| Current
amount
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(7) For the purpose of subsection (4), the
current amount in respect of the disposition of
a specified debt obligation by a taxpayer is the
positive or negative amount determined by the
formula
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A + B
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where
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A is the taxpayer's transition amount in
respect of the disposition, and
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B is
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(a) where the taxpayer has a gain from the
disposition of the obligation, the part, if
any, of the gain that is reasonably
attributable to a material increase in the
probability, or perceived probability, that
the debtor will make all payments as
required by the obligation, and
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(b) where the taxpayer has a loss from the
disposition of the obligation, the negative
amount that the taxpayer claims not
exceeding in magnitude the part, if any,
of the loss that is reasonably attributable
to a default by the debtor or a material
decrease in the probability, or perceived
probability, that the debtor will make all
payments as required by the obligation.
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| Residual
portion of
gain or loss
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(8) For the purpose of subsection (4), where
a taxpayer has a gain or loss from the
disposition of a specified debt obligation, the
residual portion of the gain or loss is the part
of the gain or loss that is not included in
determining the amount B in the formula in
subsection (7) in respect of the disposition.
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| Disposition of
part of
obligation
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(9) Where a taxpayer disposed of part of a
specified debt obligation, this section and any
regulations made for the purpose of this
section apply as if the part disposed of and the
part retained were separate specified debt
obligations.
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Mark-to-Market Properties
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| Income
treatment for
profits and
losses
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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,
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(a) there shall be included in computing the
taxpayer's income for the year the profit, if
any, from the disposition; and
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(b) there shall be deducted in computing the
taxpayer's income for the year the loss, if
any, from the disposition.
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| Mark-to-mark
et requirement
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(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
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(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
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(b) to have reacquired the property at the
end of the year at a cost equal to those
proceeds.
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| Mark-to-mark
et debt
obligation
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(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:
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(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;
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(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
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(c) for the purpose of paragraph (b), where
the taxpayer was deemed by subsection (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.
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| Transition -
deduction re
non-capital
amounts
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(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 (2).
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| Transition -
inclusion re
non-capital
amounts
|
(5) Where a taxpayer deducts an amount
under subsection (4), 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 prescribed portion
for the year of the amount so deducted.
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| Transition -
deduction re
net capital
gains
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(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 (2), shall be deemed to
be an allowable capital loss of the taxpayer for
its taxation year that includes October 31,
1994 from the disposition of property.
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| Transition -
inclusion re
net capital
gains
|
(7) Where a taxpayer elects an amount
under subsection (6), the taxpayer shall be
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 equal to the
prescribed portion for the year of the amount
so elected.
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| First deemed
disposition of
debt
obligation
|
(8) Where
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(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
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(i) the disposition occurred because of
subsection (2) and the particular year
includes October 31, 1994, or
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(ii) the disposition occurred because of
paragraph 142.6(1)(b),
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the following rules apply:
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(c) subsection 20(21) does not apply to the
disposition, and
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(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
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(ii) section 12.4 does not apply to the
disposition,
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there shall be included in computing the
taxpayer's income for the particular year
the amount, if any, by which
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(iii) the total of all amounts referred to in
subparagraph (i)
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(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.
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| Transition -
property
acquired on
rollover
|
(9) Where
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(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,
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(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,
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(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
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(d) subsection (2) deemed the taxpayer to
have disposed of the property in its
particular taxation year that includes
October 31, 1994,
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the following rules apply:
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(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 (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 (2), and not to be
a taxable capital gain for the particular year,
and
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(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 (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 (2), and shall not be
included in computing the taxpayer's
income for the particular year.
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Additional Rules
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| Becoming or
ceasing to be
a financial
institution
|
142.6 (1) Where, at a particular time after
February 22, 1994, a taxpayer becomes or
ceases to be a financial institution,
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(a) where a taxation year of the taxpayer
would not, but for this paragraph, end
immediately before the particular time,
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(i) the taxation year of the taxpayer that
would otherwise have included the
particular time shall be deemed to have
ended immediately before that time and
a new taxation year of the taxpayer shall
be deemed to have begun at that time, and
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(ii) for the purpose of determining the
taxpayer's fiscal period after the
particular time, the taxpayer shall be
deemed not to have established a fiscal
period before that time;
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(b) where the taxpayer becomes a financial
institution, the taxpayer shall be deemed to
have disposed, immediately before the end
of its taxation year that ends immediately
before the particular time, of each property
held by the taxpayer that is
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(i) a specified debt obligation (other than
a mark-to-market property for the year),
or
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(ii) where the year ends after October 30,
1994, a mark-to-market property for the
year
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for proceeds equal to its fair market value at
the time of disposition;
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(c) where the taxpayer ceases to be a
financial institution, the taxpayer shall be
deemed to have disposed, immediately
before the end of its taxation year that ends
immediately before the particular time, of
each property held by the taxpayer that is a
specified debt obligation (other than a
mark-to-market property of the taxpayer for
the year), for proceeds equal to its fair
market value at the time of disposition; and
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(d) the taxpayer shall be deemed to have
reacquired, at the end of the taxation year
referred to in paragraph (b) or (c), each
property deemed by that paragraph to have
been disposed of by the taxpayer, at a cost
equal to the proceeds of disposition of the
property.
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| Deemed
disposition
not applicable
|
(2) For the purposes of this Act, the
determination of when a taxpayer acquired a
share shall be made without regard to a
disposition or acquisition that occurred
because of subsection (1) or 142.5(2).
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| Property not
inventory
|
(3) Where a taxpayer is a financial
institution in a taxation year, inventory of the
taxpayer in the year does not include property
that is
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(a) a specified debt obligation (other than a
mark-to-market property for the year); or
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(b) where the year begins after October
1994, a mark-to-market property for the
year.
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| Property that
ceases to be
inventory
|
(4) Where a taxpayer that was a financial
institution in its particular taxation year that
includes February 23, 1994 held, on that day,
a specified debt obligation (other than a
mark-to-market property for the year) that was
inventory of the taxpayer at the end of its
preceding taxation year,
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(a) the taxpayer shall be deemed to have
disposed of the property at the beginning of
the particular year for proceeds equal to
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(i) where subparagraph (ii) does not
apply, the amount at which the property
was valued at the end of the preceding
taxation year for the purpose of
computing the taxpayer's income for the
year, and
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(ii) where the taxpayer is a bank and the
property is prescribed property for the
particular year, the cost of the property to
the taxpayer (determined without
reference to paragraph (b));
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(b) for the purpose of determining the
taxpayer's profit or loss from the
disposition, the cost of the property to the
taxpayer shall be deemed to be the amount
referred to in subparagraph (a)(i); and
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(c) the taxpayer shall be deemed to have
reacquired the property, immediately after
the beginning of the particular year, at a cost
equal to the proceeds of disposition of the
property.
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| Debt
obligations
acquired in
rollover
transactions
|
(5) Where,
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(a) on February 23, 1994, a financial
institution that is a corporation held a
specified debt obligation (other than a
mark-to-market property for the taxation
year that includes that day) that was at any
particular time before that day held by
another corporation, and
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(b) between the particular time and
February 23, 1994, the only transactions
affecting the ownership of the property
were rollover transactions,
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the financial institution shall be deemed, in
respect of that obligation, to be the same
corporation as, and a continuation of, the other
corporation.
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| Definition of
``rollover
transaction''
|
(6) For the purpose of subsection (5),
``rollover transaction'' means a transaction to
which subsection 87(2), 88(1) or 138(11.5) or
(11.94) applies, other than a transaction to
which paragraph 138(11.5)(e) requires the
provisions of subsection 85(1) to be applied.
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| Superficial
loss rule not
applicable
|
(7) Subsection 18(13) does not apply to the
disposition of a property by a taxpayer after
October 30, 1994 where
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(a) the taxpayer is a financial institution
when the disposition occurs and the
property is a specified debt obligation or a
mark-to-market property for the taxation
year in which the disposition occurs; or
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(b) the disposition occurs because of
paragraph (1)(b).
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(2) Sections 142.2 to 142.4 and
subsections 142.6(2) to (6) of the Act, as
enacted by subsection (1), apply to taxation
years that end after February 22, 1994,
except that section 142.3 of the Act does not
apply to debt obligations disposed of before
February 23, 1994.
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(3) Section 142.5 of the Act, as enacted by
subsection (1), applies to taxation years that
end after October 30, 1994.
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(4) Subsection 142.6(1) of the Act, as
enacted by subsection (1), applies after
February 22, 1994.
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(5) Subsection 142.6(7) of the Act, as
enacted by subsection (1), applies to
dispositions occurring after October 30,
1994, except the disposition of a debt
obligation before July 1995 where
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(a) the disposition is part of a series of
transactions or events that began before
October 31, 1994;
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(b) as part of the series of transactions or
events, the taxpayer who acquired the
debt obligation disposed of property
before October 31, 1994; and
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(c) it is reasonable to consider that one of
the main reasons for the acquisition of the
debt obligation by the taxpayer was to
obtain a deduction because, as a
consequence of the disposition referred to
in paragraph (b),
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(i) an amount was included in the
taxpayer's income for any taxation
year, or
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(ii) an amount was subtracted from a
balance of undeducted outlays,
expenses or other amounts of the
taxpayer and the subtracted amount
exceeded the portion, if any, of the
balance that could reasonably be
considered to be in respect of the
property.
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59. (1) The definition ``amortized cost'' in
subsection 248(1) of the Act is amended by
adding the following after paragraph (c):
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(c.1) the total of all amounts each of
which is an amount in respect of the loan
or lending asset that was included in
computing the taxpayer's income for a
taxation year that ended at or before that
time in respect of changes in the value of
the loan or lending asset attributable to
the fluctuation in the value of a currency
of a country other than Canada relative to
Canadian currency,
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(2) The definition ``amortized cost'' in
subsection 248(1) of the Act is amended by
adding the following after paragraph (f):
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(f.1) the total of all amounts each of
which is an amount in respect of the loan
or lending asset that was deducted in
computing the taxpayer's income for a
taxation year that ended at or before that
time in respect of changes in the value of
the loan or lending asset attributable to
the fluctuation in the value of a currency
of a country other than Canada relative to
Canadian currency,
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