issued by a debtor is settled at any time, the applicable fraction of the remaining unapplied portion of a forgiven amount at that time in respect of the obligation shall be applied to reduce at that time, in the following order,
(a) the debtor’s non-capital loss for each taxation year that ended before that time to the extent that the amount so applied
(i) does not exceed the amount, if any, by which
(A) the relevant loss balance at that time for the obligation and in respect of the debtor’s non-capital loss for the year
exceeds
(B) the debtor’s ordinary non-capital loss (within the meaning assigned by subparagraph 80(3)(a)(i)) at that time for the year, and
(ii) does not, because of this subsection, reduce the debtor’s non-capital loss for a preceding taxation year; and
(b) the debtor’s net capital loss for each taxation year that ended before that time, to the extent that the amount so applied
(i) does not exceed the relevant loss balance at that time for the obligation and in respect of the debtor’s net capital loss for the year, and
(ii) does not, because of this subsection, reduce the debtor’s net capital loss for a preceding taxation year.
Marginal note:Reductions with respect to depreciable property
(5) Where a commercial obligation issued by a debtor is settled at any time, the remaining unapplied portion of the forgiven amount at that time in respect of the obligation shall be applied, in such manner as is designated by the debtor in a prescribed form filed with the debtor’s return of income under this Part for the taxation year that includes that time, to reduce immediately after that time the following amounts:
(a) the capital cost to the debtor of a depreciable property that is owned by the debtor immediately after that time; and
(b) the undepreciated capital cost to the debtor of depreciable property of a prescribed class immediately after that time.
Marginal note:Restriction with respect to depreciable property
(6) Where a commercial obligation issued by a debtor is settled at any time,
(a) an amount may be applied under subsection 80(5) to reduce, immediately after that time, the capital cost to the debtor of a depreciable property of a prescribed class only to the extent that
(i) the undepreciated capital cost to the debtor of depreciable property of that class at that time
exceeds
(ii) the total of all other reductions immediately after that time to that undepreciated capital cost; and
(b) an amount may be applied under subsection 80(5) to reduce, immediately after that time, the capital cost to the debtor of a depreciable property (other than a depreciable property of a prescribed class) only to the extent that
(i) the capital cost to the debtor of the property at that time
exceeds
(ii) the amount that was allowed to the debtor before that time under Part XVII of the Income Tax Regulations in respect of the property.
(7) [Repealed, 2016, c. 12, s. 23]
Marginal note:Reductions of resource expenditures
(8) Where a commercial obligation issued by a debtor is settled at any time, the remaining unapplied portion of the forgiven amount at that time in respect of the obligation shall be applied (to the extent designated in a prescribed form filed with the debtor’s return of income under this Part for the taxation year that includes that time) to reduce immediately after that time the following amounts:
(a) where the debtor is a corporation resident in Canada throughout that year, each particular amount that would be determined in respect of the debtor under paragraph 66.7(2)(a), (2.3)(a), (3)(a), (4)(a) or (5)(a) if paragraphs 66.7(2.3)(a), (4)(a) and (5)(a) were read without reference to the expressions “30% of”, “30% of” and “10% of”, respectively, as a consequence of the acquisition of control of the debtor by a person or group of persons, the debtor ceasing to be exempt from tax under this Part on its taxable income or the acquisition of properties by the debtor by way of an amalgamation or merger, where the amount so applied does not exceed the successor pool immediately after that time for the obligation and in respect of the particular amount;
(b) the cumulative Canadian exploration expense (within the meaning assigned by subsection 66.1(6)) of the debtor;
(c) the cumulative Canadian development expense (within the meaning assigned by subsection 66.2(5)) of the debtor;
(d) the cumulative Canadian oil and gas property expense (within the meaning assigned by subsection 66.4(5)) of the debtor;
(e) the total determined under paragraph 66(4)(a) in respect of the debtor, where
(i) the debtor is resident in Canada throughout that year, and
(ii) the amount so applied does not exceed such portion of the total of the debtor’s foreign exploration and development expenses (within the meaning assigned by subsection 66(15)) as were incurred by the debtor before that time and would be deductible under subsection 66(4) in computing the debtor’s income for that year if the debtor had sufficient income described in subparagraph 66(4)(b)(ii) and if that year ended at that time; and
(f) the cumulative foreign resource expense (within the meaning assigned by subsection 66.21(1)) of the debtor in respect of a country.
Marginal note:Reductions of adjusted cost bases of capital properties
(9) If a commercial obligation issued by a debtor is settled at any time and amounts have been designated under subsections (5) and (8) to the maximum extent permitted in respect of the settlement, subject to subsection (18)
(a) the remaining unapplied portion of the forgiven amount at that time in respect of the obligation shall be applied (to the extent designated in a prescribed form filed with the debtor’s return of income under this Part for the taxation year that includes that time) to reduce immediately after that time the adjusted cost bases to the debtor of capital properties (other than shares of the capital stock of corporations of which the debtor is a specified shareholder at that time, debts issued by corporations of which the debtor is a specified shareholder at that time, interests in partnerships that are related to the debtor at that time, depreciable property that is not of a prescribed class, personal-use properties and excluded properties) that are owned by the debtor immediately after that time;
(b) an amount may be applied under this subsection to reduce, immediately after that time, the capital cost to the debtor of a depreciable property of a prescribed class only to the extent that
(i) the capital cost immediately after that time to the debtor of the property (determined without reference to the settlement of the obligation at that time)
exceeds
(ii) its capital cost immediately after that time to the debtor for the purposes of paragraphs 8(1)(j) and 8(1)(p), sections 13 and 20 and any regulations made for the purpose of paragraph 20(1)(a) (determined without reference to the settlement of the obligation at that time); and
(c) for the purposes of paragraphs 8(1)(j) and 8(1)(p), sections 13 and 20 and any regulations made for the purpose of paragraph 20(1)(a), no amount shall be considered to have been applied under this subsection.
Marginal note:Reduction of adjusted cost bases of certain shares and debts
(10) If a commercial obligation issued by a debtor is settled at any time in a taxation year and amounts have been designated by the debtor under subsections (5), (8) and (9) to the maximum extent permitted in respect of the settlement, subject to subsection (18) the remaining unapplied portion of that forgiven amount shall be applied (to the extent that it is designated in a prescribed form filed with the debtor’s return of income under this Part for the year) to reduce immediately after that time the adjusted cost bases to the debtor of capital properties, owned by the debtor immediately after that time, that are shares of the capital stock of corporations of which the debtor is a specified shareholder at that time and debts issued by corporations of which the debtor is a specified shareholder at that time (other than shares of the capital stock of corporations related to the debtor at that time, debts issued by corporations related to the debtor at that time and excluded properties).
Marginal note:Reduction of adjusted cost bases of certain shares, debts and partnership interests
(11) If a commercial obligation issued by a debtor is settled at any time in a taxation year and amounts have been designated by the debtor under subsections (5), (8), (9) and (10) to the maximum extent permitted in respect of the settlement, subject to subsection (18) the remaining unapplied portion of that forgiven amount shall be applied (to the extent that it is designated in a prescribed form filed with the debtor’s return of income under this Part for the year) to reduce immediately after that time the adjusted cost bases to the debtor of
(a) shares and debts that are capital properties (other than excluded properties and properties the adjusted cost bases of which are reduced at that time under subsection 80(9) or 80(10)) of the debtor immediately after that time; and
(b) interests in partnerships that are related to the debtor at that time that are capital properties (other than excluded properties) of the debtor immediately after that time.
Marginal note:Capital gain where current year capital loss
(12) If a commercial obligation issued by a debtor (other than a partnership) is settled at any time in a taxation year and amounts have been designated by the debtor under subsections (5), (8) and (9) to the maximum extent permitted in respect of the settlement,
(a) the debtor shall be deemed to have a capital gain for the year from the disposition of capital property (or, where the debtor is non-resident at the end of the year, taxable Canadian property), equal to the lesser of
(i) the remaining unapplied portion of the forgiven amount at that time in respect of the obligation, and
(ii) the amount, if any, by which the total of
(A) all of the debtor’s capital losses from the dispositions of properties (other than listed personal properties and excluded properties), and
(B) twice the amount that would, because of subsection 88(1.2), be deductible under paragraph 111(1)(b) in computing the debtor’s taxable income for the year, if the debtor had sufficient income and taxable capital gains for the year,
exceeds the total of
(C) all of the debtor’s capital gains for the year from the dispositions of such properties (determined without reference to this subsection), and
(D) all amounts each of which is an amount deemed by this subsection to be a capital gain of the debtor for the year as a consequence of the application of this subsection to other commercial obligations settled before that time; and
(b) the forgiven amount at that time in respect of the obligation shall be considered to have been applied under this subsection to the extent of the amount deemed by this subsection to be a capital gain of the debtor for the year as a consequence of the application of this subsection to the settlement of the obligation at that time.
Marginal note:Income inclusion
(13) Where a commercial obligation issued by a debtor is settled at any time in a taxation year, there shall be added, in computing the debtor’s income for the year from the source in connection with which the obligation was issued, the amount determined by the formula
(A + B - C - D) × E
where
- A
- is the remaining unapplied portion of the forgiven amount at that time in respect of the obligation,
- B
- is the lesser of
(a) the total of all amounts designated under subsection 80(11) by the debtor in respect of the settlement of the obligation at that time, and
(b) the residual balance at that time in respect of the settlement of the obligation,
- C
- is the total of all amounts each of which is an amount specified in an agreement filed under section 80.04 in respect of the settlement of the obligation at that time,
- D
- is
(a) if the debtor has designated amounts under subsections (5), (8), (9) and (10) to the maximum extent permitted in respect of the settlement, the amount, if any, by which
(i) the total of all amounts each of which is an unrecognized loss at that time, in respect of the obligation, from the disposition of a property
exceeds
(ii) twice the total of all amounts each of which is an amount by which the amount determined before that time under this subsection in respect of a settlement of an obligation issued by the debtor has been reduced because of an amount determined under this paragraph, and
(b) in any other case, nil, and
- E
- is
(a) where the debtor is a partnership, 1, and
(b) in any other case, 1/2.
Marginal note:Residual balance
(14) For the purpose of subsection 80(13), the residual balance at any time in a taxation year in respect of the settlement of a particular commercial obligation issued by a debtor is the amount, if any, by which
(a) the gross tax attributes of directed persons at that time in respect of the debtor
exceeds the total of
(b) the value of A in subsection 80(13) in respect of the settlement of the particular obligation at that time,
(c) all amounts each of which is
(i) the amount, if any, by which the value of A in subsection 80(13) in respect of a settlement before that time and in the year of a commercial obligation issued by the debtor exceeds the value of C in that subsection in respect of the settlement,
(ii) the value of A in subsection 80(13) in respect of a settlement of a commercial obligation that is deemed by paragraph 80.04(4)(e) to have been issued by a directed person in respect of the debtor because of the filing of an agreement under section 80.04 in respect of a settlement before that time and in the year of a commercial obligation issued by the debtor, or
(iii) the amount specified in an agreement (other than an agreement with a directed person in respect of the debtor) filed under section 80.04 in respect of the settlement before that time and in the year of a commercial obligation issued by the debtor, and
(d) all amounts each of which is an amount in respect of a settlement at a particular time before that time and in the year of a commercial obligation issued by the debtor equal to the least of
(i) the total of all amounts designated under subsection 80(11) in respect of the settlement,
(ii) the residual balance of the debtor at the particular time, and
(iii) the amount, if any, by which the sum of the values of A and B in subsection 80(13) in respect of the settlement exceeds the value of C in that subsection in respect of the settlement.
Marginal note:Gross tax attributes
(14.1) The gross tax attributes of directed persons at any time in respect of a debtor means the total of all amounts each of which is an amount that would be applied under any of subsections 80(3) to 80(10) and 80(12) in respect of a settlement of a separate commercial obligation (in this subsection referred to as a “notional obligation”) issued by directed persons at that time in respect of the debtor if the following assumptions were made:
(a) a notional obligation was issued immediately before that time by each of those directed persons and was settled at that time;
(b) the forgiven amount at that time in respect of each of those notional obligations was equal to the total of all amounts each of which is a forgiven amount at or before that time and in the year in respect of a commercial obligation issued by the debtor;
(c) amounts were designated under subsections (5), (8), (9) and (10) by each of those directed persons to the maximum extent permitted in respect of the settlement of each of those notional obligations; and
(d) no amounts were designated under subsection 80(11) by any of those directed persons in respect of the settlement of any of the notional obligations.
Marginal note:Members of partnerships
(15) Where a commercial debt obligation issued by a partnership (in this subsection referred to as the “partnership obligation”) is settled at any time in a fiscal period of the partnership that ends in a taxation year of a member of the partnership,
(a) the member may deduct, in computing the member’s income for the year, such amount as the member claims not exceeding the relevant limit in respect of the partnership obligation;
(b) for the purpose of paragraph (a), the relevant limit in respect of the partnership obligation is the amount that would be included in computing the member’s income for the year as a consequence of the application of subsection (13) and section 96 to the settlement of the partnership obligation if the partnership had designated amounts under subsections (5), (8), (9) and (10) to the maximum extent permitted in respect of each obligation settled in that fiscal period and if income arising from the application of subsection (13) were from a source of income separate from any other sources of partnership income; and
(c) for the purposes of this section and section 80.04,
(i) the member shall be deemed to have issued a commercial debt obligation that was settled at the end of that fiscal period,
(ii) the amount deducted under paragraph 80(15)(a) in respect of the partnership obligation in computing the member’s income shall be treated as if it were the forgiven amount at the end of that fiscal period in respect of the obligation referred to in subparagraph 80(15)(c)(i),
(iii) subject to subparagraph 80(15)(c)(iv), the obligation referred to in subparagraph 80(15)(c)(i) shall be deemed to have been issued at the same time at which, and in the same circumstances in which, the partnership obligation was issued,
(iv) if the member is a taxpayer that was subject to a loss restriction event at a particular time that is before the end of that fiscal period and before the taxpayer became a member of the partnership, and the partnership obligation was issued before the particular time,
(A) subject to the application of this subparagraph to the taxpayer after the particular time and before the end of that fiscal period, the obligation referred to in subparagraph (i) is deemed to have been issued by the member after the particular time, and
(B) subparagraph (b)(ii) of the definition relevant loss balance in subsection (1), paragraph (f) of the definition successor pool in that subsection and paragraph (b) of the definition unrecognized loss in that subsection do not apply in respect of the loss restriction event, and
(v) the source in connection with which the obligation referred to in subparagraph 80(15)(c)(i) was issued shall be deemed to be the source in connection with which the partnership obligation was issued.
Marginal note:Designations by Minister
(16) Where a commercial obligation issued by a debtor is settled at any time in a taxation year and, as a consequence of the settlement an amount would, but for this subsection, be deducted under section 61.2 or 61.3 in computing the debtor’s income for the year and the debtor has not designated amounts under subsections 80(5) to 80(11) to the maximum extent possible in respect of the settlement,
(a) the Minister may designate amounts under subsections 80(5) to 80(11) to the extent that the debtor would have been permitted to designate those amounts; and
(b) the amounts designated by the Minister shall, except for the purpose of this subsection, be deemed to have been designated by the debtor as required by subsections 80(5) to 80(11).
(17) [Repealed, 1998, c. 19, s. 111]
Marginal note:Partnership designations
(18) Where a commercial obligation issued by a partnership is settled at any time after December 20, 1994, the amount designated under subsection 80(9), 80(10) or 80(11) in respect of the settlement by the partnership to reduce the adjusted cost base of a capital property acquired shall not exceed the amount, if any, by which the adjusted cost base at that time to the partnership of the property exceeds the fair market value at that time of the property.
- [NOTE: Application provisions are not included in the consolidated text
- see relevant amending Acts and regulations.]
- R.S., 1985, c. 1 (5th Supp.), s. 80
- 1994, c. 7, Sch. II, s. 58
- 1995, c. 21, s. 27
- 1998, c. 19, s. 111
- 1999, c. 22, s. 21
- 2001, c. 17, s. 58
- 2007, c. 35, s. 21
- 2013, c. 34, s. 118, c. 40, s. 36
- 2016, c. 12, s. 23
- 2023, c. 26, s. 15
- Date modified: